A corporation requires a Full and Final Release wherever it seeks to conclude a legal risk permanently in exchange for consideration (value) given or received, typically money, shares, or another benefit.

When is a Full and Final Release typically used?

• The settlement of litigation or a demand made prior to the commencement of proceedings.
• The termination of an employment relationship, particularly with a senior employee, officer, or director who may hold claims for wrongful dismissal, unpaid compensation, or indemnification.
• The buy-out of a shareholder or departing business partner, to preclude subsequent claims relating to valuation, oppression, or the corporation’s internal affairs.
• The winding up or dissolution of a corporation, to protect those who managed it from future claims by creditors, shareholders, or one another.
• The completion of a transaction, such as a share purchase, where a purchaser requires the vendor to release the corporation from pre-closing claims, or the converse.

Is a Director’s Resolution required?

A Directors’ Resolution authorizing the release and confirming that the release and the consideration exchanged serve the best interests of the corporation, should be passed and retained, consistent with the directors’ statutory standard of care.

What are the consequences of proceeding without a Release?

In the absence of an executed release, a settled dispute may recur. This could happen even where consideration has been exchanged, resulting in the paying party possibly having no documented protection against the other party’s same, or a related claim in subsequent proceedings.

Illustration

When two co-founders of an Ontario corporation conclude their business relationship, and one is bought out for one hundred and fifty thousand dollars, both the departing shareholder and the corporation ordinarily execute mutual Full and Final Releases, after which neither party may make a claim against the other in respect of the pre-buy-out conduct of the business.

A Full and Final Release is appropriate whenever a corporation exchanges consideration (value) to resolve a dispute or conclude a relationship, and the release should be authorized by the board and executed with the same formality applied to other significant corporate transactions.

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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