NITTY GRITTIES OF FORMING A COMPANY
Registration is very different from incorporation. A company has to incorporate only once, but it has to register to carry on business in any and all the places it intends to do business. Doing business in a province or a territory can mean running a business there, having an address, a post office box or phone number there, and/or offering services or products there in order to make a profit. In view of this, companies have to register themselves in provinces and territories within a few weeks after incorporation. There could be some fees to pay for registration, details of which and also the filing requirements could be obtained for each province or territory where the company plans to expand, through Levy Zavet PC.
The unique federal government numbering system identifying the company’s business and the accounts the company maintains with the Canada Revenue Agency (“CRA”) is called a Business Number (“BN”). The BN is issued by CRA for the following business accounts:
- Goods and Services Tax/Harmonized Sales Tax (GST/HST);
- Payroll deductions;
- Corporate income tax; and
- Import/export duties and taxes.
When the incorporation is complete, Corporations Canada requests CRA to issue a BN for the company. CRA then registers the company and sends a letter confirming the company’s BN and the accounts registered, as well as a summary of the information the company provided.
Where is the Permit?
The company may be required to satisfy a number of other requirements in order to carry on business. For example, some municipalities may ask the company to obtain a permit to carry on business in the municipality. It may also be necessary for the company to get a provincial permit to carry on business in a particular sector. For instance, if the company operates a chain of restaurants, it will be necessary for the company to get liquor licenses/permits to serve alcoholic beverages. For greater details please visit, call or email Levy Zavet PC.
Organizing the Company
Having regard to the fact that the company is incorporated now, it is necessary to finalize the internal organization of the company.
When the company was incorporated, a form titled Initial Registered Office Address and First Board of Directors was filed with Corporations Canada. This form listed the first members of the board of directors of the company.
These directors are to begin their mandate on the date Corporations Canada issues the certificate of incorporation and end at the first meeting of shareholders. At that first meeting, the shareholders elect the company’s directors. Elected directors may be chosen from the first directors or they can be entirely new people.
At the initial stages of a company, an incorporator or a director generally call for an “organizational meeting.” The notice for this meeting should be served at least five days before the meeting to each director listed in the Initial Registered Office Address and First Board of Directors form filed with the Articles of Incorporation. This notice has to indicate the date, time and place of the meeting.
The directors, at this meeting, can:
- Formulate By-Laws (these by-laws will have to be approved by the shareholders at the first annual meeting);
- Adopt forms of security certificates and corporate records;
- Authorize the issuance of shares and other types of securities;
- Appoint officers;
- Select an interim auditor to hold office until the first meeting of shareholders;
- Make banking arrangements; and
- Decide on any other matters.
The internal operations of a company are governed by the rules within the By-Laws. For instance, the company may wish to have certain rules that are not dealt with in the Canada Business Corporation Act (“CBCA”). The company may also like to modify some of the rules that are in the CBCA, so long as the changes brought about are permitted by the Act.
In addition to the above, corporate By-Laws can:
- Fix the date of a corporation’s financial/fiscal year-end;
- Make banking arrangements and choose the financial institution;
- Decide on the appointments, qualifications and duties of officers;
- Delegate the responsibility for determining the salaries of directors and officers;
- Establish the salaries or other remuneration of directors and officers;
- Formulate the procedures for calling and conducting directors’ and shareholder’s meetings;
- Establish the minimum number of people required at directors’ and shareholders’ meetings to establish a quorum; and
- Make rules limiting the modifications that can be made to the powers given to corporate directors under the CBCA like, the By-Laws could make all share issuances subject to shareholder approval.
One of the company’s first activities following incorporation is to issue shares. Without doing so the company has not technically been given life. A person becomes a shareholder when the company “issues” shares in that person’s name or records a transfer of previously owned shares to that person. Normally, unless the company indicates differently in their Articles of Incorporation or By-Laws, the company’s board of directors can issue shares whenever it wishes, to whomever it chooses, and for whatever value it decides.
Directors may decide to issue shares by majority vote. The directors’ decision (known as a resolution) to issue shares must be recorded in the company’s minutes book.
The company cannot issue a share until it actually receives full consideration (payment) for that share. This consideration is usually in the form of money, although it can also be in the form of services or property given to the company. A person’s payment for the share(s), in a form agreed upon by the directors, represents that person’s investment in the company.
Once a share has been issued, the shareholder is entitled to a share certificate. This certificate must state:
- The corporation’s name, as set out in the Articles of Incorporation;
- The name of the shareholder; and
- The number and class of shares it represents.
If the company’s Articles of Incorporation contain restrictions on the transfer of shares (like the Articles of most small companies), the share certificate itself must refer to these restrictions.
Shares are normally issued without nominal/par or share values. A share certificate does not set out a monetary value.
Selection of officers
Officers are appointed by the directors, and along with the directors form the management of the company. Officers can take any position that the company wants them to occupy, like president/CEO, secretary or any other position. They are responsible for the day-to-day operations of the corporation.
Any individual could be an officer of the company. Officers may or may not be shareholders, and they may or may not also be directors of the company. One person may simultaneously act as a director, officer and shareholder. It is not unusual to find in many small businesses that one individual is the sole director, the sole officer and the sole shareholder.