Incorporation Guide 2011 En

8/3/2019 Incorporation Guide 2011 En

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Guide to Federal Incorporation

Corporations Canada

Helping small

businesses

incorporate

federally


2/66

Corporations Canada

Guide to Federal

Incorporation

Helping small businesses

incorporate federally

The information in this guide is current as of March

2011. Please note, however, that some of the informa-tion such as fees and addresses, is subject to change

without notice.


3/66

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Cat. No. Iu70-4/8-2011E-PDF

ISBN 978-1-100-17616-1

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Aussi oert en ranais sous le titre Guide pour aider

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Cover: 20% recycled materialInside pages: 20% recycled material


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Table o Contents

Preace .................................................................................................... 1

Chapter 1 Why Should I Incorporate? ................................................2

Chapter 2 Incorporating ......................................................................6

Chapter 3 Other Formalities ...............................................................14

Chapter 4 Next Steps in Organizing Your Corporation .......................16

Chapter 5 Keeping Your Corporation in Good Standing ....................20

Chapter 6 Other Obligations o the Corporation ................................ 26

Chapter 7 Organizing Your Corporation: The Directors ......................30

Chapter 8 Organizing Your Corporation: The Shareholders ...............34

Anne A Example o Completed Articles o Incorporation

(corporate name and one class o shares) .........................39

Anne B Example o Completed Articles o Incorporation

(numbered name and two classes o shares) .................... 42

Anne C Examples o By-Laws ........................................................45

Anne D Examples o Notice o Annual Shareholders Meeting

and o Minutes o an Annual Shareholders

Meeting ..............................................................................48

Anne E Examples o Resolution o the Directors and o

Resolution o Shareholders ................................................50

Freqently Ased Qestions .................................................................53

Glossary o Terms...................................................................................56

Contacts ..................................................................................................58

Lins o Interest to Small Bsinesses ..................................................59


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6/66www.corporationscanada.ic.gc.ca

PreaceThis gide gies bsiness owners a general oeriew

o ederal corporate law nder the Caaa Busss

Cas Ac (CBCA). In preparing the Gide,

we hae assmed that yo hae passed the initial

bsiness concept stage and that yo hae either

made the decision to incorporate or are in the

process o maing that decision. Althogh mch o

the inormation in this gide is aimed at single-owner

corporations, it is important to note that the content

applies eqally to all corporations with ewer than

50 shareholders.

This guide provides essential inormation on:

how to incorporate your business;

ling Articles o Incorporation and other orms online;a number o administrative ormalities, such as

registration with provincial and territorial authorities;

the internal organization o your corporation;

the duties o directors and shareholders;

how to keep your corporation in good standing;

examples o a number o completed orms, such as

Articles o Incorporation, organizational resolutions,

by-laws and minutes o a shareholders meeting; and

how to contact Corporations Canada plus other links

o interest.

You should note that this guide does not oer inormation

on distributing corporations, commonly called public

corporations. It also does not deal with organizations such

as banking, insurance, loan and trust companies, or with

non-prot corporations since, in Canada, all o these are

incorporated under statutes other than the CBCA.

IMPORTANTThis guide is not legal advice. It does not

discuss all ederal and provincial/territorial

laws that aect CBCA corporations and those

who run them, nor does it deal exhaustively

with the CBCA. It does, however, provide

the basic knowledge and tools that asmall business owner will need in order to

incorporate and operate a corporation under

the CBCA.

Because this Guide deals with a statute o the

Government o Canada the CBCA a great deal o

the language used is rooted in legal terminology. With this

in mind, a glossary o terms and expressions has beenincluded. We urge you to consult it regularly to avoid

errors in ling your documents.

As you read through this Guide, you may nd that some

sections contain more inormation than you currently

need. Regardless, we suggest that you keep it on hand

or uture reerence as your business develops.


7/66Chapter 1 Why shoud I incorporate?2

Chapter 1

Why Should I Incorporate?One o the most requently asked

questions by entrepreneurs starting anew business is: Should I incorporate?

The answer to this question is usually:

That depends on your particular

situation and your particular needs.

Among the actors to consider in making this decision

are the benets o incorporating (versus operating the

business as a sole proprietorship or partnership) and the

implications that incorporation may have or the business.

I you decide to incorporate, you will then have to choose

between ederal and provincial/territorial incorporation.

I you are not ready to incorporate at this time, remember

that the actors aecting this decision can change overtime. You may nd it helpul to keep this guide on hand or

uture reerence.

1.1 Benets o Incorporating

Separate legal entity

The act o incorporating creates a new legal entity called

a corporation, commonly reerred to as a company. Acorporation has the same rights and obligations under

Canadian law as a natural person. Among other things,

this means it can acquire assets, go into debt, enter into

contracts, sue or be sued, and even be ound guilty o

committing a crime. A corporations money and other

assets belong to the corporation and not to its

shareholders.

When a business is incorporated, its separate legal status

property, rights and liabilities continue to exist until the

corporation is dissolved, even i one or more shareholders

or directors sell their shares, die or leave the corporation.

Limited liability

Incorporation limits the liability o a corporations

shareholders. This means that, as a general rule, theshareholders o a corporation are not responsible or its

debts. I the corporation goes bankrupt, a shareholder

will not lose more than his or her investment (unless

the shareholder has provided personal guarantees

or the corporations debts). Creditors also cannot

sue shareholders or liabilities (debts) incurred by the

corporation, even though shareholders are owners o

the corporation. Note, however, that i a shareholder

has another relationship with the corporation or

example, as a director then he or she may, in certain

circumstances, be liable or the debts o the corporation.

The Canada Business Corporations Act (CBCA) places a

number o obligations and responsibilities on directors.

For example, it says that directors can be held liable or

certain acts or ailures to act. Chapter 7 o this guide has

urther inormation on the role o directors.



For more inormation on:The tax benefts and implications o incorpo-

ration, consult the Canada Revenue Agency

(CRA) publication Canadian Small Businesses

Guide. This publication, which also covers

such matters as business and proessional

income and payroll deductions, is available on

the CRA website: www.cra-arc.gc.ca.

Lower corporate ta rates

Because corporations are taxed separately rom their

owners, and the corporate tax rate is generally lower

than the individual tax rate, incorporation may oer you

some scal advantages. We strongly suggest that you

ask a lawyer or accountant to help you assess whether

incorporating might save you money.

Greater access to capital

It is oten easier or corporations to raise money than

it is or other orms o business. For example, while

corporations have the option o issuing bonds or share

certicates to investors, other types o businesses must

rely solely on their own money and loans or capital. This

can limit the ability o a business to expand.

Corporations are also oten able to borrow money at lowe

rates than those paid by other types o businesses, simply

because nancial institutions and others tend to see loans

to corporations as less risky than those given to other

orms o enterprise.

For more inormation on:How small businesses can fnance their busi-

ness ventures, consult the Canada Business

website: canadabusiness.ca.

Continos eistence

While a partnership or sole proprietorship ceases to

exist upon the death o its owner(s), a corporation would

continue to live on even i every shareholder and director

were to die. This is because, in the case o a corporation,ownership o the business would simply transer to the

shareholders heirs.

This assurance o continuous existence gives a corpora-

tion greater stability. This, in turn, allows the corporation

to plan over a longer term, thereby helping it obtain more

avourable nancing.


9/66Chapter 1 Why shoud I incorporate?4

1.2 Implications oIncorporating

Higher start-p costs

I you decide to incorporate your business, you will have

higher start-up costs than i you carry on the business

as a sole proprietorship or partnership. Some o these

costs are directly related to the process o setting up the

corporation, while others can include proessional ees

paid or legal and accounting services. Although there is

no requirement to obtain legal advice to incorporate, we

encourage you to do so, especially i you are considering

setting up a company with a complex share structure.

