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Silent Partnership Agreement for Canada

Silent Partnership Agreement Template for Canada

A Silent Partnership Agreement under Canadian law establishes a business relationship where one partner (the silent or dormant partner) provides capital investment but remains undisclosed to the public, while another partner (the active partner) manages the business operations. This agreement defines the terms of capital contribution, profit sharing, management rights, and confidentiality obligations while ensuring compliance with Canadian federal and provincial partnership laws. It includes specific provisions for protecting the silent partner's anonymity while establishing clear mechanisms for financial reporting, decision-making authority, and exit strategies.

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What is a Silent Partnership Agreement?

The Silent Partnership Agreement is a crucial document used in Canadian business arrangements where investors wish to participate in business ventures while maintaining anonymity. This agreement type is particularly valuable for high-net-worth individuals, strategic investors, or business entities seeking to invest in operations without public disclosure of their involvement. The document comprehensively addresses capital contributions, profit sharing, management responsibilities, and confidentiality obligations, while ensuring compliance with Canadian federal and provincial regulations. Silent Partnership Agreements are especially relevant in situations where investors want to provide financial support without assuming management responsibilities or public liability, making them popular in various industries from real estate to technology ventures. The agreement must carefully balance the silent partner's right to information and returns with the active partner's operational autonomy, all while maintaining strict confidentiality.

What sections should be included in a Silent Partnership Agreement?

1. Parties: Identification of the active partner and silent partner(s), including full legal names and addresses

2. Background: Context of the partnership formation, business objectives, and acknowledgment of the silent nature of the partnership

3. Definitions: Key terms used throughout the agreement, including 'Business', 'Capital Contribution', 'Profit Share', etc.

4. Partnership Structure: Details of partnership formation, clarification of silent partner status, and relationship between partners

5. Capital Contributions: Initial and any subsequent capital contributions, valuation methods, and timing

6. Profit and Loss Sharing: Formula for calculating and distributing profits and losses, payment schedules, and accounting methods

7. Management and Control: Exclusive management rights of active partner, scope of authority, and limitations

8. Confidentiality: Obligations to maintain secrecy of partnership, permitted disclosures, and consequences of breach

9. Term and Termination: Duration of partnership, termination triggers, and exit procedures

10. Representations and Warranties: Standard declarations by all parties regarding capacity, authority, and compliance

11. Tax Matters: Tax treatment, reporting responsibilities, and allocation of tax obligations

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

What sections are optional to include in a Silent Partnership Agreement?

1. Non-Competition: Restrictions on partners engaging in competing businesses, used when there's significant risk of competition

2. Intellectual Property: IP ownership and licensing provisions, included when the business involves significant IP assets

3. Additional Capital Calls: Procedures for requesting additional capital, included when future funding needs are anticipated

4. Advisory Rights: Silent partner's rights to receive information or provide input, used when silent partner wants limited involvement

5. Insurance: Required insurance coverage and obligations, included for high-risk businesses

6. Dispute Resolution: Alternative dispute resolution procedures, recommended for international partnerships or complex arrangements

7. Force Majeure: Provisions for unforeseen circumstances, particularly relevant in volatile industries or uncertain markets

What schedules should be included in a Silent Partnership Agreement?

1. Schedule A - Capital Contributions: Detailed breakdown of initial and committed capital contributions from each partner

2. Schedule B - Business Plan: Detailed business plan including projections and operational strategy

3. Schedule C - Profit Sharing Formula: Detailed calculations and examples of profit/loss sharing mechanism

4. Schedule D - Reporting Requirements: Format and frequency of financial reports to be provided to silent partner

5. Schedule E - Valuation Methodology: Agreed methods for valuing partnership interests for various purposes

6. Appendix 1 - Bank Account Details: Designated account information for capital contributions and distributions

7. Appendix 2 - Tax Elections: Copies of tax elections and related documentation

Authors

Alex Denne

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

Jurisdiction

Canada

Publisher

Ƶ

Cost

Free to use
Relevant legal definitions
































Clauses



































Relevant Industries

Real Estate Development

Technology Startups

Manufacturing

Retail

Professional Services

Healthcare

Hospitality

Entertainment

Financial Services

Agriculture

Construction

Energy

Mining

Transportation and Logistics

Relevant Teams

Legal

Finance

Corporate Development

Investment

Risk Management

Tax

Compliance

Executive Leadership

Business Development

Corporate Governance

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Business Development Manager

Investment Manager

Private Equity Manager

Legal Counsel

Corporate Lawyer

Business Owner

Entrepreneur

Finance Director

Managing Partner

Investment Advisor

Venture Capitalist

Business Angel

Corporate Secretary

Risk Manager

Tax Advisor

Partnership 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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