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Documentation

Preliminary agreements
What preliminary agreements are commonly drafted?

The two most common preliminary agreements that are drafted to commence a transaction are a letter of intent and a non-disclosure agreement. These documents generally set out initial terms pertaining to the structure of the proposed transaction and lay the groundwork for commencing negotiations.

Principal documentation
What documents are required?

A form of definitive agreement – which sets out the nature of the transaction – is required. Common definitive agreements include:

  • arrangement agreements;
  • share purchase (or exchange) agreements; and
  • asset purchase agreements.

Further, if shareholder approval is necessary to affirm the transaction, an information circular will also be required.

Which side normally prepares the first drafts?

The purchaser will normally prepare the first draft of the document, as it is usually the party making the initial offer.

What are the substantive clauses that comprise an acquisition agreement?

Basic contract law principles dictate that the keys terms required for a binding contract are offer, acceptance and consideration. Generally speaking, the substantive clauses that comprise an acquisition agreement are:

  • purchase price and other related provisions (ie, adjustments, allocations, method and timing of payment);
  • representations and warranties;
  • covenants; and
  • provisions related to indemnification and limitation of liability.

What provisions are made for deal protection?

Deal protection is increasingly common in Canadian M&A. The key forms of deal protection are break fees, lock-up agreements, standstill agreements and non-solicitation and no-shop provisions.

Closing documentation
What documents are normally executed at signing and closing?

The documents that must be executed on signing and closing of a transaction vary according to the nature of the transaction. Typically, the definitive agreement must be executed, as will documentation relating to endorsed share certificates, conveyance or a bill of sale (as applicable). In addition, a number of other ancillary documents (eg, resolutions, receipts, employment agreements and other related agreements) must be executed.

Are there formalities for the execution of documents by foreign companies?

Generally speaking, there is no difference between the execution of documents by foreign companies and domestic entities, other than as may be required by local laws governing such foreign companies. The one area where a difference may arise is with respect to notarisation requirements, where applicable or required for land transfers.

Are digital signatures binding and enforceable?

Yes – digital signatures are binding and enforceable. The Personal Information Protection and Electronic Documents Act (Canada) governs matters in this regard.

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