Increased ormalities

All ederally incorporated businesses must le certain

documents with Corporations Canada. Among these are:

Articles o Incorporation;

an Annual Return; and

notices o any changes in the board o directors and/or

the address o the registered oce.

A ederally incorporated business must also:

maintain certain specied corporate records;

le corporate income tax returns; and

register in any province or territory where it carries on

business.

More comple strctre

Because a corporation is a separate legal entity that has

no physical orm, its activities must be carried out by

individuals who have an interest in the corporation and

are entitled to act on its behal. These individuals can be

divided into three categories:

1. Shareholders These are the people who own the

corporation. They make decisions by voting and

passing resolutions, generally at a shareholdersmeeting. Most importantly, they elect the directors o

the corporation.

2. Directors They supervise the management o the

corporations business. A corporation must have

at least one director. They are also responsible or

appointing the corporations ocers. A director cannot

be another corporation.

3. Ocers A corporations ocers hold positions

such as president, chie executive ocer, secretary

and chie nancial ocer. Although a corporations

ocers are appointed by the directors, their duties

are normally set out in the by-laws. In general, ocers

are responsible or managing and executing the

corporations day-to-day business.

An individual may hold more than one o these positionsin a corporation. For example, the same individual may be

a shareholder, a director and an ocer, or even the sole

shareholder, sole director and sole ocer.

For more inormation on the roles and responsibilities o

shareholders, directors and ocers, see Chapter 7 and

Chapter 8 o this guide.

For more inormation on:I you are considering a business ventureinvolving more than one shareholder, you

may want to obtain legal advice about the

benets o entering into a shareholder

agreement. Unanimous shareholder

agreements can establish the rules by

which the shareholders make decisions and,

most importantly, resolve disputes among

themselves. Section 8.4 o this guide reviews

these documents in very general terms.

1.3 Benets oIncorporating Federally

Online incorporation and otherserices

Corporations Canada is always working to make its

services more accessible and convenient. For example,

with our online service you can:

le an Annual Return;

change directors or Registered Oce inormation;

receive acknowledgements o lings;

request certicates; and

pay ees.



Filing requests online gives you a number o distinct

advantages. Among them:

Convenience You can le a request rom your oce

or your home. The Online Filing Centre is open seven

days a week, 24 hours a day.

Low or no delivery costs and delays Online requests

eliminate delivery expenses and delays.

Immediate acknowledgement o ling No more

uncertainty about whether your request has beenreceived.

Prompt processing o Articles o Incorporation

Corporations Canada processes online requests either

the same day or the next day, depending on the time

o day the request is submitted and the complexity o

the application.

Reduced ling ee $200 or online incorporation

rather than the regular ee o $250.

Heightened name protection

An approved ederal corporate name oers an extra

degree o protection o your rights to that name.

Specically, ederal incorporation allows your business

to operate using its corporate name right across Canada,

which is important i you decide to expand your business

to other provinces or territories.

Every incorporating jurisdiction in Canada screens

proposed corporate names. However, i you incorporate

under the legislation o one province or territory and later

want to expand your business to another province or

territory, you could nd that another corporation is already

using a name similar to yours in that other location.

On the other hand, an approved ederal corporate name

allows your business to operate using its corporate name

right across Canada (the Province o Quebec may require

that a French version o the name be registered).

Location feibility

Incorporation under the CBCA also gives you a degree

o fexibility in choosing a location or your business. This

fexibility is not always available under the legislation o

other Canadian jurisdictions. For example, the CBCA

sets no restrictions on the province or territory where

registered oces can be located. Nor does it dictate

where corporate records are maintained or where annual

meetings are held. In act, the CBCA even permits

meetings to be held electronically or outside o Canada.

Recognition

Corporations incorporated under the CBCA are

recognized around the world as Canadian corporations.

This means that ederal incorporation may be seen as a

sign o distinction.

High-qality client serice

Corporations Canada processes applications and all other

service requests with minimal delay. Visit our website to

learn more about our standards or processing various

types o requests. You can also subscribe to receive

email notices reminding you to le your annual returns.

You can also subscribe to receive notices o general

inormation rom Corporations Canada by email or

RSS eed.

The Corporations Canada website is available in both

English and French, as are all o our publications. The

knowledgeable and helpul sta members o our client

services unit are also ully bilingual.

Resorces or small bsinesses

Corporations Canada is a Branch o Industry Canada,

a Canadian government department that views small

business as a key to jobs and economic growth. However,

many people nd it dicult to understand the complex

laws, such as the CBCA or the provincial/territorial

incorporation laws that have been put into place by

governments to regulate businesses. There are also

many people starting out in business who cannot aord

the ees o proessionals to help them meet the wide-

ranging requirements o these laws. With this in mind,

Corporations Canada has created a variety o materials

to help the small business person start and operate a

corporation. This material is available on the website or

by contacting Corporations Canada. You may also wish to

consult Links o Interest or Small Businesses at the end

o this Guide or listings o other resources available tosmall businesses.


11/66Chapter 2 Incorporating6

Chapter 2

IncorporatingOnce you have decided to

incorporate, you must fle completedorms with Corporations Canada.

The easiest way is to fle is through

the Online Filing Centre on

Corporations Canadas website.

2.1 The Role oCorporations Canada

When Corporations Canada receives your Articles o

Incorporation, we will make sure that they have been

properly completed and that the proposed name is

acceptable. I so, we will then send you a Certicate o

Incorporation, showing the name o the corporation, thecorporation number and the date o incorporation, along

with your Articles o Incorporation.

You will also receive a Corporation Inormation Sheet that

includes your new Corporation Key. A Corporation Key is

an access code that you will need to le certain requests

online such as making changes to the registered oce

address and director inormation. Should you happen to

lose this key, you will have to request a new one beore

you can use the Corporations Canada Online Filing Centre

to perorm these transactions online. To request a newCorporations Key, go to the Online Filing Centre, click on

Obtain Corporation Key and ollow the instructions.

The date o incorporation is the date on which

Corporations Canada receives the Articles o

Incorporation and the ees. For administrative purposes,

you may wish to request a later incorporation date when

you le your articles.

Documents to fle withCorporations Canada

Once you have decided to incorporate, you

must le the ollowing completed orms with

Corporations Canada:

(Use this as a checklist to help ensure that your

application is complete.)

Articles o Incorporation

Initial Registered Oce Address and First

Board o Directors orm

Yo mst pay the prescribed ees:

Online ling: $200

or

By email, ax, or mail: $250

I yo are seeing approal o a corporatename, yo mst also proide:

a NUANS Name Search Report. The report

must not be dated more than 90 days prior

to the ling date.

inormation about the proposed name.

We strongly sggest that you complete a

Corporate Name Inormation Form.



Your corporations name, incorporation date and other

inormation will then be listed on the Corporations Canada

website.

2.2 How to File Yor Articleso Incorporation

You can le your Articles o Incorporation and other

related documents:

online through the Online Filing Centre. You will nd

helpul inormation about the online ling process on

the website.

by email, ax or mail. Our addresses and ax numbers

are in the Contacts section.

For more inormation on:Inormation on the incorporation process,

including the required orms, is available

through the Corporations Canada website.

You can also contact Corporations Canada to

obtain the orms (see the Contacts section).

Want to fle your Articleso Incorporation online?

Its easy!

1 Go to the Corporations Canada website and

click on Online Filing Centre.

