The Importance of Articles of Incorporation in Ontario

Jul 17, 2023

When establishing a corporation in Ontario, one crucial step is to create and submit the articles of incorporation. These documents are essential as they bring your corporation into existence and outline important aspects of your business, such as any business restrictions, share classes, and share transfer limitations. Properly preparing these articles is vital for the success of your business.

Selecting a Distinctive Name Before drafting the articles, you must choose a unique name for your corporation, one that doesn’t cause confusion with existing registered business names, corporation names, or trademarks. It’s essential to opt for a memorable name. Prior to filing, a NUANS search is conducted to review similar names already registered.

Registered Office and Number of Directors The articles will specify a registered office address in Ontario, which will serve as the official address for legal and governmental purposes. This address doesn’t have to be your public business address; many people use their home address initially. You must also indicate the number of directors for your corporation, with a minimum of one director required, and at least 25% of the directors being Canadian residents. Providing a range for the number of directors offers flexibility for future changes in your business.

Business Restrictions Section 5 of the articles requires identifying any business restrictions. Most corporations state no limitations to allow for growth and new directions. However, professional corporations, like those in medicine, may need to restrict their business to their specific profession.

Class of Shares Section 6 outlines the classes of shares authorized for issuance by your corporation, typically including Common shares and sometimes Special (or Preferred) shares. Common shares can be voting or non-voting equity shares, while Special shares are often used for tax planning and can be redeemable or retractable. You can start with only the necessary share class or include extra classes for potential future use. Keep in mind that articles of incorporation can be amended later to add new share classes.

Attributes of Each Share Class Section 7 describes the attributes of each share class, such as whether they are voting or non-voting, provide fixed or discretionary dividends, and whether they are redeemable or retractable. If your corporation has only one class of shares, this section may be marked as “N/A.”

Issuing, Transferring, or Owning Shares For private companies, Section 8 should include language that restricts the issue, transfer, and ownership of shares.

Additional Provisions Section 9 allows for other terms to be included in the corporation’s charter documents. This may involve provisions for borrowing money and specifying the number of shareholders, although such provisions are not typically necessary.

Seek Legal Expertise While some online tools claim to help with articles of incorporation, it’s advisable to rely on legal expertise from professionals like CBES. They can ensure your articles are legally sound and tailored to meet your specific business needs now and in the future.

 

 

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