Shareholder Loan Agreement Template Canada

Shareholder Loan Agreement Template Canada

1. Document Preamble & Recitals

THIS SHAREHOLDER LOAN AGREEMENT (the "Agreement") is entered into and made effective as of this [Day] day of [Month], [Year] (the "Effective Date").

BETWEEN:

[Full Legal Name of Shareholder], an individual having an address at [Insert Address] / a corporation incorporated under the laws of [Province/Federal Jurisdiction], having its registered office at [Insert Address] (hereinafter referred to as the "Lender")

AND:

[Full Legal Name of Corporation], a corporation incorporated under the laws of [Province/Federal Jurisdiction], having its registered office at [Insert Address] (hereinafter referred to as the "Borrower")

WHEREAS: A. The Lender is a registered shareholder of the Borrower, holding [Number] common/preferred shares representing [Percentage]% of the issued and outstanding voting equity of the Borrower. B. The Borrower has requested, and the Lender has agreed to advance, a term loan in the principal amount of [Currency and Written Amount, e.g., One Hundred Thousand Canadian Dollars (CAD $100,000.00)] for the purpose of funding the working capital requirements and general corporate operations of the Borrower. C. The Parties intend for this loan to be documented comprehensively, establishing clear terms of repayment, interest, subordination (if applicable), and remedies upon default, in compliance with the laws of the Province of [Province] and the federal laws of Canada applicable therein.

NOW, THEREFORE, WITNESSETH, that in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties covenant and agree as follows:

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2. Operational Definitions

For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the meanings set forth below:

1. "Business Day" means any day, other than a Saturday, Sunday, or statutory holiday, on which commercial banks are open for general business in [City, Province].
2. "Default Rate" means an interest rate equal to [Insert Number, e.g., two percent (2%)] per month, compounded monthly, or the maximum rate permitted by applicable Canadian law, whichever is lower.
3. "Effective Date" has the meaning ascribed to it in the preamble of this Agreement.
4. "Event of Default" has the meaning ascribed to it in Section 4.1 of this Agreement.
5. "Interest Rate" means simple/compounded interest calculated at the rate of [Insert Number, e.g., five percent (5%)] per annum, calculated [annually/semi-annually/monthly] on the outstanding principal balance from time to time.
6. "Lender" means [Full Legal Name of Shareholder], including its permitted successors and assigns.
7. "Loan" means the principal sum of [Dollar Amount] advanced by the Lender to the Borrower pursuant to Section 3.1, together with all accrued and unpaid interest and other charges payable hereunder.
8. "Maturity Date" means [Insert Date, e.g., December 31, 2028], or such earlier date as the Loan becomes due and payable pursuant to the terms of this Agreement.
9. "Material Adverse Effect" means a material adverse effect on: (a) the business, operations, assets, liabilities, or financial condition of the Borrower; (b) the ability of the Borrower to perform its obligations under this Agreement; or (c) the validity or enforceability of this Agreement.
10. "Parties" means collectively the Lender and the Borrower, and "Party" means either one of them.
11. "Prime Rate" means the annual rate of interest announced by the primary Canadian chartered bank designated by the Lender from time to time as its reference rate for commercial loans made in Canada in Canadian dollars.

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3. Substantive Terms & Obligations

3.1 Advance of the Loan

Subject to the terms and conditions of this Agreement, the Lender agrees to advance to the Borrower, and the Borrower agrees to borrow from the Lender, the principal sum of [Dollar Amount] in Canadian Dollars on the Effective Date by way of wire transfer of immediately available funds to an account designated in writing by the Borrower.

3.2 Repayment of Principal and Interest

1. Principal Repayment: The outstanding principal balance of the Loan, together with all accrued and unpaid interest, shall be repaid in full by the Borrower to the Lender on the Maturity Date, subject to the prior acceleration provisions contained herein.
2. Interest Calculation: Interest shall accrue daily on the outstanding principal balance of the Loan from the Effective Date until the Loan is paid in full, at the Interest Rate. Interest shall be calculated on the basis of a 365-day year and the actual number of days elapsed.
3. Voluntary Prepayment: The Borrower may, at any time and from time to time, prepay the whole or any part of the principal amount of the Loan then outstanding without penalty or bonus, provided that all accrued and unpaid interest up to the date of such prepayment is paid concurrently therewith.

3.3 Use of Proceeds

The Borrower covenants and agrees that the proceeds of the Loan shall be used exclusively for the general corporate purposes and working capital requirements of the Borrower, and for no other purpose without the prior written consent of the Lender.

3.4 Representations and Warranties of the Borrower

The Borrower hereby represents and warrants to the Lender, acknowledging that the Lender is relying upon such representations and warranties in entering into this Agreement, that:

1. Status and Capacity: The Borrower is a corporation duly incorporated, organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, and has all necessary corporate power and authority to own its assets and carry on its business as currently conducted.
2. Authority: The Borrower has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of the Borrower.
3. Enforceability: This Agreement constitutes a legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, and other laws affecting creditors' rights generally.
4. No Conflict: The execution, delivery, and performance by the Borrower of this Agreement do not and will not: (a) violate any provision of the constating documents, articles, or bylaws of the Borrower; (b) violate any law, regulation, order, writ, judgment, injunction, or decree applicable to the Borrower; or (c) result in any breach of, or constitute a default under, any material contract, agreement, or instrument to which the Borrower is a party.

