The Founder Stock Purchase Agreement is a foundational document used during company formation or early-stage operations in Canada. It is essential when founders are acquiring their initial equity stake in the company or formalizing existing share arrangements. The agreement ensures compliance with Canadian federal and provincial corporate and securities laws while protecting both the company's and founders' interests. The document typically includes detailed terms about share acquisition, vesting schedules, transfer restrictions, and founder obligations. It's particularly crucial for startups and early-stage companies as it helps establish clear ownership structures and prevents future disputes. The agreement must align with the Canada Business Corporations Act or provincial corporate statutes, and may need to address specific requirements for Canadian Controlled Private Corporations (CCPCs) for tax purposes.
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1. Parties: Identification of the company and the founding purchaser(s)
2. Background: Context of the agreement, including company incorporation details and purpose of the share purchase
3. Definitions: Key terms used throughout the agreement
4. Purchase and Sale of Shares: Details of shares being purchased, including class, number, and price per share
5. Payment Terms: Method, timing, and conditions of payment for the shares
6. Closing: Conditions precedent, closing mechanics, and deliverables
7. Representations and Warranties of the Company: Company's confirmations regarding its authority, share status, and corporate matters
8. Representations and Warranties of the Founder: Founder's confirmations regarding capacity, understanding, and compliance
9. Founder Covenants: Ongoing obligations of the founder, including confidentiality and non-competition
10. Share Restrictions: Limitations on transfer, right of first refusal, and other share-related restrictions
11. General Provisions: Standard legal provisions including notices, amendments, governing law, etc.
1. Vesting Provisions: Include when shares are subject to vesting schedule
2. Drag-Along Rights: Include for potential future sale scenarios
3. Tag-Along Rights: Include to protect minority shareholders in sale scenarios
4. Board Matters: Include when founder is getting board representation rights
5. Intellectual Property Assignment: Include when IP assignment hasn't been covered in separate agreements
6. Tax Elections: Include specific provisions for tax treatment of shares
7. Founder Services: Include when agreement includes terms of founder's service to company
8. Special Rights: Include for any special voting or preferential rights attached to founder shares
1. Schedule A - Share Certificate: Form of share certificate to be issued
2. Schedule B - Consent of Spouse: Spouse's acknowledgment and consent to share restrictions (if applicable)
3. Schedule C - Vesting Schedule: Detailed vesting terms and schedule if applicable
4. Schedule D - Shareholders' Rights and Restrictions: Detailed terms of shareholder rights and restrictions
5. Schedule E - Board Resolutions: Copy of board resolutions approving share issuance
6. Schedule F - Subscription Form: Form for share subscription details
7. Schedule G - Accredited Investor Certificate: Confirmation of founder's investor status if required
8. Schedule H - IP Assignment Details: Specific IP being assigned if included in agreement
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