Using a Full and Final Release is among the most effective ways a corporation can permanently resolve a legal risk. When properly drafted and authorized, it converts a settled dispute into a strong resolution; however, when not properly drafted, it may not deliver the protection it is intended to provide.

What should you consider when drafting a Full and Final Release?

• The release should identify not only the corporation but also its directors, officers, employees, and affiliates, since a claimant may otherwise pursue those individuals directly despite the release of the corporation.
• As the release will be construed according to its plain wording, vague or unduly narrow language may leave related claims unresolved.
• Confirmation that genuine consideration is being exchanged, whether a settlement payment, a waived debt, a share transfer, or other value.
• Inclusion of a confidentiality clause, where appropriate, and a clause specifying the governing law as that of Ontario.
• Inclusion of a severability clause, such that the invalidity of one provision does not affect the remainder of the release.

Is a Director’s Resolution required?

Because a release is a contract binding the corporation, the board should authorize it by Directors’ Resolution, and the individual executing it should possess proper signing authority under the corporation’s by-laws or a specific resolution, preventing any subsequent contention that the release was not properly approved.

Mistakes when drafting a Full and Final Release

• Execution of a release supported only by nominal or no genuine consideration, may result in s challenge to its enforceability.
• Omission of related parties, such as directors or officers, who remain exposed to individual claims.
• Use of generic precedent language that does not correspond to the claims actually in dispute.
• Failure to retain evidence of authorization within the corporation’s records.

As releases carry permanent legal consequences, a corporation should obtain legal review of the document prior to execution, particularly where significant claims or continuing relationships are at stake.

Getting the legal help you need

Protect yourself and your business from future claims or lawsuits. Create a Full and Final Release of Corporation quickly and affordably with Legal Line Documents. Get your document in just a few minutes and move forward with confidence. Start now.

								
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