Investment Agreement — Quebec (Convention d'investissement)

A Quebec Investment Agreement (Convention d'investissement) is a thorough legal document that governs the terms and conditions under which an investor provides capital to a corporation or business entity in exchange for equity, debt, or hybrid financial instruments. Investment agreements in Quebec are governed primarily by the Code civil du Quebec (CCQ), the Loi sur les societes par actions du Quebec (LSAQ, RLRQ, c. S-31.1), the Canada Business Corporations Act (CBCA) where applicable, and the securities legislation administered by the Autorite des marches financiers (AMF) under the Securities Act (RLRQ, c. V-1.1) and the applicable exemptions from prospectus requirements for private placements.

Investment agreements in Quebec's private capital markets are typically negotiated in the context of venture capital, angel investment, private equity, or strategic partnership transactions. The agreement defines the economic and governance rights of the investor in the corporation, the conditions under which the investment is made and disbursed, and the mechanisms for the investor to realize a return on their investment through dividends, redemptions, or exit events such as an initial public offering (IPO) or a sale of the corporation.

The most common types of investment structures used in Quebec include: (1) ordinary or preferred share subscriptions, where the investor receives newly issued shares in exchange for the investment amount; (2) convertible notes or Simple Agreements for Future Equity (SAFEs), where the investor provides debt capital that converts into equity upon the occurrence of a future financing event or milestone; (3) term loans with equity warrants, where a debt investment is coupled with the right to acquire shares at a predetermined price; and (4) revenue-based financing arrangements, where the investor receives a percentage of future revenues until a multiple of the investment is returned.

Under the LSAQ, the rights attaching to different classes of shares, including preferred shares typically issued to investors, must be set out in the corporation's articles of incorporation and may be supplemented by a shareholders agreement or a unanimous shareholders agreement (USA, convention unanime des actionnaires). Preferred shares commonly carry rights superior to those of common shares with respect to dividends, distributions on liquidation, redemption rights, anti-dilution protections, and conversion rights. These rights must be established in the articles and exercised in accordance with arts. 49-70 LSAQ governing share capital and arts. 212-228 LSAQ governing unanimous shareholders agreements.

The AMF regulates the distribution of securities in Quebec, including private placements of shares and convertible instruments to investors. Subject to certain exemptions, including the accredited investor exemption and the private issuer exemption under the Regulation respecting Prospectus Exemptions (RLRQ, c. V-1.1, r. 3), corporations distributing securities to investors must comply with the AMF's disclosure and reporting requirements. The investment agreement itself is typically not required to be filed with the AMF, but representations and warranties about the corporation's regulatory compliance and the eligibility of the investors to rely on applicable exemptions are standard components of the agreement.

Key commercial terms in a Quebec investment agreement include the pre-money valuation of the corporation (which determines the price per share and the post-investment ownership percentage of the investor), the milestones or conditions to closing, representations and warranties about the corporation's business and financial condition, covenants governing the corporation's conduct during and after the investment, and the investor's governance rights such as board representation, information rights, and approval rights over specified corporate actions.

Article 1385 of the Civil Code of Quebec establishes the foundation of contractual obligations, while Article 1590 of the Civil Code of Quebec governs remedies for non-performance. Section 40 of the Consumer Protection Act of Quebec (CQLR c P-40.1) regulates unfair contract terms. The Commission des normes de l'equite de la sante et de la securite du travail (CNESST) enforces the Act Respecting Labour Standards of Quebec (CQLR c N-1.1). Section 49 of the Charter of Human Rights and Freedoms of Quebec protects fundamental civil liberties. The Tribunal administratif du Quebec (TAQ) hears administrative disputes under Section 14 of the Act Respecting Administrative Justice of Quebec (CQLR c J-3). The Regie du logement du Quebec (now Tribunal administratif du logement) adjudicates residential tenancy disputes under Section 28 of the Act Respecting the Regie du logement of Quebec. The Autorite des marches financiers du Quebec (AMF) regulates financial services under Section 4 of the Act Respecting the Autorite des marches financiers of Quebec. Revenu Quebec administers the Taxation Act of Quebec (CQLR c I-3) and the Act Respecting the Quebec Sales Tax of Quebec (CQLR c T-0.1). The Barreau du Quebec and the Chambre des notaires du Quebec regulate legal professionals under Section 1 of the Professional Code of Quebec (CQLR c C-26).

