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Membership Interest Redemption Agreement Template for Canada

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Key Requirements PROMPT example:

Membership Interest Redemption Agreement

"Need a Membership Interest Redemption Agreement for our Ontario-based tech startup where we're buying out a founding member's 25% interest in quarterly installments over 18 months, starting March 2025, with special provisions for intellectual property protection."

Document background
The Membership Interest Redemption Agreement is a crucial document used when a company wishes to buy back or redeem the ownership interest of a departing member. This type of agreement is commonly used in Canadian business transactions when a member wishes to exit the business, retire, or when required by operating agreements. The document addresses key aspects such as valuation of the interest, payment terms, tax implications, and ongoing obligations of both parties. It must comply with Canadian federal and provincial corporate laws, securities regulations, and tax requirements. The agreement is particularly important for protecting both the company and the selling member by clearly documenting the terms of the transaction, including any representations, warranties, and post-closing obligations. It may also include provisions for installment payments, security arrangements, and non-compete obligations, depending on the specific circumstances of the redemption.
Suggested Sections

1. Parties: Identifies and defines the company, the selling member, and any other relevant parties to the agreement

2. Background: Recitals explaining the context of the redemption, including the member's current ownership interest and the parties' desire to enter into the redemption transaction

3. Definitions: Defines key terms used throughout the agreement

4. Redemption and Purchase: Details the specific membership interests being redeemed and the agreement to sell and purchase

5. Purchase Price: Specifies the total purchase price and how it was determined

6. Payment Terms: Outlines the payment structure, including timing, method, and any installment arrangements

7. Closing: Specifies the closing date, location, and mechanics of the transaction

8. Representations and Warranties of Selling Member: Member's confirmations regarding ownership, authority to sell, and absence of encumbrances

9. Representations and Warranties of Company: Company's confirmations regarding authority, financial condition, and ability to complete the transaction

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

11. Release: Mutual release of claims related to the membership interest

12. Confidentiality: Provisions regarding confidential treatment of agreement terms and company information

13. General Provisions: Standard clauses including governing law, notices, amendments, and entire agreement

Optional Sections

1. Tax Matters: Special tax provisions and allocations when specific tax treatment is desired

2. Regulatory Approvals: Required when the redemption needs regulatory or third-party approvals

3. Non-Competition: Restrictions on the selling member's future competitive activities, if applicable

4. Installment Payment Security: Security provisions when payment is made in installments

5. Earn-out Provisions: When part of the purchase price is contingent on future performance

6. Member Resignation: Required when the selling member holds positions in company management

7. Survival: Specific provisions about which representations and warranties survive closing

Suggested Schedules

1. Schedule A - Description of Membership Interest: Detailed description of the membership interest being redeemed

2. Schedule B - Purchase Price Calculation: Detailed calculation or valuation method used to determine the purchase price

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

4. Schedule D - Payment Schedule: If applicable, detailed schedule of installment payments

5. Schedule E - Company Resolutions: Copies of relevant company resolutions approving the redemption

6. Schedule F - Required Consents: List of third-party consents required for the redemption

7. Appendix 1 - Form of Release: Form of mutual release to be executed at closing

8. Appendix 2 - Transfer Documents: Forms of transfer documents required to effect the redemption

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 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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Professional Services

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Relevant Teams

Legal

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Executive Leadership

Corporate Governance

Tax

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Corporate Secretary Office

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Relevant Roles

Chief Executive Officer

Chief Financial Officer

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Corporate Secretary

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Business Development Director

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Chief Operating Officer

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Partnership Manager

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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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