3.5 Representations and Warranties of the Lender

The Lender hereby represents and warrants to the Borrower that:

1. Capacity: The Lender has full legal capacity, power, and authority to enter into this Agreement and to perform all obligations required hereunder.
2. Source of Funds: The funds advanced pursuant to this Agreement are derived from lawful sources and do not contravene any anti-money laundering legislation applicable in Canada.

3.6 Subordination (Optional / To be checked if applicable)

If checked [ ], the indebtedness evidenced by this Agreement is and shall be subordinate and junior in right of payment, to the extent and in the manner set forth herein, to the prior payment in full of all senior indebtedness of the Borrower to institutional senior lenders, chartered banks, or secured creditors. The Lender agrees not to demand, sue for, or accept any payment of principal or interest under this Agreement if an event of default has occurred and is continuing under any senior credit facility of the Borrower.

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4. Default, Termination, and Remedies

4.1 Events of Default

The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Agreement:

1. Failure to Pay: The Borrower fails to pay any principal amount of the Loan when due, or fails to pay any accrued interest within [Insert Number, e.g., ten (10)] Business Days of the date such interest becomes due and payable.
2. Breach of Covenants: The Borrower fails to perform, observe, or comply with any other material covenant, term, or condition contained in this Agreement and such failure continues unremedied for a period of [Insert Number, e.g., thirty (30)] Business Days after written notice thereof has been given by the Lender to the Borrower.
3. Insolvency and Bankruptcy: The Borrower institutes or has instituted against it proceedings seeking liquidation, winding-up, reorganization, dissolution, or bankruptcy under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada), or any other applicable insolvency legislation; or the Borrower makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts as they become due.
4. Execution and Seizure: A receiver, receiver-manager, liquidator, custodian, or similar official is appointed for all or substantially all of the assets of the Borrower, or an encumbrancer takes possession of, or execution or distress is levied against, any substantial portion of the Borrower's property.

4.2 Acceleration and Remedies

Upon the occurrence of an Event of Default and at any time thereafter during the continuance thereof, the Lender may, by written notice to the Borrower, declare the entire outstanding principal balance of the Loan, together with all accrued and unpaid interest and any other amounts payable hereunder, to be immediately due and payable, without presentment, demand, protest, or further notice of any kind, all of which are hereby expressly waived by the Borrower.

4.3 Default Interest

Upon the occurrence and during the continuance of an Event of Default, the outstanding principal amount of the Loan and, to the extent permitted by law, any overdue interest, shall bear interest at the Default Rate, calculated from the date of default until the date such amounts are paid in full.

4.4 Cumulative Remedies

The rights and remedies of the Lender under this Agreement are cumulative and are in addition to, and not in substitution for, any other rights or remedies provided by law or in equity. No single or partial exercise by the Lender of any right or remedy precludes or inhibits any other or further exercise thereof or the exercise of any other right or remedy.

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5. Boilerplate Legal Provisions

5.1 Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be severed from this Agreement and the remaining provisions shall remain in full force and effect, provided that such severance does not materially and adversely affect the economic or legal substance of the transactions contemplated hereby.

5.2 Entire Agreement

This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof and supersedes all prior negotiations, understandings, drafts, commitments, representations, and agreements, whether oral or written, between the Parties.

5.3 Force Majeure

Neither Party shall be held liable or responsible to the other Party, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement when and to the extent such failure or delay is caused by acts of God, flood, fire, earthquake, explosion, war, terrorism, invasion, riot, national state of emergency, pandemic, epidemics, or other similar events beyond the reasonable control of the affected Party, provided that the affected Party gives prompt written notice to the other Party and uses commercially reasonable efforts to resume performance.

5.4 Governing Law and Attornment

This Agreement, its construction, validity, enforcement, and performance, shall be governed by and construed in accordance with the laws of the Province of [Province] and the federal laws of Canada applicable therein, without giving effect to any choice or conflict of law provision or rule. Each Party irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of the Province of [Province] sitting in [City], and any appellate courts thereof, in any action or proceeding arising out of or relating to this Agreement.

5.5 Amendments and Waivers

No modification, amendment, supplement, or waiver of any provision of this Agreement shall be effective unless it is in writing and signed by both Parties. No failure or delay by either Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof.

5.6 Successors and Assigns

This Agreement shall enure to the benefit of and be binding upon the Parties and their respective heirs, executors, administrators, legal personal representatives, successors, and permitted assigns. The Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Lender.

5.7 Language

The Parties confirm that it is their express wish that this Agreement, as well as all documents relating hereto, including notices, schedules, and authorizations, have been and shall be drawn up in the English language only. Les parties confirment leur volonté expresse que cette convention, de même que tous les documents y relatifs, y compris les avis, annexes et autorisations, soient rédigés en langue anglaise seulement.

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6. Formal Execution Block

IN WITNESS WHEREOF, the Parties hereto have duly executed this Shareholder Loan Agreement as of the Effective Date first written above.

BORROWER:
[Full Legal Name of Corporation]

Per: ___________________________________
Name: [Signatory Name]
Title: [Signatory Title, e.g., President & CEO]
I/We have the authority to bind the Corporation.

Date: [Date of Execution]

LENDER:
[Full Legal Name of Shareholder / Corporate Lender]

Per: ___________________________________
Name: [Signatory Name]
Title: [Signatory Title / "As Attorney/In Personal Capacity"]
I/We have the authority to bind the Lender. (Delete if Lender is an individual)

Date: [Date of Execution]