An investment agreement is needed in Quebec whenever an investor provides capital to a private corporation in exchange for equity or debt instruments and the parties wish to formally document their rights and obligations arising from the investment. The following contexts represent the most common situations where a formal investment agreement is required.

Early-stage startup financing requires a formal investment agreement when founders accept capital from outside investors such as angel investors, friends and family, or early-stage venture capital firms. The agreement establishes the valuation of the startup, the price per share, the rights attaching to the shares issued to investors, and the governance arrangements that will govern the corporation after the investment closes. In Quebec's startup ecosystem, organizations such as Anges Quebec, Investissement Quebec, and CDPQ Infra provide early-stage and growth capital subject to formal investment agreements that comply with the LSAQ and the AMF's applicable regulatory requirements.

Series A, B, and later-stage venture capital financing rounds involve more complex investment agreements negotiated between professional investors and the founding team. These agreements typically include preferred share terms with liquidation preferences, anti-dilution protection, participation rights, and conversion rights, as well as thorough covenants, information rights, and board representation provisions. In Montreal and Quebec City's growing technology and life sciences sectors, these investment rounds often involve both Quebec-based and international investors, requiring investment agreements that follow both Quebec civil law and common law principles.

Strategic investments by corporations into other companies as part of business development initiatives, technology licensing arrangements, or joint venture structures require investment agreements that address the strategic objectives of both parties in addition to the financial terms. These agreements may include exclusivity or non-compete provisions, technology sharing arrangements, and exit mechanisms tailored to the strategic rather than purely financial nature of the investment.

Government grants, loans, and equity investments from Investissement Quebec, the Business Development Bank of Canada (BDC), and other public sector financing entities are documented through formal investment agreements that include compliance obligations, reporting requirements, conditions to disbursement, and specific use-of-proceeds restrictions. These agreements may also include job creation commitments and other conditions tied to the public policy objectives of the financing program.

Real estate and infrastructure investments, including investments in real estate development projects through limited partnerships or co-ownership structures, require investment agreements that address the specific characteristics of the underlying real property, the applicable real estate regulations under the Act respecting land use planning and development (RLRQ, c. A-19.1) and municipal zoning by-laws, and the financing structure applicable to the project. Co-investment and syndicate structures where multiple investors participate in a single financing round require investment agreements that address the respective rights and priorities of each investor class, the lead investor's role in negotiating and enforcing the agreement on behalf of the syndicate, and the allocation of securities and economic rights among the co-investors. Family offices, pension funds, and institutional investors providing mezzanine or growth financing to established Quebec corporations require detailed investment agreements addressing the specific regulatory and fiduciary requirements applicable to these classes of investors. The documentation of these transactions requires experienced securities and corporate law counsel familiar with both the Quebec civil law framework and the applicable AMF regulatory requirements. Due diligence, term sheet negotiation, and definitive documentation typically require several weeks to months to complete, depending on the complexity of the transaction and the condition of the corporation's corporate records and financial reporting.

Article 1385 of the Civil Code of Quebec establishes the foundation of contractual obligations, while Article 1590 of the Civil Code of Quebec governs remedies for non-performance. Section 40 of the Consumer Protection Act of Quebec (CQLR c P-40.1) regulates unfair contract terms. The Commission des normes de l equite de la sante et de la securite du travail (CNESST) enforces the Act Respecting Labour Standards of Quebec (CQLR c N-1.1). Section 49 of the Charter of Human Rights and Freedoms of Quebec protects fundamental civil liberties. The Tribunal administratif du Quebec (TAQ) hears administrative disputes under Section 14 of the Act Respecting Administrative Justice of Quebec (CQLR c J-3). The Regie du logement du Quebec (now Tribunal administratif du logement) adjudicates residential tenancy disputes under Section 28 of the Act Respecting the Regie du logement of Quebec. The Autorite des marches financiers du Quebec (AMF) regulates financial services under Section 4 of the Act Respecting the Autorite des marches financiers of Quebec. Revenu Quebec administers the Taxation Act of Quebec (CQLR c I-3) and the Act Respecting the Quebec Sales Tax of Quebec (CQLR c T-0.1). The Barreau du Quebec and the Chambre des notaires du Quebec regulate legal professionals under Section 1 of the Professional Code of Quebec (CQLR c C-26).