2 Click on Incorporate a business and ollowthe instructions. You will be asked to choose

one o the ollowing options:

incorporate with a proposed name to be

approved by Corporations Canada (you must

provide the NUANS Name Search Report

reservation number);

incorporate with a name that has been pre-

approved by Corporations Canada (you must

provide the Request ID and the conrmation

number that you received rom Corporations

Canada); or

incorporate with an assigned numbered

name (Corporations Canada will assign the

next number available).

3 Pay the $200 ee by credit card (American

Express, MasterCard or Visa).

You will receive an email acknowledging receipt.

Once your request has been processed and

approved, you will receive another email,

containing a PDF version o your Certicate o

Incorporation. The Certicate o Incorporation

and the original signed orms should be keptwith the corporate records.

2.3 How to Complete theArticles o Incorporation

In this section, you will nd advice to help you prepare

your Articles o Incorporation. Items are presented in the

order o appearance in the Articles o Incorporation. The

provisions proposed in this chapter are those that arecommonly used by incorporators and are not mandatory

in any way. They are intended to serve as examples

only. In addition, since these examples do not deal with

all aspects o the CBCA, they should not be seen as

a complete list o all possible provisions. Accordingly,

you may wish to consult with legal counsel or other

proessional advisors beore applying or incorporation.

Please see Annexes A and B or examples o completed

Articles o Incorporation.



Articles o Incorporation

2.3.1 The Corporation Name

_____________________________________

Indicate the proposed corporations name

or

I you want a numbered name:

online: choose the option Request an assigned

numbered name and ollow the instructions

on paper orm: leave a blank space, write in the word

Canada, and add the legal element o your choice,

such as Inc., Ltd., Corp., etc.

Example: __________CANADA Inc._____________________________________

Every corporation must have a name; it may be a

corporate name or a numbered name. This name must

be distinct rom the names o all other corporations.

Corporations Canada applies very rigorous standards

when granting names. Note that numbered names are

dealt with at the end o this section.

For more inormation on:The documents Choosing a Name and the

Name Granting Compendium have moreinormation to help you choose a name or

your corporation. You can obtain these docu-

ments rom the Corporations Canada web-

site or by contacting Corporations Canada.

Whats in a name?

A corporate name contains three elements:

a distinctive element (such as a surname or other

unique term);

a descriptive element (e.g., Manuacturing, Consulting,

Trading); and

a mandatory legal element (e.g., Corp., Inc., Ltd.).

Name reqest

I you want Corporations Canada to assign to you the

exclusive use o a corporate name in Canada, you must

provide two things:

1 A NUANS Name Search Report This is a document

that includes a list o business names and trade-marks

that sound similar to the name an incorporator is

proposing. The list is drawn rom NUANS, the nationaldata bank o existing and reserved business names

as well as trade-marks registered and applied or in

Canada. Note that a NUANS Name Search Report is

valid or 90 days rom the date o the report. I you do

not apply to incorporate within this period, you will

have to obtain a new report.

There are two ways to get a NUANS Name Search Report

a) You can order a NUANS Name Search Report online

and pay the ees o approximately $20 by credit

card (American Express, MasterCard or Visa).

The system provides direct access to the NUANS

name search service. However, it does not provide

the proessional assistance and recommendations

oten available rom a registered NUANS search

house. Because o this, you should be sure that

you understand the requirements you must meet

beore Corporations Canada will approve a name.

The name in your NUANS Name Search Report may

be rejected i it does not comply with CBCA name

regulations; or

b) You can ask or a report rom a search house.

A search house is an independent, private-sector

business that charges a ee or advice on the

availability o your corporate name choice. You can

nd a list o these rms on the NUANS website or in

the Yellow Pages o your telephone directory under

Searchers o Records.

2 Inormation about the name The approval o the

name may be acilitated i you provide inormation

about your reasons or choosing the name. We

strongly recommend that you use the Corporate

Name Inormation orm (available on our website).

However, instead o this orm, you may also submit a

letter describing the corporations activities, products

and services, target clientele, where you expect the

corporation to operate, and the origin o the distinctive

element o the corporate name.



I you intend to do business in the Province o Quebec,

please note that the Province o Quebec does not

currently provide corporate name data to NUANS. It

is your responsibility to veriy with the Registraire des

entreprises, Quebec that the chosen corporate name is

not used in Quebec by another business. You do not have

to provide a report rom the Registraire des entreprises,

Quebec with your Articles o Incorporation.

Is the name acceptable?

Corporations Canada will review your proposed name to

determine i it can be assigned to you. The decision will

be based on several criteria. For example:

Does the proposed name contain any prohibited

words or phrases, such as Parliament Hill, RCMP,

Cooperative, and United Nations?

Is it obscene?

Is it too general?

Is it only a geographical name such as North West Inc.,or only an individuals name such as Joe Smith Inc.?

Is it so similar to the trade-mark, ocial mark or trade-

name o another corporation that both names appear

to reer to the same business? Or is it so similar that it

appears to be related to the other business?

Does the proposed corporation have a oreign aliate

with a similar name? I so, you may need to provide us

with written consent rom the oreign aliate and add

an element to your proposed name to distinguish it,

such as ABBA Consulting Canada Inc.

I yor name is not approed

Incorporators are sometimes surprised to learn that

Corporations Canada has not approved the name they

have proposed, particularly i a NUANS Name Search

Report appears to indicate that no similar names exist. In

such cases, it is important to remember that a proposed

corporate name may not be approved i we do not have

enough background inormation on which to base a

decision.

I Corporations Canada does not approve the name

proposed or your corporation, your business cannot

be incorporated. In this case, we will send you a notice

stating the reasons or the decision. You can then

submit additional inormation to support approval o the

corporate name, or propose a completely dierent name.

You may need to obtain a new NUANS Name Search

Report i the report is no longer valid (i.e., the report

date is beyond the 90-day limit) at the time you submit

additional inormation or the name you are proposing

is dierent rom the name proposed in the original

application.

Pre-approal o name

I you would like us to approve the corporate name you

have chosen beore you le your Articles o Incorporation,

you can request a pre-approval online or you may write to

us requesting a pre-approved name. This request should

be accompanied by your NUANS Name Search Report.

We strongly recommend that you also submit a completed

Corporate Name Inormation Form at the same time. I

we accept the name you choose, we will let you know by

letter that the selected name is reserved or 90 days rom

the date o the NUANS Name Search Report. You may

then prepare your Articles o Incorporation.

Sbmitting an online namepre-approal reqest:



2 Click on Pre-approve a corporate name and

ollow the instructions.

You will receive an email acknowledging receipt o

your request. Once the request has been processed

and approved, you will receive another email

containing the Request ID and conrmation numbers

needed to complete the request or incorporation.

Sbmitting a name pre-approalreqest ia email, a or mail:

Send your written request to Corporations Canada(see Contacts section). Be sure to include the

NUANS Name Search Report with your request.

Including a completed Corporate Name Inormation

Form with your request is also highly recommended.

Once the name is pre-approved, you will receive

a letter including the Request ID and the

conrmation number to be provided with a request

or incorporation.



Nmber name

Instead o asking Corporations Canada to approve a

name or your corporation, you can also choose to have

a number assigned (e.g., 1234567 Canada Ltd.) when

we process your Articles o Incorporation. In such cases,

Corporations Canada simply assigns the next available

number when processing the articles. You must ask

or a number name when you apply or your Articles oIncorporation. A NUANS Name Search Report is not

needed.

Many companies choose this option when a corporate

name is not important to their business. This ensures

aster processing and saves the expense o a NUANS

Name Search Report.

