Share Pledge Agreement Template for Canada

A Canadian Share Pledge Agreement is a crucial security document used to create and perfect a security interest in shares of a corporation. It operates under Canadian federal and provincial legislation, particularly the Personal Property Security Act (PPSA) in common law provinces and the Civil Code in Quebec. The agreement details the terms under which shares are pledged as collateral, including perfection requirements, voting rights, dividend treatments, and enforcement mechanisms. It must comply with both corporate law requirements and securities regulations, while addressing specific provincial variations in security interest creation and registration.

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What is a Share Pledge Agreement?

The Share Pledge Agreement is a fundamental security document used in Canadian financing transactions where shares are offered as collateral for loans or other obligations. It is commonly used in corporate financing, acquisition financing, and restructuring scenarios. The agreement must comply with Canadian federal and provincial requirements, including the Personal Property Security Act (PPSA) in common law provinces or the Civil Code in Quebec, as well as relevant corporate and securities laws. The document typically includes detailed provisions about the pledge creation, perfection requirements, rights and obligations of parties, voting arrangements, dividend treatments, and enforcement mechanisms. It's particularly important in secured lending transactions, corporate reorganizations, and cross-border financing arrangements where Canadian shares are involved.

What sections should be included in a Share Pledge Agreement?

1. Parties: Identifies the pledgor, pledgee, and any other relevant parties to the agreement

2. Background: Sets out the context of the pledge, including reference to any underlying obligations being secured

3. Definitions and Interpretation: Defines key terms and establishes interpretation rules for the agreement

4. Grant of Security Interest: Creates and defines the scope of the security interest in the pledged shares

5. Pledged Collateral: Describes the shares being pledged, including class, number, and issuing corporation

6. Perfection of Security Interest: Requirements for perfecting the security interest, including delivery of share certificates and registration

7. Representations and Warranties: Pledgor's representations regarding ownership, authority, and status of pledged shares

8. Covenants: Ongoing obligations of the pledgor regarding the pledged shares

9. Voting Rights and Dividends: Provisions governing exercise of voting rights and receipt of dividends pre/post-default

10. Events of Default: Defines circumstances constituting default under the agreement

11. Enforcement Rights: Pledgee's rights and remedies upon default

12. General Provisions: Standard provisions including notices, amendments, governing law, etc.

What sections are optional to include in a Share Pledge Agreement?

1. Securities Account Control: Required when pledged shares are held in a securities account rather than physically certificated

2. Foreign Ownership Compliance: Required when shares are subject to foreign ownership restrictions

3. Related Party Provisions: Required when pledge is between related entities with specific corporate governance requirements

4. Regulatory Approval Requirements: Required for regulated industries or when pledge triggers regulatory oversight

5. Intercreditor Provisions: Required when multiple creditors have security interests in the same shares

6. Tax Provisions: Required when pledge has specific tax implications or requirements

What schedules should be included in a Share Pledge Agreement?

1. Description of Pledged Shares: Detailed description of shares including certificate numbers, class rights, and corporate information

2. Form of Stock Power: Form of stock transfer power to be executed in blank

3. Permitted Encumbrances: List of pre-existing permitted liens or encumbrances on the pledged shares

4. Required Consents: List of required third-party or regulatory consents

5. Shareholders Agreement Terms: Relevant provisions from shareholders agreement affecting the pledge

6. PPSA Registration Details: Details of PPSA registration and filing requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

Canada

Publisher

Genie AI

Document Type

Agreement Contract

Cost

Free to use

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