A Canadian Investment Agreement is a legally binding contract between a company seeking capital and an investor providing funds in exchange for equity ownership (shares), debt repayment with interest, or a convertible instrument that starts as debt and converts to equity upon a qualifying event. This document formalizes the terms of the investment, including the amount, structure, investor rights, representations, and conditions precedent to closing.

Canadian private investments are regulated under a multi-layered framework. At the federal level, the Canada Business Corporations Act (CBCA) governs corporate structure and share issuance for federally incorporated companies. Provincial Business Corporations Acts (OBCA, BCBCA, ABCA, QBCA) apply to provincially incorporated entities. Securities regulation is handled by provincial and territorial securities commissions, coordinated through the Canadian Securities Administrators (CSA). National Instrument 45-106 — Prospectus Exemptions provides the primary framework for exempt distributions, allowing companies to raise capital without filing a prospectus when specific conditions are met.

Common prospectus exemptions include the accredited investor exemption (NI 45-106, s. 2.3), which requires the investor to meet financial thresholds (e.g., net financial assets exceeding CAD $1,000,000 or net income exceeding CAD $200,000); the friends, family and business associates exemption (s. 2.5); the private issuer exemption (s. 2.4); and the minimum amount investment exemption (s. 2.10, requiring a minimum investment of CAD $150,000). Ontario also introduced a self-certified investor exemption (OI 45-510) effective October 2025.

For tax purposes, the Canada Revenue Agency (CRA) treats equity investments, debt investments, and convertible instruments differently. Interest income on debt is fully taxable as ordinary income. Capital gains on the disposition of shares are subject to the inclusion rate under section 38 of the Income Tax Act (Canada). The lifetime capital gains exemption under section 110.6 may apply to qualifying small business corporation (QSBC) shares, with the exemption amount set at CAD $1,250,000 as of June 2024.

When a startup or growing business needs to raise capital from angel investors, venture capital firms, or private equity investors, and the investment involves issuing shares (common or preferred) or convertible instruments.

When a private company is raising a seed, Series A, or later-stage financing round and needs to document the investment terms, including share price, ownership percentage, anti-dilution protections, and investor rights such as board representation and information rights.

When a company is accepting a private loan from an individual or entity and needs to formalize the repayment terms, interest rate, and security (if any) under the applicable provincial Personal Property Security Act (PPSA), while ensuring the interest rate does not exceed the criminal interest rate threshold under Criminal Code s. 347.

When friends, family members, or business associates are investing in a private company and the parties need to rely on the friends/family/business associates exemption under NI 45-106, s. 2.5, which requires a specific form of risk acknowledgement.

When an accredited investor is making a private placement and the company needs to document the investor’s accredited status, the resale restrictions under NI 45-102, and the company’s obligation to file a report of exempt distribution with the applicable securities commission.

When a company issues a convertible note to bridge financing and needs to specify the conversion discount, valuation cap, and qualifying financing threshold that will trigger automatic conversion from debt to equity.

Operating without a formal investment agreement creates ambiguity about ownership, investor rights, and exit terms, and may expose the company to securities law violations, CRA reassessments, or shareholder disputes.

Investment Structure — Clear identification of whether the investment is equity (share purchase), debt (loan), or a convertible instrument (note converting to shares). Each structure has different legal, tax, and regulatory implications under Canadian law.

Securities Exemption — For equity and convertible investments, the specific prospectus exemption under NI 45-106 relied upon for the distribution. The company must file a report of exempt distribution (Form 45-106F1) with the applicable securities commission within the prescribed period.

Investment Amount and Funding — The total investment in Canadian dollars (CAD), the funding deadline, and the method of payment. For equity investments, the price per share and total shares issued. For debt, the principal amount and disbursement terms.

Investor Rights — Board representation (seat or observer), information rights (financial reporting frequency and standards), anti-dilution protection (full ratchet or weighted average), and pre-emptive rights (participation in future financing rounds).

Representations and Warranties — Statements of fact by both parties. The company represents its corporate standing, capitalization, compliance with tax and securities laws, and absence of material litigation. The investor represents eligibility, investment intent, and acknowledgement of resale restrictions.

Conditions Precedent — Requirements that must be satisfied before the investment closes, such as completion of due diligence, delivery of officer certificates, corporate authorizations, and third-party consents.

Use of Funds — Description of how the investment funds will be deployed, providing transparency and accountability to the investor.

Non-Competition — Restrictions on founders and key personnel from engaging in competing businesses, which must be reasonable in scope, duration, and geographic area under Shafron v. KRG Insurance Brokers (2009 SCC 6).

Confidentiality — Obligations to protect non-public information exchanged in connection with the investment, with compliance with PIPEDA and applicable provincial privacy legislation.

Governing Law and Dispute Resolution — The province whose laws govern the agreement and the mechanism for resolving disputes (arbitration, mediation, or litigation).