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Silent Shareholder Agreement

Silent Shareholder Agreement Template for Canada

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Key Requirements PROMPT example:

Silent Shareholder Agreement

"I need a Silent Shareholder Agreement for my family-owned technology company in Ontario, where my uncle will invest CAD 500,000 but wants to remain completely passive and anonymous, with quarterly profit distributions starting March 2025."

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Document background
The Silent Shareholder Agreement is a crucial document used when a business seeks to bring in an investor who wishes to maintain confidentiality and have limited involvement in company operations. This agreement, structured under Canadian law, is particularly valuable for private companies looking to raise capital without diluting operational control. It details the silent shareholder's investment terms, profit-sharing arrangements, confidentiality obligations, and exit mechanisms while ensuring compliance with relevant Canadian federal and provincial regulations. The document is commonly used in situations where high-net-worth individuals, family offices, or investment entities wish to make passive investments while maintaining privacy and limiting their liability. It includes comprehensive provisions for protecting both the company's interests and the silent shareholder's rights while establishing clear boundaries for involvement in business decisions.
Suggested Sections

1. Parties: Identification of the company, active shareholders, and silent shareholder(s)

2. Background: Context of the agreement, including company status and reason for silent shareholder involvement

3. Definitions: Key terms used throughout the agreement

4. Investment Terms: Details of the silent shareholder's investment, including amount, form, and timing

5. Rights and Obligations: Specific rights of the silent shareholder and limitations on involvement in company operations

6. Profit Sharing and Distributions: Terms for profit distribution, dividend policies, and payment mechanisms

7. Confidentiality: Obligations regarding maintaining the confidentiality of the silent shareholder's identity and investment

8. Transfer Restrictions: Limitations on transferring shares and rights of first refusal

9. Term and Termination: Duration of the agreement and circumstances for termination

10. Exit Provisions: Procedures and terms for the silent shareholder's exit from the investment

11. Representations and Warranties: Standard declarations about legal capacity, authority, and company status

12. General Provisions: Standard legal clauses including governing law, notices, and amendments

Optional Sections

1. Tag-Along Rights: Optional protection allowing silent shareholder to join in sale of shares by other shareholders

2. Drag-Along Rights: Optional right forcing silent shareholder to join in sale of company if majority agrees

3. Special Voting Rights: Used when silent shareholder requires voting rights for specific major decisions

4. Anti-dilution Protection: Optional protection against value dilution in future funding rounds

5. Information Rights: Detailed terms about what company information the silent shareholder can access

6. Foreign Investment Provisions: Required when silent shareholder is a foreign investor

7. Tax Matters: Special tax considerations and structures if complex tax planning is involved

8. Dispute Resolution: Detailed procedures for handling disputes, including mediation or arbitration

Suggested Schedules

1. Schedule A - Investment Details: Detailed breakdown of investment amount, share class, and payment terms

2. Schedule B - Shareholder Information: Confidential details of silent shareholder and their holdings

3. Schedule C - Company Information: Current company structure, capitalization table, and key financial information

4. Schedule D - Profit Distribution Formula: Detailed calculation method for profit sharing and distributions

5. Schedule E - Reporting Requirements: Format and frequency of financial reports to be provided to silent shareholder

6. Appendix 1 - Consent Forms: Required regulatory and corporate consents

7. Appendix 2 - Share Certificate: Copy of share certificate or other proof of ownership

8. Appendix 3 - Company Resolutions: Corporate resolutions approving the silent shareholder arrangement

Authors

Alex Denne

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

alex.den.21@genieai.co
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Relevant Industries

Private Equity

Venture Capital

Real Estate

Technology

Manufacturing

Professional Services

Retail

Healthcare

Family Business

Hospitality

Construction

Agriculture

Entertainment

Relevant Teams

Legal

Finance

Corporate Governance

Executive Leadership

Investment

Compliance

Board of Directors

Corporate Secretariat

Risk Management

Business Development

Relevant Roles

Chief Executive Officer

Chief Financial Officer

Corporate Lawyer

Investment Manager

Business Development Director

Company Secretary

Legal Counsel

Finance Director

Managing Director

Board Member

Corporate Governance Officer

Compliance Officer

Investment Advisor

Private Equity Manager

Venture Capital Partner

Family Office 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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