Investment clubs in Canada provide an excellent opportunity for like-minded investors to pool funds and make joint investment decisions. When starting an investment club, it’s crucial to have a formal partnership agreement outlining the rights and responsibilities of members. This helps avoid potential disputes down the road. Here are some key elements to include in an investment club partnership agreement template under Canadian regulations:
Official club name and purpose
The agreement should clearly state the official name of the investment club and its main objectives. This establishes the club as a formal entity and aligns members to a shared mission, such as achieving long-term capital growth through equity investments.
Member capital contributions
Define the initial and ongoing capital contribution from each member, such as an upfront fee and monthly deposits into the club’s investment account. Include provisions for how new members buy into existing assets.
Decision-making procedures
Detail the decision-making process for club activities like selecting investments, adding new members, amending rules, etc. Common approaches include majority vote, unanimous consent, or delegation to a club president or investment committee.
Profit/loss distribution
Specify how any realized gains and losses will be allocated among members. The two main methods are pro-rata distribution based on ownership percentage, or dividing equally regardless of contribution size.
Withdrawal policies
Define the requirements and procedures for members to withdraw their capital, such as provided written notice, limits on frequency/amounts, and treatment of the member’s ownership percentage.
Key elements of an investment club partnership agreement include the club’s purpose, member contributions, decision-making, profit/loss distribution, and withdrawal policy. Following Canadian regulations ensures a binding contract.