Another option is to apply or a number name and ask

or a name change later. To replace a number name by

a corporate name, you must amend your Articles oIncorporation by ling Articles o Amendment and paying

the $200 ee. In this case, a NUANS Name Search Report

is required.

Some incorporators choose this option when they want

to incorporate a business but do not have enough time to

obtain approval or a corporate name.

2.3.2 The Registered Oce

_____________________________________

Indicate the province or territory in Canada where the

corporations registered oce will be located._____________________________________

Every corporation must have a registered oce within

Canada. This is primarily so that Corporations Canada,

shareholders, directors and the public can send

documents to the corporation. A post oce box cannot

take the place o a registered oce.

When you complete your Articles o Incorporation, you

need only indicate the province or territory in Canada

where the registered oce is to be located. You do not

have to provide a street address.

2.3.3 Description o the Classeso Shares

_____________________________________

Describe the classes o shares o the corporation and the

maximum number o shares the corporation is authorized

to issue (usually unlimited) or each class. I there is more

than one class o shares, you must speciy the rights,

privileges, restrictions and conditions or each._____________________________________

An incorporated business must issue at least one class

o shares. Shares represent an ownership interest in the

corporation. They are property, much like a car or a house

Share owners can transer (sell) their shares and the

rights that go with them (you may hear the phrase rights

that are attached to the shares). Such a transer must

conorm to any conditions or restrictions that apply to the

shares.

For more inormation on:Any person may hold shares in a corpora-

tion. In addition to an individual, a person

may include a legal entity such as a trust, a

mutual und or another corporation.

Classes o shares

Generally, shares have three inherent rights:

the right to vote;

the right to receive dividends (i the board o directors

has declared any); and

the right to receive the remaining property o the

corporation ater it is dissolved.

All shares are without nominal or par value; that is, no

specic value is attributed to them and no value appears

on the share certicate.

You may vary the composition and complexity o your

corporations share structure in a number o ways to suit

your circumstances. Your Articles o Incorporation may

allow or one or more classes o shares. There is no limit

on the number o classes o shares you may set out in the

Articles o Incorporation. You may describe shares using

class names such as preerred or common, or use letters,

such as Class A, Class B, etc.



Where there is more than one class, you must set out

the rights, privileges, restrictions and conditions or each

class. You must assign the rights set out above (voting

rights, the right to receive dividends, the right to receive

the corporations remaining property on dissolution) to at

least one class o shares but one class does not need to

have all three. I you create only one class o shares, that

class will carry all these rights.

Articles o Incorporation with more than one class o

shares oten provide or unlimited common and preerred

shares. Usually the common shares have the right to vote,

the right to receive dividends ater preerred shareholders,

and the right to share in the property upon dissolution.

Preerred shares usually have no voting rights but are

given the right, ahead o the common shares, to receive

dividends and to share in the property on dissolution. I

the Articles o Incorporation describe only one class o

shares, they are usually reerred to as common shares.

These dierences in rights can be useul i you have

investors with dierent objectives. Voting shares are oten

issued to the person(s) actually running the company

(control shares), whereas preerred shares may be

issued to partners or investors who are not involved in

running the business but who have invested money in

the company with the expectation o prot (investment

shares). Thus, the common shareholder (having votes)

runs the company (with the power to elect directors,

approve all major activities, etc.) but may only be entitled

to receive dividends ater the preerred shareholders.

For more inormation on:A new corporation may not need

dierent classes o shares at the time

o incorporation. I your corporation

becomes a success and then needs a more

complex share structure, you should seek

proessional advice to make sure youhave the best structure and to properly

prepare any changes to your Articles o

Incorporation.

For more inormation on:For your corporation to avoid being designatedas a reporting issuer under provincialsecurities legislation and consequently as adistributing corporation under the CBCA, youmust include in your Articles o Incorporationa statement that restricts the transer o thecorporations securities without the consent othe majority o the directors or shareholders.Distributing corporations must complywith the registration and prospectus flingrequirements and other related procedures setout in the CBCA and in provincial/territorialsecurities law.

To restrict the transer o shares, you shouldinclude the ollowing statements in yourArticles o Incorporation: attheitementitledRestrictionsonshares

transers a statement restricting thetranser o the corporations shares; and

attheitementitledOtherprovisionsastatement restricting the transer o thecorporations securities.

I you later decide to oer shares publicly,you will have to remove these restrictionsby submitting Articles o Amendment andpaying the $200 fling ee. All previous shareissuances would remain valid, however,because your corporation would nothave been subject to the registration andprospectus requirements under securities law.

2.3.4 Restrictions on Share Transers

_____________________________________

Indicate the restrictions on share transers, i any._____________________________________

When you are incorporating your business, you must

decide whether to restrict the transer o your corpora-

tions shares. Such restrictions enable the shareholdersand directors to control who holds shares in a corporation

by limiting the ability o shareholders to resell their shares.

These restrictions must be described on share certicates

issued to shareholders.

The most requent share transer restriction prevents a

shareholder rom transerring shares without the prior

consent, by way o resolution, o the board o directors or

a majority o the shareholders.



2.3.5 Nmber o Directors

_____________________________________

Indicate the minimum and maximum number o directors_____________________________________

In your Articles o Incorporation, you must indicate a

minimum and maximum number o directors, or a xed

number. We recommend that you provide or a minimumand maximum number o directors rather than a xed

number. This will oer more fexibility and may help you

avoid the expense o submitting Articles o Amendment

i you decide to change the number at some time in the

uture. Note, however, that your corporation must have at

least one director.

2.3.6 Restrictions on BsinessActiities

_____________________________________Indicate any limits imposed on a corporations business

activities._____________________________________

Set out the restrictions, i any, on the corporations

business activities. Most corporations do not provide any

restrictions and simply write None.

I or some reason you want to limit the commercial

activities o the corporation, we recommend that you usethis preamble: The business o the corporation shall be

limited to the ollowing: ... Complete the preamble by

dening the limits you want to impose on the corporation.

2.3.7 Other Proisions

_____________________________________

Indicate other applicable provisions, i any._____________________________________

You may want to include other provisions in your Articleso Incorporation. For example, some incorporators decide

to include clauses in the articles that will satisy the

requirements o other legislation or institutions.

Here are some examples o such provisions. Please note

that these are examples, not a complete list. Note, too,

that there is no requirement to include provisions like

these in your Articles o Incorporation.

A provision restricting the transer o the corporations

securities. As we said in Section 2.3.4 o this guide,

i you want your corporation to avoid designation as

a distributing corporation under provincial securities

legislation, then you must include a statement that

restricts the transer o the corporations securities.

A provision regarding directors borrowing powers and

the delegation o those powers, in order to limit the

authority o directors and/or to satisy the requirementso lending institutions.

A provision that increases the size o the majority

required when shareholders vote.

A provision that species the orm o your corporate

name or use outside Canada. Do not use this item to

designate the English or French orm o the corporate

name or use in Canada. For this, use the item entitled

Corporation Name.

A provision that prescribes how shareholders will ll a

vacancy on the Board o Directors.

A provision that species what constitutes a quorum odirectors.

2.3.8 Sign Yor Articles oIncorporation

_____________________________________

Online:

The Articles o Incorporation must be printed and signed

by the incorporator(s). The name(s) o the incorporator(s)

are then entered in the appropriate elds online. The

signed orm is to be kept with the corporate records.

By email, ax or mail:

Forms sent by email, ax or mail must bear the signatures

o all the incorporators; a typed name is not acceptable as

a signature._____________________________________

Articles o Incorporation must be signed by the

incorporator(s), all o whom must be competent, at least

18 years o age and not in a state o bankruptcy. Thereis no requirement to have more than one incorporator.

