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Shareholder Buyout Agreement Template for Canada

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Key Requirements PROMPT example:

Shareholder Buyout Agreement

"I need a Shareholder Buyout Agreement for a technology startup where two founding shareholders are selling their combined 40% stake to the company, with payment to be made in installments over 12 months starting March 2025, and including non-compete provisions for the Ontario market."

Document background
The Shareholder Buyout Agreement is a crucial document used when one or more shareholders wish to exit a company by selling their shares to other shareholders or to the company itself. This agreement is particularly important in Canadian private corporations where share transfers need to be carefully documented and controlled. The document addresses key aspects such as valuation, payment terms, representations and warranties, and post-sale obligations, while ensuring compliance with both federal and provincial legislation. It's commonly used in scenarios including retirement of founding members, resolution of shareholder disputes, or strategic restructuring of ownership. The agreement must comply with the Canada Business Corporations Act or relevant provincial corporation acts, securities regulations, and tax laws, and typically includes provisions for share transfer mechanics, payment security, and ongoing obligations of the departing shareholder.
Suggested Sections

1. Parties: Identification of the selling shareholder(s), purchasing shareholder(s) or company, and the corporation whose shares are being sold

2. Background: Recitals explaining the context of the agreement, current shareholdings, and intention to buy/sell

3. Definitions: Key terms used throughout the agreement

4. Sale and Purchase of Shares: Core transaction terms including number of shares, class of shares, and purchase price

5. Payment Terms: Structure and timing of payment for the shares

6. Closing: Closing date, conditions precedent, and closing deliverables

7. Representations and Warranties of Seller: Seller's confirmations regarding share ownership, authority to sell, and absence of encumbrances

8. Representations and Warranties of Purchaser: Purchaser's confirmations regarding authority and capacity to purchase

9. Pre-Closing Covenants: Obligations of parties between signing and closing

10. Release and Waiver: Seller's release of claims against the company

11. Confidentiality: Obligations regarding confidential information

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

Optional Sections

1. Employment Termination: Used when the selling shareholder is also an employee/officer and their employment is being terminated

2. Non-Competition and Non-Solicitation: Used when restrictions on the seller's future business activities are required

3. Installment Payment Terms: Used when the purchase price is to be paid in installments

4. Security for Payment: Used when security is required for deferred payments

5. Tax Matters: Used when specific tax structuring or indemnities are required

6. Continued Board Representation: Used when seller retains right to board representation during any transition period

7. Drag-Along/Tag-Along Rights: Used when other shareholders have specific rights in relation to the sale

Suggested Schedules

1. Schedule A - Share Details: Details of shares being sold including share certificate numbers and share classes

2. Schedule B - Purchase Price Calculation: Detailed calculation of the purchase price if based on a formula

3. Schedule C - Encumbrances: List of any existing encumbrances on the shares

4. Schedule D - Corporate Records: List of corporate records and documents to be delivered at closing

5. Schedule E - Outstanding Litigation: Details of any pending litigation affecting the shares or company

6. Appendix 1 - Resignation Letters: Form of resignation letters for corporate positions if applicable

7. Appendix 2 - Release Forms: Forms of mutual releases to be executed at closing

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈ˰æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions

































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Relevant Industries

Technology

Manufacturing

Professional Services

Retail

Real Estate

Financial Services

Healthcare

Construction

Energy

Agriculture

Transportation

Media and Entertainment

Relevant Teams

Legal

Corporate Governance

Finance

Executive Leadership

Board of Directors

Compliance

Corporate Secretariat

Investment

Treasury

Risk Management

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Corporate Secretary

General Counsel

Legal Counsel

Corporate Director

Board Member

Managing Director

Finance Director

Business Owner

Company Secretary

Shareholder

Corporate Governance Officer

Compliance Officer

Investment Manager

Private Equity Manager

Venture Capital Manager

Industries








Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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