Chapter 2 - Incorporating

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Once you have decided to incorporate, you must file completed forms with Corporations Canada. The easiest way is to file is through the Online Filing Centre on Corporations Canada's website.

2.1 The Role of Corporations Canada

When Corporations Canada receives your Articles of Incorporation, we will make sure that they have been properly completed and that the proposed name is acceptable. If so, we will then send you a Certificate of Incorporation, showing the name of the corporation, the corporation number and the date of incorporation, along with your Articles of Incorporation.

You will also receive a Corporation Information Sheet that includes your new Corporation Key. A Corporation Key is an access code that you will need to file certain requests online – such as making changes to the registered office address and director information. Should you happen to lose this key, you will have to request a new one before you can use the Corporations Canada Online Filing Centre to perform these transactions online. To request a new Corporations Key, go to the Online Filing Centre, click on “Obtain Corporation Key” and follow the instructions.

The date of incorporation is the date on which Corporations Canada receives the Articles of Incorporation and the fees. For administrative purposes, you may wish to request a later incorporation date when you file your articles.

Your corporation's name, incorporation date and other information will then be listed on the Corporations Canada website.

2.2 How to File Your Articles of Incorporation

You can file your Articles of Incorporation and other related documents:

• online through the Online Filing Centre. You will find helpful information about the online filing process on the website.
• by email, fax or mail. Our addresses and fax numbers are in the Contacts section.

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2.3 How to Complete the Articles of Incorporation

In this section, you will find advice to help you prepare your Articles of Incorporation. Items are presented in the order of appearance in the Articles of Incorporation. The provisions proposed in this chapter are those that are commonly 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 of the CBCA, they should not be seen as a complete list of all possible provisions. Accordingly, you may wish to consult with legal counsel or other professional advisors before applying for incorporation.

Please see Annexes A and B for examples of completed Articles of Incorporation.

Articles of Incorporation

2.3.1 The Corporation Name

Every corporation must have a name; it may be a corporate name or a numbered name. This name must be distinct from the names of all other corporations. Corporations Canada applies very rigorous standards when granting names. Note that numbered names are dealt with at the end of this section.

What's 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., Manufacturing, Consulting, Trading); and
• a mandatory legal element (e.g., Corp., Inc., Ltd.).

Name request

If you want Corporations Canada to assign to you the exclusive use of a corporate name in Canada, you must provide two things:

1. A NUANS Name Search Report — This is a document that includes a list of business names and trade-marks that sound similar to the name an incorporator is proposing. The list is drawn from NUANS, the national data bank of existing and reserved business names as well as trade-marks registered and applied for in Canada. Note that a NUANS Name Search Report is valid for 90 days from the date of the report. If 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:

   1. You can order a NUANS Name Search Report online and pay the fees of 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 professional assistance and recommendations often available from a registered NUANS search house. Because of this, you should be sure that you understand the requirements you must meet before Corporations Canada will approve a name. The name in your NUANS Name Search Report may be rejected if it does not comply with CBCA name regulations; or

   2. You can ask for a report from a search house.

      A search house is an independent, private-sector business that charges a fee for advice on the availability of your corporate name choice. You can find a list of these firms on the NUANS website or in the Yellow Pages of your telephone directory under “Searchers of Records.”

2. Information about the name — The approval of the name may be facilitated if you provide information about your reasons for choosing the name. We strongly recommend that you use the Corporate Name Information form (available on our website). However, instead of this form, you may also submit a letter describing the corporation's activities, products and services, target clientele, where you expect the corporation to operate, and the origin of the distinctive element of the corporate name.
   
   If you intend to do business in the Province of Quebec, please note that the Province of Quebec does not currently provide corporate name data to NUANS. It is your responsibility to verify 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 from the Registraire des entreprises, Quebec with your Articles of Incorporation.

Is the name acceptable?

Corporations Canada will review your proposed name to determine if 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 individual's name such as Joe Smith Inc.?
• Is it so similar to the trade-mark, official mark or trade-name of another corporation that both names appear to refer 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 foreign affiliate with a similar name? If so, you may need to provide us with written consent from the foreign affiliate and add an element to your proposed name to distinguish it, such as ABBA Consulting Canada Inc.

If your name is not approved

Incorporators are sometimes surprised to learn that Corporations Canada has not approved the name they have proposed, particularly if 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 if we do not have enough background information on which to base a decision.

If Corporations Canada does not approve the name proposed for your corporation, your business cannot be incorporated. In this case, we will send you a notice stating the reasons for the decision. You can then submit additional information to support approval of the corporate name, or propose a completely different name.

You may need to obtain a new NUANS Name Search Report if the report is no longer valid (i.e., the report date is beyond the 90-day limit) at the time you submit additional information or the name you are proposing is different from the name proposed in the original application.

Pre-approval of name

If you would like us to approve the corporate name you have chosen before you file your Articles of 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 Information Form at the same time. If we accept the name you choose, we will let you know by letter that the selected name is reserved for 90 days from the date of the NUANS Name Search Report. You may then prepare your Articles of Incorporation.

Number name

Instead of asking Corporations Canada to approve a name for your corporation, you can also choose to have a number assigned (e.g., 1234567 Canada Ltd.) when we process your Articles of Incorporation. In such cases, Corporations Canada simply assigns the next available number when processing the articles. You must ask for a number name when you apply for your Articles of Incorporation. 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 faster processing and saves the expense of a NUANS Name Search Report.

Another option is to apply for a number name and ask for a name change later. To replace a number name by a corporate name, you must amend your Articles of Incorporation by filing Articles of Amendment and paying the $200 fee. 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 for a corporate name.