Although incorporators may be directors or shareholders

o the corporation ater it is organized, there is no legal

requirement or them to assume such roles.

I the incorporator is a body corporate (i.e., another

corporation), the name provided must be the name o the

body corporate; the address must be its registered oce;

and the Articles must be signed by a person authorized to

sign on behal o the body corporate.



2.4 How to Complete theInitial Registered OceAddress and First Board oDirectors Form

In this section, you will nd advice to help you prepare

the Initial Registered Oce Address and First Boardo Directors orm. Items are presented in the order o

appearance in the orm. Please see Annexes A and B or

examples o completed Initial Registered Oce Address

and First Board o Directors orms.

I you are incorporating online, you will be prompted to

provide the Initial Registered Oce Address and First

Board o Directors inormation ater completing the


2.4.1 The Corporation Name

_____________________________________

Indicate the proposed name or i you wish to be assigned

a numbered name, leave this section blank._____________________________________

Unless you have decided to use a numbered name, you

must provide the same name that is indicated in the


2.4.2 Address o Registered Oce

_____________________________________

Indicate the address o the registered oce. This must

be a street address; a post oce box number is not

sucient. Provide a mailing address i this is dierent rom

the registered address._____________________________________

You must provide the street address o the registered

oce, as well as a mailing address, i dierent rom the

street address. These addresses allow Corporations

Canada to contact you or various reasons, such as to

send you reminder notices regarding the Annual Return

or inormation that can aect the business o your

corporation.

Please see Section 5.2 o this guide or inormation on

what to do i your corporation changes its address ater

its incorporation.

2.4.3 First Board o Directors

_____________________________________

Indicate the rst name, last name and residential address

o each director. Indicate whether or not each director is a

resident Canadian._____________________________________

It is required to indicate the residential address o eachdirector. This inormation allows Corporations Canada

and others to send notices to the directors i required.

Corporations Canada does not publish the residential

addresses o directors on its website. However, this

inormation is provided upon written request.

2.4.4 Signatre

_____________________________________

Online:

The orm must be printed and signed by one o the

incorporators whose name is entered in the appropriate

eld online. The signed orm is to be kept with the

corporate records.

By email, ax or mail:

Forms sent by email, ax or mail must bear the signature

o an incorporator; a typed name is not acceptable as a

signature._____________________________________

The orm must be signed by one incorporator. I the

person signing is a body corporate (i.e., another

corporation), then the orm must be signed by a person

authorized to sign on behal o the body corporate.

2.5 Pay the Filing Fee

_____________________________________

Filing ees to incorporate a business:

Online: $200; or

By email, ax, mail: $250_____________________________________

You may pay your ees:

Online, email or by ax: using a credit card (American

Express, MasterCard, or Visa)

by mail: using a credit card (American Express,

MasterCard, or Visa) or cheque (made payable to the

Receiver General or Canada)

When you pay through the Online Filing Centre, you can

be condent that your transaction will be processed with

complete security.


19/66Chapter 3 Other Formalities14

Chapter 3

OtherFormalitiesSome ormalities may apply to

your corporation depending onthe municipality, province and

business sector in which it

carries on business.

3.1 Proincial and TerritorialRegistration

You will likely have to register your corporation in any

province or territory where you carry on business.

Registration is dierent rom incorporation. A corporation

may incorporate only once, but it may register to carry

on business in any number o jurisdictions. Carrying onbusiness in a province or territory can mean running

a business there; having an address, a post oce

box or phone number there; or oering services or

products there in order to make a prot. Provinces and

territories oten require corporations to register within

a ew weeks ater incorporation. You may have to pay

a ee or registration. We suggest you contact the local

corporate law administration oce in each province or

territory where you plan to do business to determine

their ling requirements. For contact inormation, consult

the Contacts section at the end o this Guide or visitCorporations Canada website.

For more inormation on:To save you time and simpliy your

paperwork, Corporations Canada has

joint registration agreements with some

provinces. These agreements allow

corporations that incorporate online to apply

or provincial registration online. For more

inormation, visit the Corporations Canada

website.

3.2 Bsiness Nmber

The Business Number (BN) is part o a unique ederal

government numbering system that identies your

business and the accounts you maintain with the CanadaRevenue Agency (CRA). Generally, CRA uses a BN or the

ollowing business accounts:

Goods and Services Tax/Harmonized Sales Tax (GST/

HST);

payroll deductions;

corporate income tax; and

import/export duties and taxes.



When Corporations Canada incorporates your business,

we will ask CRA to issue a BN or your corporation. CRA

will then register your corporation and send you a letter

conrming your BN and the accounts registered, as well

as a summary o the inormation you provided.

You will nd more inormation about the BN on the CRA

website.

3.3 Permits and OtherFormalities

You may have to ulll a number o other requirements

in order to carry on business. For example, some

municipalities ask you to obtain a permit to carry on

business in the municipality. You may also need a

provincial permit to carry on business in a particular

sector; or example i you operate a restaurant, you mayneed a liquor permit to serve alcoholic beverages.

Corporations Canada does not provide inormation

on such requirements. Instead, we suggest you check

with the appropriate municipal, provincial, territorial or

ederal government agencies, as well as proessional

organizations.

You might also wish to consult the BizPal website at

www.bizpal.ca. BizPal is an online service that will

help you generate a personalized list o the business

documents required by the government agencies you may

have to deal with local, provincial/territorial and ederal

in order to start up or grow your business. I your

business is already operating, BizPal can help you veriy

that you have all the correct permits and licences.


21/66Chapter 4 Next Steps in Organizing Your Corporation16

Chapter 4

NextStepsinOrganizingYour CorporationNow that your business is

incorporated, the next step is to

complete the internal organization

o the corporation.

4.1 First Directors

When you incorporated, you led a orm entitled Initial

Registered Oce Address and First Board o Directors

with Corporations Canada. This orm lists the rst

members o the board o directors o the corporation.

The mandate o these directors begins on the

date Corporations Canada issues the Certicate

o Incorporation and ends at the rst meeting o

shareholders. At that rst meeting, the shareholders

elect the corporations directors. Elected directors may

be chosen rom the rst directors or they can be

entirely new.

4.2 Organizational Meeting

Early in the lie o a corporation, an incorporator or a

director will usually call an organizational meeting. The

notice or this meeting must be sent to each director listed

in the Initial Registered Oce Address and First Board

o Directors orm led with the Articles o Incorporation

at least ve days beore the meeting. This notice must

indicate the date, time and place o the meeting.

At this meeting, the directors may:

make by-laws (these by-laws will have to be approved

by shareholders at the rst annual meeting);

adopt the orms o security certicates (shares) and

corporate records the corporation will use;

authorize the issuance o shares and other types o

securities;

appoint ocers;

appoint an interim auditor to hold oce until the rstmeeting o shareholders;

make banking arrangements; and

transact any other business.



By-laws

By-laws are rules that govern the internal operations o a

corporation. For example, you may want your corporation

to have certain rules that are not dealt with in the CBCA.

You could also want to modiy some o the rules that are

in the CBCA, so long as the changes you wish to make

are permitted by the Act.

Among other things, corporate by-laws can:

set the date o a corporations nancial year-end;

make banking arrangements;

address the appointments, qualications and duties o

ocers;

delegate the responsibility or setting the salaries o

directors and ocers;

establish the salaries or other remuneration o directors

and ocers;

set down the procedures or calling and conducting

directors and shareholders meetings;establish the minimum number o people required at

directors and shareholders meetings to establish

quorum; and

make rules limiting the modications that can be made

to the powers given to corporate directors under

the CBCA (e.g., the by-laws could make all share

issuances subject to shareholder approval).