A thorough and legally valid Quebec investment agreement must include the following key elements to satisfy the requirements of the LSAQ, the CCQ, the AMF securities regulations, and commercial standard practices:

**Identification of Parties:** Full legal names, addresses, and legal capacity of all investors and the investee corporation, including the corporation's NEQ, its authorized and issued share capital as of the date of the agreement, and the identity and authority of all signing representatives.

**Description of the Investment:** The total investment amount, the form of the investment (equity subscription, convertible note, SAFE, term loan with warrants, or other instrument), the price per share or conversion mechanics, the post-investment capitalization table showing the ownership percentages of all shareholders after closing, and the conditions to closing.

**Share Rights and Preferences:** If the investment involves preferred shares, a complete description of the rights, privileges, restrictions, and conditions attaching to the preferred shares, including dividend rights (cumulative or non-cumulative, participating or non-participating), liquidation preference (amount and seniority), conversion rights (optional and mandatory conversion mechanics), anti-dilution protection (broad-based or narrow-based weighted average), redemption rights, and voting rights.

**Representations and Warranties:** Thorough representations and warranties by the corporation about its incorporation and corporate status, its authorized and issued share capital, the absence of liens or encumbrances on its shares or assets, the accuracy of its financial statements, compliance with applicable laws including tax, employment, and environmental laws, the absence of material litigation, and the full disclosure of all material information about the corporation's business and prospects.

**Covenants:** Affirmative covenants (things the corporation agrees to do) and negative covenants (things the corporation agrees not to do without investor approval). Common affirmative covenants include maintaining proper books and records, providing monthly or quarterly financial reports, maintaining adequate insurance, and complying with applicable laws. Common negative covenants include restrictions on additional borrowing, issuances of new shares, payment of dividends, sale of material assets, and changes to the business without investor consent.

**Governance Rights:** Board representation rights, including the number and selection mechanism for investor-designated directors; observer rights at board meetings; information rights, including access to financial records, management accounts, and material contracts; and approval rights over specified corporate actions that require investor consent.

**Anti-Dilution Protection:** The mechanism by which the investor's effective price per share will be adjusted if the corporation subsequently issues shares at a lower price, including the formula used and the securities excluded from the anti-dilution calculation.

**Exit Mechanisms:** Drag-along rights allowing the investor (if holding a sufficient percentage) to compel other shareholders to join in a sale of the corporation; tag-along rights allowing the investor to participate in any sale by the founders on the same terms; and registration rights if the corporation is contemplating a public offering.

**Good Faith and Governing Law:** An express acknowledgment that all parties act in good faith (bonne foi, art. 1375 CCQ), that the agreement is governed by the laws of Quebec and Canada, and that disputes will be resolved before the courts of Quebec or through arbitration as specified. **Securities Law Compliance:** Representations by the corporation that the issuance of securities under the investment agreement complies with applicable Quebec securities law, including the Regulation respecting Prospectus Exemptions (RLRQ, c. V-1.1, r. 3), and that the investor qualifies for the applicable exemption (accredited investor, private issuer, or other applicable exemption). The agreement should also include investor representations confirming their eligibility for the applicable exemption and their understanding of the resale restrictions applicable to the securities received. **Closing Mechanics:** A detailed description of the conditions precedent to closing, the sequence of deliveries at closing (including share certificate issuance, payment of the investment amount, and delivery of executed ancillary documents), and the consequences of failure to close by the agreed deadline. Under Quebec law, Article 1385 of the Civil Code of Québec (CCQ) and Section 79.1 of the Act Respecting Labour Standards (CQLR c N-1.1) govern the core requirements for this type of document.

Under Quebec law, the Civil Code of Quebec (CCQ) governs contractual obligations and property rights. The Act Respecting Labour Standards (CQLR c N-1.1) and the Commission des normes, de l'equite, de la sante et de la securite du travail (CNESST) regulate employment. The Consumer Protection Act (CQLR c P-40.1) and the Office de la protection du consommateur (OPC) protect consumer rights. The Act Respecting the Protection of Personal Information in the Private Sector governs data privacy through the Commission d'acces a l'information (CAI). Revenu Quebec administers provincial tax obligations. The forms-legal.com Investment Agreement — Quebec (Convention d'investissement) template covers the mandatory elements under Civil Code of Québec (CCQ), Book Five: Obligations. Under Quebec law, Article 35 of the Code of Civil Procedure (CQLR c C-25.01) govern the core requirements for this type of document.