Download - Guide to Federal Incorporation_Guide_2011-En
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Guide to Federal Incorporation
Corporations Canada
Helping small
businesses
incorporate
federally
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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.
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For additional copies o this publication, please contact:
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TTY: 1-800-465-7735Fax (toll-ree): 1-800-565-7757 (Canada and U.S.)
Fax (local): 613-954-5779
Email: [email protected]
Website: www.pblications.gc.ca
This publication is available upon request in accessible
ormats. Contact:
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Industry Canada
Room 264D, West Tower
235 Queen Street
Ottawa ON K1A 0H5
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Email: [email protected]
This publication is also available electronically
on the World Wide Web at the ollowing address:
www.corporationscanada.ic.gc.ca
Permission to Reprodce
Except as otherwise speciically noted, the inormation in
this publication may be reproduced, in part or in whole
and by any means, without charge or urther permission
rom Industry Canada, provided that due diligence is
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Cat. No. Iu70-4/8-2011E-PDF
ISBN 978-1-100-17616-1
60204
Aussi oert en ranais sous le titre Guide pour aider
les petites entreprises se constituer en socit de
rgime dral.
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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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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:
1 Go to the Corporations Canada website and
click on Online Filing Centre.
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.
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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.
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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.
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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.
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2.4 How to Complete theInitial Registered Office
Address and First Board ofDirectors Form
of Directors form. Items are presented in the order of
appearance in the form. Please see Annexes A and B for
and First Board of Directors forms.
If you are incorporating online, you will be prompted to
Board of Directors information after completing the
Articles of Incorporation.
2.4.1 The Corporation Name
_____________________________________
Indicate the proposed name or if 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
Articles of Incorporation.
2.4.2 Address of Registered Office
_____________________________________
the registered address._____________________________________
You must provide the street address of the registered
street address. These addresses allow Corporations
Canada to contact you for various reasons, such as to
send you reminder notices regarding the Annual Return
or information that can affect the business of your
corporation.
Please see Section 5.2 of this guide for information on
what to do if your corporation changes its address after
its incorporation.
2.4.3 First Board of Directors
_____________________________________
of each director. Indicate whether or not each director is a
resident Canadian._____________________________________
It is required to indicate the address of eachdirector. This information allows Corporations Canada
and others to send notices to the directors if required.
Corporations Canada does not publish the
addresses of directors on its website. However, this
information is provided upon written request.
2.4.4 Signature
_____________________________________
Online:
The form must be printed and signed by one of the
incorporators whose name is entered in the appropriate
corporate records.
By email, fax or mail:
Forms sent by email, fax or mail must bear the signature
of an incorporator; a typed name is not acceptable as a
signature._____________________________________
The form must be signed by one incorporator. If the
person signing is a body corporate (i.e., another
corporation), then the form must be signed by a person
authorized to sign on behalf of the body corporate.
2.5 Pay the Filing Fee
_____________________________________
Filing fees to incorporate a business:
Online: $200; or
By email, fax, mail: $250_____________________________________
You may pay your fees:
Online, email or by fax: 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 for Canada)
When you pay through the Online Filing Centre, you can
complete security.
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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.
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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.
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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.
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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.
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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.
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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!
1 Go to the Corporations Canada website and
click on Online Filing Centre.
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.
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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.
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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
click on Online Filing Centre.
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.
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Filing the Change ofAddress of the
Registered OfficeChange of address within the province or
territory indicated in the Articles
Note that it is also important to advise
Corporations Canada of a change in the mailing
address.
To file:
Submit a completed Change of Registered
Signature
By any individual who has relevant knowledge
of the corporation and who is authorized by the
directors. For example:
a director of the corporation;
an authorized agent.
When to file the Change of Registered
Office Address form
Within 15 days following change to a
Fees
There is no fee.
Change of address to a province or
territory other than the one in the
Articles
Articles of Amendment
Signature
corporation.
Fees
$200
5.3 Changes RegardingDirectors
You must notify Corporations Canada of any change in the
board of directors within 15 days following the change:
when new directors are appointed, or
when individuals cease to be directors.
You must also notify Corporations Canada of any change
of address of a director within 15 days of being
informed of the change. Note that directors must notify
the corporation of a change in their address
within 15 days after moving.
Changes Regarding
Directors (Including theaddress)To file:
Submit a completed Changes Regarding
Directors form.
Signature
By any individual who has relevant knowledge
of the corporation and who is authorized by the
directors. For example:
a director of the corporation;
an authorized agent.
When to file a Changes Regarding
Directors form
Within the 15 days following the change
Fees
Directors form.
Once the request has been processed, you will
receive a letter listing all the names of the mem-
bers of the board of directors that are currently
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Want to notifyCorporations Canada
about Changes Regarding
Directors online?Its easy!
1 Go to the Corporations Canada website and
click on Online Filing Centre.
2 Click on Change director information.
3 Enter your Corporation Key
the Corporation Key in the Corporation
Information Sheet you received with your
the Corporation Key, you can request a new
one in the Online Filing Centre by clicking onObtain Corporation Key and following the
instructions.
4 Follow the instructions to change the director
information.
Youll receive an email acknowledging
receipt of your request. Once the request has
been processed, you will receive an email
Please keep the signed copy of the form with
the corporate records.
The names and the addresses of a corporations directors are public
information. You should ensure that Corporations Canada
shareholders and third parties can send materials to or
serve notice on current directors.
Although Corporations Canada does not publish the
addresses of directors on its website, this
information is available by writing to CorporationsCanada.
If a corporation does not notify Corporations Canada of
changes regarding its directors (including a change of
their address), Corporations Canada will consider
the corporation to be not in compliance with the CBCA
and may impose penalties as allowed by the Act.
If the number of directors changes from the number
indicated in your corporations Articles, you must amend
form.
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Want to apply ora Certifcate o
Compliance or Certifcateo Existence online?
Its easy!
1 Go to the Corporations Canada website and
click on Online Filing Centre.
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.
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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.
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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.
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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.
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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.
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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.
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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
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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-laws permit it and as long as
all participants in the meeting can communicate ully.
You will nd an example o a Resolution o the Directors inAnnex E.
7.5 Dties o Directors
The shareholders expect and trust the directors to
conduct the corporations business in a way that will
preserve and enhance the shareholders investment.
Directors are responsible or supervising the activities o
the corporation and or making decisions regarding those
activities. Although some decisions made by the directors
require the approval o shareholders, other important
decisions can be made without such approval. Here
are some examples o these decisions and the level o
approval they require:
Decision RequiRes
shaReholDeR
ap