Issing shares

One o a corporations rst activities ollowing

incorporation is to issue shares. A person becomes a

shareholder when a corporation issues shares in that

persons name or records a transer o previously owned

shares to the person. Generally, unless you indicate

dierently in your Articles o Incorporation or by-laws,

your corporations board o directors can issue shares

whenever it wishes, to whomever it chooses, and or

whatever value it decides.

Directors may decide to issue shares by majority vote.

The directors decision (called a resolution) to issue shares

must be recorded in the corporations minute books.

The corporation cannot issue a share until it actually

receives ull consideration (payment) or that share. This

consideration is generally in the orm o money, although it

For more inormation on:Consult Section 7.6 o this guide or more

inormation on by-laws. You will also nd an

example o by-laws in Annex C.


23/66Chapter 4 Next Steps in Organizing Your Corporation18

can also be in the orm o services or property given to the

corporation. A persons payment or the share(s), in a orm

agreed upon by the directors, represents that persons

investment in the corporation.

Once a share has been issued, the shareholder is entitled

to a share certicate. This certicate must state:

the corporations name, as set out in the Articles o

Incorporation;the name o the shareholder; and

the number and class o shares it represents.

I your Articles o Incorporation contain restrictions on

the transer o shares (as do the Articles o most small

corporations; see Section 2.3.4 o this guide), the share

certicate itsel must reer to these restrictions.

Shares are issued without nominal or share value. A share

certicate does not carry a monetary value.

Appoint ocers

Ocers are appointed by the directors, and with the

directors orm the management o the corporation.

Ocers can take any position that the directors want them

to ll (e.g., president, secretary or any other position).

They are responsible or the day-to-day operations o the

corporation.

Any individual may be an ocer o your corporation.

Ocers may or may not be shareholders, and they may or

may not also be directors o the corporation. One person

may act as a director, ocer and shareholder at the same

time. In many small businesses, one individual is the sole

director, the sole ocer and the sole shareholder.

4.3 First Meeting oShareholders

The directors o a corporation must call the rst

shareholders meeting within 18 months o the

corporations date o incorporation. This meeting is usually

held ater the rst organizational meeting o the directors.

At this meeting, the shareholders:

elect directors;

conrm, modiy or reject the by-laws established by

directors; and

appoint an auditor. Note that this auditor can either be

the same one appointed by the directors or a dierent

one.

Resoltion in lie o a meeting

In a small business where one or two people act as

directors, ocers and shareholders, meetings are not

necessary. Shareholders in these corporations oten pree

to act through written resolutions. I every shareholder

signs a written record that sets out the terms o the

necessary resolutions, then a shareholders meeting is

not needed.

For more inormation on:The elected directors may be the same as

thoseindicatedontheInitialRegistered

OfceAddressandFirstBoardofDirectors

orm led with the Articles o Incorpora-

tion. However, i the directors change, the

corporationmustletheChangesRegarding

Directors orm with Corporations Canada

within 15 days o the election.


25/66Chapter 5 Keeping Your Corporation in Good Standing20

Chapter 5

Keeping Your Corporationin Good StandingTo make sure that your corporation

continues to beneft rom

incorporation under the CBCA, you

need to ulfll certain requirements on

an annual or occasional basis.

This section deals only with requirements under the CBCA

or corporations that are not distributing corporations. It

does not address every possible change you could make

to your articles, nor does it deal with requirements rom

other government agencies that could have an impact on

your Articles o Incorporation.

5.1 Filing an Annal Retrn

The Annual Return is a document that provides

inormation about your corporation. This inormation lets

Corporations Canada make sure that your corporation

complies with certain requirements o the CBCA. It also

allows Corporations Canada to maintain its database o

ederal corporations. Note that the annual return is not

the corporations tax return which must be led with the

Canada Revenue Agency.

The Annual Return can either be completed and led:

online at the Corporations Canada website,

by email, ax or mail: you can download the Annual

Return orm on the Corporations Canada website.

You can also obtain a paper copy rom

Corporations Canada.

Every corporation must submit an Annual Return every

year to Corporations Canada within 60 days ater itsanniversary date. The anniversary date is the date the

corporation was created or the date the corporation

rst came under the jurisdiction o the CBCA (i.e., the

date o incorporation, amalgamation or continuance).

For a corporation that has been revived, the anniversary

date remains the date it was created (i.e., the date

o incorporation, amalgamation or continuance). For

purposes o ling the Annual Return, the anniversary

date consists o the month and the day o the month.

Want to fle your AnnualReturn online?

Its easy!



2 Click on File Annual Return, and ollow theinstructions.

3 Pay the $20 ees online by credit card

(American Express, Visa or MasterCard).

You will receive an email conrmation that your

Annual Return has been processed. Keep

the signed Annual Return with the corporate

records.



The anniversary date can be ound on the corporations

Certicate o Incorporation, Amalgamation or

Continuance. You can also nd it on the Corporations

Canada website.

Failre to le an Annal Retrn

A corporation is deemed not to be in good standing with

the CBCA i it:ails to le its Annual Return or a period o one year;

ails to pay the required ees; and/or

submits an incomplete return.

Corporations Canada has the power to dissolve

a corporation that has not complied with certain

requirements o the CBCA. In such cases, Corporations

Canada sends a notice to the corporation and its directors

advising them o the Directors intention to dissolve the

corporation. I the corporation does not respond, or its

response is inadequate, the Director will issue a Certicateo Dissolution ollowing the expiration o the deadline

stated in the notice.

It is possible to revive a corporation ater dissolution. To

do so, the corporation, or an interested party (such as a

creditor or a shareholder), must le Articles o Revival and

pay the $200 ee. For details on how to do this, see the

inormation on revival that is available online at the

Corporations Canada website.

Filing the Annual ReturnAnnual Return

File a completed Annual Return

Signature

The annual return may be signed by any

individual who has the relevant knowledge othe corporation and who is authorized by the

directors. For example:

a director o the corporation;

an authorized ocer o the corporation; or

an authorized agent.

Fees or fling an Annual Return

Through the Corporations Canada Online Filing

Centre: $20

By email, ax or mail: $40

When to fle the Annual Return

Once a year, within 60 days ater the

anniversary date o the corporation.



5.2 Change o Address o aRegistered Oce

Moing the registered oce within theproince or territory indicated in thearticles

Your corporation must notiy Corporations Canada o

any change to its registered oce address (e.g., i the

corporation moves) within 15 days ollowing the change.

The corporation must also provide the new mailing

address, i any.

This notication is important because it allows

Corporations Canada to communicate with you. For

example, we may send you a reminder notice concerning

the Annual Return, or inormation on legislative

amendments that could aect your corporation. I you donot notiy Corporations Canada o the change o address,

your corporation will be considered not to have complied

with the CBCA. In such cases, Corporations Canada may

impose appropriate penalties, as provided by the CBCA.

Moing the registered oce intoanother proince or territory other thanthe one indicated in the articles

I you move your registered oce to another province or

territory other than the one indicated in the Articles, youmust amend your Articles. To do this, you must le Ar-

ticles o Amendment and pay the $200 ee. You must also

le the Change o Registered Oce Address Form. Please

consult the Amendment Policy available on the website or

contact Corporations Canada.

I the mailing address is dierent rom the registered oce

address, you will need to include that address when ling

the change to the registered oce address.

