What steps should be taken to welcome an investor?

Bringing an investor into a corporation generally requires determining the investment structure, reviewing corporate documentation, and preparing the necessary transaction documents.

One of the first questions is how the investor will become a shareholder. This may include:

• subscribe to new shares issued by the company;
• acquire shares held by an existing shareholder.

When new shares are issued, the invested funds are generally paid to the company in exchange for the shares issued. For a company incorporated under the Quebec regime, the issued shares do not necessarily have to be fully paid for at the time of issuance. Payment may, depending on the applicable terms, be made according to the company's payment requests. When purchasing existing shares, the transaction takes place between the investor and the shareholder selling their shares.

Before proceeding, it may be necessary to:

• determine the amount and terms of the investment;
• determine the stake that the new investor will hold;
• check the categories or series of shares and the rights attached to them;
• examine the statutes and their amendments as well as the regulations;
• check the restrictions applicable to the issuance or transfer of shares;
• examine any existing shareholder agreements, if applicable;
• to verify and update the minutes book and corporate records;
• regularize corporate documentation, if necessary;
• assess the legal, tax and financial consequences of the investment.

The investor can also conduct due diligence to examine the legal, corporate, financial, tax and commercial situation of the company before making their investment.

Depending on the transaction under consideration, it may be necessary to prepare a share subscription or purchase agreement, the required corporate resolutions, as well as a new shareholders' agreement or an amendment to the existing one.

Following the transaction, the corporate records and minute book must be updated to reflect the arrival of the new shareholder and the shares they hold. Any required update filings with government or regulatory authorities must also be made, where applicable.

Information relating to persons exercising control over the company must also be updated, where required by applicable rules, particularly when the investment results in a change of control or information that must be retained or reported.

In summary , welcoming an investor first requires determining whether they will subscribe to new shares or purchase existing ones. Next, applicable rights and restrictions must be verified, necessary due diligence performed, and the legal and corporate documentation prepared to complete the investment. After the transaction, the minutes book, corporate records, and information required by the relevant authorities must also be updated, where applicable.