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Membership Unit Purchase Agreement Template for Canada

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Key Requirements PROMPT example:

Membership Unit Purchase Agreement

"I need a Membership Unit Purchase Agreement for the acquisition of 25% ownership in a Canadian technology startup, with specific provisions for tag-along rights and an earn-out mechanism based on 2025 revenue targets."

Document background
The Membership Unit Purchase Agreement is a crucial document used in Canadian business transactions when one party wishes to acquire membership units (similar to shares) in a company from existing unit holders. This agreement is essential for both private and public companies, though its complexity may vary depending on the transaction size and nature of the business. The document must comply with both federal and provincial legislation, including securities laws, corporate statutes, and tax regulations. It typically includes detailed provisions about the transaction structure, purchase price mechanisms, representations and warranties, and closing conditions. The agreement is particularly important in protecting both parties' interests by clearly defining their rights, obligations, and remedies while ensuring the transfer meets all regulatory requirements under Canadian law.
Suggested Sections

1. Parties: Identification of the seller(s) and purchaser(s) of the membership units

2. Background: Context of the transaction, including description of the company and the membership units being sold

3. Definitions: Key terms used throughout the agreement

4. Purchase and Sale: Core transaction terms including number of units, purchase price, and payment terms

5. Closing: Timing and mechanics of the closing, including conditions precedent and deliverables

6. Representations and Warranties of Seller: Seller's confirmations regarding ownership, authority, and company status

7. Representations and Warranties of Purchaser: Purchaser's confirmations regarding authority, financial capacity, and investment intent

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

9. Indemnification: Terms for compensating parties for losses arising from breaches or misrepresentations

10. Confidentiality: Provisions regarding non-disclosure of transaction and company information

11. Notices: Process and addresses for formal communications between parties

12. General Provisions: Standard legal provisions including governing law, amendments, and severability

Optional Sections

1. Right of First Refusal: Used when existing members have rights to purchase units before third parties

2. Tag-Along Rights: Include when minority members have the right to join in sales by majority members

3. Drag-Along Rights: Include when majority members can force minority members to join in a sale

4. Non-Competition: Used when seller is restricted from competing with the company post-sale

5. Tax Matters: Include detailed tax provisions when transaction has significant tax implications

6. Regulatory Approvals: Required when transaction needs government or regulatory approval

7. Employee Matters: Include when seller has ongoing employment relationship with company

8. Earn-Out Provisions: Used when portion of purchase price is contingent on future performance

Suggested Schedules

1. Schedule A - Description of Membership Units: Detailed description of units being purchased including class, rights, and restrictions

2. Schedule B - Purchase Price Calculation: Breakdown of purchase price and payment terms

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

4. Schedule D - Company Financial Statements: Recent financial statements of the company

5. Schedule E - Disclosure Schedule: Exceptions to representations and warranties

6. Schedule F - Required Consents: List of third-party consents needed for the transaction

7. Appendix 1 - Form of Transfer Power: Form for transferring membership units

8. Appendix 2 - Form of Release: Form of mutual release between parties

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

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Technology

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Relevant Teams

Legal

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Corporate Development

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Executive Leadership

Board of Directors

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Relevant Roles

Chief Executive Officer

Chief Financial Officer

Corporate Lawyer

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Business Development Manager

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Private Equity Manager

Venture Capital Manager

Mergers & Acquisitions Director

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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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