Want to notiyCorporations Canada

about a change inyour registered ofce

address online?Its easy!1 Go to the Corporations Canada website and


2 Click on Change Registered Oce

Inormation.

3 Enter your Corporation Key. You will nd

the corporation key in the Corporation

Inormation Sheet you received with the

Certicate o Incorporation. I you have lost

the Corporation Key, you can request a new

one in the Online Filing Centre, by clicking on

Obtain Corporation Key and ollowing the

instructions.

4 Follow the instructions to change the

registered oce address.

You will receive an email acknowledging

receipt o your request. Once the request has

been processed, you will receive an email

conrmation o the new registered oce

address. Please keep the signed orm with the

corporate records.



Filing the Change oAddress o the

Registered Ofce

Change o address within the province or

territory indicated in the Articles

Note that it is also important to advise

Corporations Canada o a change in the mailing

address.

To fle:

Submit a completed Change o Registered

Oce Address orm.

Signature

By any individual who has relevant knowledge

o the corporation and who is authorized by the





When to fle the Change o Registered

Ofce Address orm

Within 15 days ollowing change to a

corporations registered oce address.

Fees

There is no ee.

Change o address to a province or

territory other than the one in the

Articles

To le:

Articles o Amendment

Change o Registered Oce Address orm

I you le the Articles o Amendment online you

will be asked to change the registered oceaddress at the same time. I you le by another

means you can le both orms together.

Signature

By an authorized ocer or director o the

corporation.

Fees

$200

5.3 Changes RegardingDirectors

You must notiy Corporations Canada o any change in the

board o directors within 15 days ollowing the change:

when new directors are appointed, or

when individuals cease to be directors.

You must also notiy Corporations Canada o any change

o residential address o a director within 15 days o being

inormed o the change. Note that directors must notiy

the corporation o a change in their residential address

within 15 days ater moving.

Changes Regarding

Directors (Including theresidential address)To fle:

Submit a completed Changes Regarding

Directors orm.

Signature

By any individual who has relevant knowledge

o the corporation and who is authorized by the





When to fle a Changes Regarding

Directors orm

Within the 15 days ollowing the change

Fees

There is no ee or ling the Changes Regarding

Directors orm.

Once the request has been processed, you will

receive a letter listing all the names o the mem-

bers o the board o directors that are currently

on le with Corporations Canada.



Want to notiyCorporations Canada

about Changes RegardingDirectors online?

Its easy!



2 Click on Change director inormation.

3 Enter your Corporation Key. You will nd

the Corporation Key in the Corporation

Inormation Sheet you received with your

Certicate o Incorporation. I you have lost

the Corporation Key, you can request a new

one in the Online Filing Centre by clicking on

Obtain Corporation Key and ollowing the

instructions.4 Follow the instructions to change the director

inormation.

Youll receive an email acknowledging

receipt o your request. Once the request has

been processed, you will receive an email

conrmation o the names o the members o

the board o directors that are currently on le.

Please keep the signed copy o the orm with

the corporate records.

The names o a corporations directors are public

inormation. You should ensure that Corporations Canada

has up-to-date inormation on le so that other directors,

shareholders and third parties can send materials to or

serve notice on current directors.

Although Corporations Canada does not publish the

residential addresses o directors on its website, this

inormation is available by writing to CorporationsCanada.

I a corporation does not notiy Corporations Canada o

changes regarding its directors (including a change o

residential address), Corporations Canada will consider

the corporation to be not in compliance with the CBCA

and may impose penalties as allowed by the Act.

I the number o directors changes rom the number

indicated in your corporations Articles, you must amend

them by ling Articles o Amendment and paying a ee o$200. You must also le the Changes Regarding Directors

orm.



Want to apply ora Certifcate o

Compliance or Certifcateo Existence online?

Its easy!



2 Click on Obtain Certicate o Compliance

or Obtain Certicate o Existence and

ollow the instructions.

You will receive an email acknowledging receipt

o your application. Once your request has

been processed and approved, you will receive

an email containing a PDF o the Certicate o

Compliance or the Certicate o Existence.

5.4 Certicate o Eistenceand Certicate o Compliance

At some point, a supplier, banker or some other party

may ask you to provide a Certicate o Existence and/or

a Certicate o Compliance. These certicates are oten

needed to support a loan request or to provide assurance

to a potential investor that a corporation has not beendissolved.

The Certicate o Existence certies that, as o a specic

date or or a specic period, a corporation:

has not been dissolved or discontinued; and

has not changed its structure in such a way as to

cause a change to its corporate number (e.g., through

an amalgamation).

The Certicate o Compliance certies that a corporation:

has not been dissolved;

has sent to the Director the Annual Returns required

under the CBCA; and

has paid all required ees.

The Director may issue a Certicate o Existence or a

Certicate o Compliance to anyone who asks or one.

Note that Corporations Canada will not issue a Certicate

o Compliance or a corporation that is not in compliance

with the CBCA.

For more inormation on:More inormation on obtaining these

certicatesisavailableinthePolicyRelated

to the Certicate o Existence and to the

Certicate o Compliance. The policy is

available at the Corporations Canada

website.


31/66Chapter 6 Other Obligations o the Corporation26

Chapter 6

6.1 Corporate Records

Your corporation must keep certain corporate records at

its registered oce - or at some other location elsewhere

in Canada - as set out by the directors.

Upon request, a corporations shareholders and creditors

(such as suppliers) may examine the ollowing records:

Articles o Incorporation, by-laws and their

amendments and any unanimous shareholder

agreements;

minutes o meetings and resolutions o shareholders;

copies o certain orms that have been led, or

example Initial Registered Oce Address and First

Board o Directors, Change o Registered Oce

Address and Changes Regarding Directors; and

a share register showing the names and addresses o

all shareholders and details o shares held.

The corporation must also prepare and maintain

accounting records. Although there is no requirement or

these accounting records to be available or consultation

by shareholders, nancial statements must be available

or consultation. This ensures that shareholders can

obtain inormation about the nancial situation o the

corporation, so that they are able to make appropriate

decisions regarding the corporation.

6.2 Appointment o Aditors

At the shareholders meeting, shareholders must, by

ordinary resolution, appoint an auditor to audit the

corporations nancial statements. However, shareholders

may decide by a unanimous resolution (voting andnon-voting shares) not to appoint an auditor.

The requirement or an auditor increases the reliability

o the nancial statements and improves protection or

stakeholders.

OtherObligationsoftheCorporationYour corporation is a separate

legal entity that has certain

obligations to its owners, the

shareholders.

For more inormation on:Corporations oten maintain their corporate

records in a single book, reerred to as the

Minute Book o the corporation. Minute

Books are available rom legal stationery

stores and search houses. While the CBCA

does not require it, it is a good practice to

maintain a Minute Book.



6.3 Financial Statements

A corporation must prepare nancial statements. There is

no requirement to le these statements with Corporations

Canada.

Financial statements must be prepared in accordance

with the Generally Accepted Accounting Principles, as set

out in the Canadian Institute o Chartered Accountants

Handbook - Accounting.

You must provide copies o your nancial statements

to your shareholders at least 21 days beore your

corporations annual meeting each year.

6.4 Shareholders Meetings

The CBCA states that a corporation ... must hold a

shareholders meeting on a date that is no later than 15

months ater holding the last preceding annual meeting,

but no later than six months ater the end o its preceding

nancial year. Alternatively, shareholders may pass

a resolution in lieu o meeting. A resolution in lieu o a

meeting may be useul or small corporations that have

only one or a ew shareholders.

