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Common Stock Purchase Agreement Template for Canada

A Common Stock Purchase Agreement under Canadian law is a legally binding document that formalizes the sale and purchase of common shares in a corporation. This agreement outlines the terms and conditions of the share transfer, including the purchase price, number of shares, representations and warranties, and closing conditions. It ensures compliance with Canadian federal and provincial securities laws, corporate legislation, and establishes the rights and obligations of all parties involved in the transaction. The document includes necessary provisions for regulatory compliance, share transfer mechanics, and risk allocation between parties.

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What is a Common Stock Purchase Agreement?

The Common Stock Purchase Agreement is a fundamental document used in Canadian corporate transactions when one party wishes to sell and another party wishes to purchase common shares in a corporation. This agreement is essential for both private and public companies, though its specific requirements may vary depending on the corporation's status and applicable securities regulations. The document typically includes detailed information about the transaction structure, purchase price, payment terms, representations and warranties, and closing conditions. It must comply with various Canadian legal frameworks, including the Canada Business Corporations Act, provincial securities legislation, and relevant regulatory requirements. This agreement is particularly important for documenting ownership changes, ensuring proper transfer of rights, and establishing clear obligations and protections for all parties involved in the share transaction.

What sections should be included in a Common Stock Purchase Agreement?

1. Parties: Identification of the seller(s), purchaser(s), and the corporation whose shares are being sold

2. Background: Recitals explaining the context of the transaction and the parties' intentions

3. Definitions: Definitions of key terms used throughout the agreement

4. Purchase and Sale: Core transaction terms including number of shares, price per share, and aggregate purchase price

5. Closing: Details of when, where, and how the transaction will close, including conditions precedent

6. Representations and Warranties of the Seller: Seller's statements regarding ownership, authority to sell, and share status

7. Representations and Warranties of the Purchaser: Purchaser's statements regarding authority, financial capacity, and investment sophistication

8. Covenants: Ongoing obligations of the parties before and after closing

9. Indemnification: Terms for compensating parties for breaches or losses

10. Survival: Which provisions survive after closing and for how long

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

What sections are optional to include in a Common Stock Purchase Agreement?

1. Regulatory Compliance: Required when the transaction needs specific securities law compliance or regulatory approvals

2. Right of First Refusal: Include when existing shareholders have pre-emptive rights or when new rights are being created

3. Tag-Along Rights: Include when minority shareholders need protection in case of future sales

4. Drag-Along Rights: Include when majority shareholders want the right to force minority participation in future sales

5. Share Restrictions: Include when there are restrictions on transfer or ownership of the shares

6. Board Representation: Include when the purchase includes rights to board seats

7. Registration Rights: Include for private companies that may go public in the future

What schedules should be included in a Common Stock Purchase Agreement?

1. Schedule A - Share Certificate Details: List of share certificate numbers and details of shares being transferred

2. Schedule B - Purchase Price Calculation: Detailed breakdown of how the purchase price was calculated

3. Schedule C - Closing Deliverables: List of all documents and items to be delivered at closing

4. Schedule D - Disclosed Matters: Exceptions to representations and warranties

5. Schedule E - Required Consents: List of third-party consents required for the transaction

6. Appendix 1 - Form of Share Certificate: Template of the share certificate to be issued

7. Appendix 2 - Corporate Resolutions: Required corporate approvals and resolutions

8. Appendix 3 - Legal Opinion: Form of legal opinion to be delivered at closing

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

Cost

Free to use

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