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Revenue Sharing Investment Agreement Template for Canada

A Canadian Revenue Sharing Investment Agreement is a sophisticated financial instrument that establishes the terms under which an investor provides capital to a company in exchange for a percentage of future revenue streams. This agreement, governed by Canadian federal and provincial laws, details the investment amount, revenue sharing calculations, payment mechanisms, and reporting requirements. It incorporates specific provisions for compliance with Canadian securities regulations and tax laws, while establishing clear rights and obligations for both the investor and the company. The document includes comprehensive protections for both parties and addresses key aspects such as financial reporting, audit rights, and default remedies within the Canadian legal framework.

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What is a Revenue Sharing Investment Agreement?

The Revenue Sharing Investment Agreement serves as a critical document for businesses seeking alternative financing methods in the Canadian market. This agreement type is particularly valuable for companies that generate consistent revenue but may not be suitable candidates for traditional equity investment or debt financing. It enables investors to provide capital in exchange for a percentage of the company's future revenue, offering a flexible financing solution that aligns investor returns with business performance. The agreement must comply with Canadian securities regulations, both at federal and provincial levels, and includes essential provisions for revenue definitions, calculation methodologies, payment terms, and investor protections. It's commonly used by growth-stage companies, particularly in sectors with predictable revenue streams, and can be structured to accommodate various investment sizes and revenue-sharing arrangements while ensuring compliance with Canadian corporate and securities laws.

What sections should be included in a Revenue Sharing Investment Agreement?

1. Parties: Identification of the investor(s) and the company receiving the investment

2. Background: Context of the investment, company's business, and purpose of the agreement

3. Definitions: Defined terms used throughout the agreement, including financial and technical terms

4. Investment Terms: Details of the investment amount, payment schedule, and conditions precedent

5. Revenue Sharing Mechanics: Definition of revenue base, sharing percentage, calculation methods, and payment terms

6. Payment Terms: Timing and method of revenue share payments, including minimum and maximum payment provisions

7. Financial Reporting: Company's obligations for financial reporting, including frequency, format, and audit rights

8. Representations and Warranties: Standard and specific representations by both parties

9. Company Covenants: Ongoing obligations of the company regarding business operations and reporting

10. Events of Default: Circumstances constituting default and corresponding remedies

11. Term and Termination: Duration of the agreement and termination provisions

12. Confidentiality: Protection of confidential information shared between parties

13. General Provisions: Standard boilerplate clauses including notices, amendments, governing law, etc.

What sections are optional to include in a Revenue Sharing Investment Agreement?

1. Multiple Investor Provisions: Required when there are multiple investors, addressing voting rights and decision-making processes

2. International Payments: Required for cross-border investments, addressing currency conversion and international transfer requirements

3. Intellectual Property Protection: Needed when the investment involves access to or use of intellectual property

4. Security Interest: Optional section for secured investments, including details of collateral and registration requirements

5. Board Observer Rights: Optional rights for investor representation in company meetings

6. Tag-Along Rights: Optional provisions for investor protection in case of sale of company shares

7. Competition Restrictions: Optional non-compete and non-solicitation provisions

8. Exit Strategy: Optional provisions detailing buy-out mechanisms or IPO scenarios

What schedules should be included in a Revenue Sharing Investment Agreement?

1. Schedule A - Investment Amount and Payment Terms: Detailed breakdown of investment amount, payment schedule, and funding conditions

2. Schedule B - Revenue Definition and Calculations: Detailed definition of qualifying revenue and calculation methodology

3. Schedule C - Financial Reporting Template: Template for required financial reports and calculations

4. Schedule D - Disclosure Schedule: Company disclosures relating to representations and warranties

5. Schedule E - Key Performance Indicators: Specific metrics for monitoring company performance

6. Appendix 1 - Form of Compliance Certificate: Template for periodic compliance certification

7. Appendix 2 - Form of Revenue Share Report: Standard format for revenue share calculations and reporting

8. Appendix 3 - Wire Transfer Instructions: Banking and payment processing details

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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