The shareholders meeting (or resolution in lieu o a

meeting) allows shareholders to obtain inormation about

the corporations business and to make appropriate

decisions regarding this business. The date o the

meeting, or o the resolution, must be indicated on yourAnnual Return.

For more inormation on:A resolution in lieu o a meeting is a written

resolution (signed by all shareholders who

would have been entitled to vote at the

meeting) that deals with all matters required

to be dealt with at a shareholders meeting.

This resolution is just as valid as it would

be i passed at a meeting o shareholders.

It should be retained in the corporations

records.


33/66Chapter 6 Other Obligations o the Corporation28

Agenda

At minimum, the agenda o an annual meeting must

include the ollowing items:

consideration o the nancial statements;

appointment o an auditor (or a resolution o all

shareholders not to appoint an auditor); and

election o directors.

Oten, the agenda includes an additional item, any other

business. This portion o the meeting allows shareholders

to raise any other issues o concern to them. I directors

want shareholders to consider a matter, it should be listed

in the agenda prior to the meeting and not raised as any

other business.

Calling a shareholders meeting

The directors must notiy voting shareholders o the time

and place o a shareholders meeting. They must do so

no more than 60 days and no ewer than 21 days beore

the meeting date. For example, i the meeting is to be held

on May 20, the notice o the meeting should be sent no

earlier than March 22 and no later than April 30.

Unless otherwise provided by the by-laws or the articles,

this notice can be sent electronically to shareholders i

they have previously consented to receiving such notices

electronically and i they have designated a system or

receiving them. You will nd an example o a Notice o

Annual Shareholders meeting in Annex D.

Location o the shareholders meeting

The annual meeting may be held in Canada at a place

specied in the by-laws. Or, i the by-laws do not speciy

a location, directors may choose one. An annual meeting

may be held outside Canada only in cases where the

corporations articles permit it or i all voting shareholders

agree.

Also, where the corporations by-laws permit it, the

directors o a corporation may decide that a meeting

o shareholders will be held entirely by means o a

telephonic, electronic or other communication means that

will permit all participants to communicate adequately

with each other during the meeting. In such cases, it is the

responsibility o the corporation to make these acilities

available.

Unless otherwise provided by the by-laws, a corporation

can allow shareholders to attend the meeting

electronically. The communications system used must

permit all participants to communicate adequately with

each other during the meeting.

Other reqirements o theshareholders meeting

QuORuM

Unless a quorum o shareholders is present or

represented at annual or special shareholders meetings,

no business that is binding on the corporation can be

conducted. A quorum is present at a meeting when the

holders o a majority o the shares entitled to vote at the

meeting are present in person or represented by proxy,

regardless o the number o persons actually present at

the meeting. Note, however, that a corporations by-laws

can provide or a dierent type o quorum.

ELECTRONIC vOTING

Unless the corporations by-laws specically orbid it,

electronic voting is allowed, as long as it is possible to

veriy the vote without knowing how each shareholder

voted.

MINuTES OF THE MEETING

The corporation must keep a written record o the

meeting. This record usually includes such inormation as:

where and when the meeting was held;

who attended; and

the results o any voting.

These records are commonly reerred to as the Minutes

o the meeting and are kept in the corporations Minute

Book. (See Section 6.1 o this guide)

You will nd an example o Minutes o an Annual

Shareholders Meeting in Annex D.



6.5 Special Meetings

Shareholders may also be called to special meetings. The

notice or a special meeting must state the time and place

o the meeting and provide shareholders with enough

inormation in advance so that they know what they will

be asked to consider and vote on at the meeting.

Agendas or special meetings o shareholders usually

deal with specic questions or issues, such as

whether to approve a undamental change proposed

by the corporations directors. A undamental change

could include such actions as amending the Articles

o Incorporation to change the corporations name.

Generally, a corporations directors will call a special

meeting o the shareholders when they would like to

undertake a particular activity or to consider a special

issue that requires shareholder approval.

It is oten convenient to combine special meetings with

annual meetings. The notice or such a meeting must

clearly indicate what special business will be considered.


35/66Chapter 7 Organizing Your Corporation: The Directors30

Chapter 7

7.1 Yor Corporations Boardo Directors

Your corporation must have at least one director.

The number o directors is specied in your Articles

o Incorporation. Shareholders elect directors at the

shareholders meeting by a majority o votes. An individual

may be the only shareholder, the only director and theonly ocer.

7.2 Who Can Be a Director?

A director must be:

at least 18 years old;

o sound mind; (i.e., not a person a court has

determined to be o unsound mind);

an individual (a corporation cannot be a director); and

not in bankrupt status.

Ordinarily, at least 25 percent o the directors o a

corporation must be resident Canadians. However, i a

corporation has ewer than our directors, then at least

one o them must be a resident Canadian. In addition,

corporations operating in sectors subject to ownership

restrictions (such as airlines and telecommunications)or corporations in certain cultural sectors (such as book

retailing, video or lm distribution) must have a majority o

resident Canadian directors.

Directors may hold shares o a corporation where they

are directors. However, the directors o a corporation are

not required to hold shares in the corporation unless the

Articles o Incorporation make this a requirement or the

directors.

7.3 Mandate o the Directorsand vacancy on the Board oDirectors

The directors may be elected or terms o up to three

years. The length o the mandate o the directors can be

set out in the by-laws. I no term is stated, directors hold

oce until the next meeting o shareholders. Directors

OrganizingYourCorporation: The DirectorsDirectors are responsible or

supervising the activities o the

corporation and or making

decisions regarding those

activities.

For more inormation on:I you want to increase or decrease the

number o directors o your corporation

permitted by the articles, you must amend

your articles and pay a $200 ee. Please see

Section 5.3 o this guide or more details.



need not all be elected at the same time or or the same

length o time. A director whose term has expired can be

re-elected as a director.

Persons who have been nominated as directors, and who

are present at the shareholders meeting are deemed to

have consented to serve as directors, unless they reuse.

However, i they are not present at the meeting, they

must either: 1) consent to their election, in writing, within10 days o their election, or 2) act as a director ater

the election.

Also, a directors term ends when he or she:

resigns;

dies; or

is disqualied/removed by the shareholders.

I a vacancy occurs, the members o the board o

directors may continue to exercise all the powers o

directors as long as the number o remaining electeddirectors constitutes a quorum (the minimum number

o directors required at a meeting, as specied in your

corporations by-laws).

It is also possible or the remaining directors to name

one or more additional directors between shareholder

meetings unless the Articles o Incorporation stipulate

that vacancies can only be lled ollowing a vote by

shareholders.

Shareholders may remove a director they had previously

elected, or a variety o reasons. Removing a director is a

simple procedure that generally requires the approval o a

majority o votes represented at a meeting o shareholders

called or the purpose o removing the director.

7.4 Meetings o the Board oDirectors

Most boards o directors meet on a regular basis to

oversee the business operations o the corporation. Such

meetings may be held monthly, quarterly or annually,

depending on the needs o the corporation. Directors

may also need to meet occasionally to conduct special

business.

Meetings o the board can be held whenever and

wherever the board wishes, unless the corporationsby-laws or Articles say otherwise. In all cases, however,

a quorum o directors must be present.

Directors may conduct business through signed

resolutions instead o meetings. Note, however, that in

such situations the signatures o all directors are required.

These signed resolutions have the same value as they

would have i they were adopted at a meeting o the board

o directors. This way o conducting the business o the


37/66Chapter 7 Organizing Your Corporation: The Directors32

corporation can be very useul or small companies with

only one or a ew directors.

Note that it is also possible or one or more directors to

participate in a meeting by telephone or electronically, as

long as the corporations by-law

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