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2.3.2 The Registered Office

Indicate the province or territory in Canada where the corporation's registered office will be located.

Every corporation must have a registered office within Canada. This is primarily so that Corporations Canada, shareholders, directors and the public can send documents to the corporation. A post office box cannot take the place of a registered office.

When you complete your Articles of Incorporation, you need only indicate the province or territory in Canada where the registered office is to be located. You do not have to provide a street address.

2.3.3 Description of the Classes of Shares

Describe the classes of shares of the corporation and the maximum number of shares the corporation is authorized to issue (usually unlimited) for each class. If there is more than one class of shares, you must specify the rights, privileges, restrictions and conditions for each.

An incorporated business must issue at least one class of shares. Shares represent an ownership interest in the corporation. They are property, much like a car or a house. Share owners can transfer (sell) their shares and the rights that go with them (you may hear the phrase “rights that are attached to the shares”). Such a transfer must conform to any conditions or restrictions that apply to the shares.

Classes of shares

Generally, shares have three inherent rights:

• the right to vote;
• the right to receive dividends (if the board of directors has declared any); and
• the right to receive the remaining property of the corporation after it is dissolved.

All shares are without nominal or par value; that is, no specific value is attributed to them and no value appears on the share certificate.

You may vary the composition and complexity of your corporation's share structure in a number of ways to suit your circumstances. Your Articles of Incorporation may allow for one or more classes of shares. There is no limit on the number of classes of shares you may set out in the Articles of Incorporation. You may describe shares using class names such as preferred 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 for each class. You must assign the rights set out above (voting rights, the right to receive dividends, the right to receive the corporation's remaining property on dissolution) to at least one class of shares but one class does not need to have all three. If you create only one class of shares, that class will carry all these rights.

Articles of Incorporation with more than one class of shares often provide for unlimited common and preferred shares. Usually the common shares have the right to vote, the right to receive dividends after preferred shareholders, and the right to share in the property upon dissolution. Preferred shares usually have no voting rights but are given the right, ahead of the common shares, to receive dividends and to share in the property on dissolution. If the Articles of Incorporation describe only one class of shares, they are usually referred to as common shares.

These differences in rights can be useful if you have investors with different objectives. Voting shares are often issued to the person(s) actually running the company (control shares), whereas preferred 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 of profit (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 after the preferred shareholders.

2.3.4 Restrictions on Share Transfers

Indicate the restrictions on share transfers, if any.

When you are incorporating your business, you must decide whether to restrict the transfer of your corpora­tion's shares. Such restrictions enable the shareholders and directors to control who holds shares in a corporation by limiting the ability of shareholders to resell their shares. These restrictions must be described on share certificates issued to shareholders.

The most frequent share transfer restriction prevents a shareholder from transferring shares without the prior consent, by way of resolution, of the board of directors or a majority of the shareholders.

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2.3.5 Number of Directors

Indicate the minimum and maximum number of directors

In your Articles of Incorporation, you must indicate a minimum and maximum number of directors, or a fixed number. We recommend that you provide for a minimum and maximum number of directors rather than a fixed number. This will offer more flexibility and may help you avoid the expense of submitting Articles of Amendment if you decide to change the number at some time in the future. Note, however, that your corporation must have at least one director.

2.3.6 Restrictions on Business Activities

Indicate any limits imposed on a corporation's business

Set out the restrictions, if any, on the corporation's business activities. Most corporations do not provide any restrictions and simply write “None.”

If for some reason you want to limit the commercial activities of the corporation, we recommend that you use this preamble: “The business of the corporation shall be limited to the following: ...” Complete the preamble by defining the limits you want to impose on the corporation.

2.3.7 Other Provisions

Indicate other applicable provisions, if any.

You may want to include other provisions in your Articles of Incorporation. For example, some incorporators decide to include clauses in the articles that will satisfy the requirements of other legislation or institutions.

Here are some examples of 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 of Incorporation.

• A provision restricting the transfer of the corporation's securities. As we said in Section 2.3.4 of this guide, if you want your corporation to avoid designation as a distributing corporation under provincial securities legislation, then you must include a statement that restricts the transfer of the corporation's securities.
• A provision regarding directors' borrowing powers and the delegation of those powers, in order to limit the authority of directors and/or to satisfy the requirements of lending institutions.
• A provision that increases the size of the majority required when shareholders vote.
• A provision that specifies the form of your corporate name for use outside Canada. Do not use this item to designate the English or French form of the corporate name for use in Canada. For this, use the item entitled Corporation Name.
• A provision that prescribes how shareholders will fill a vacancy on the Board of Directors.
• A provision that specifies what constitutes a quorum of directors.

2.3.8 Sign Your Articles of Incorporation

Online: The Articles of Incorporation must be printed and signed by the incorporator(s). The name(s) of the incorporator(s) are then entered in the appropriate fields online. The signed form is to be kept with the corporate records.

By email, fax or mail: Forms sent by email, fax or mail must bear the signatures of all the incorporators; a typed name is not acceptable as a signature.

Articles of Incorporation must be signed by the incorporator(s), all of whom must be competent, at least 18 years of age and not in a state of bankruptcy. There is no requirement to have more than one incorporator. Although incorporators may be directors or shareholders of the corporation after it is organized, there is no legal requirement for them to assume such roles.

If the incorporator is a body corporate (i.e., another corporation), the name provided must be the name of the body corporate; the address must be its registered office; and the Articles must be signed by a person authorized to sign on behalf of the body corporate.

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2.4 How to Complete the Initial Registered Office Address and First Board of Directors Form

In this section, you will find advice to help you prepare the Initial Registered Office Address and First Board of Directors form. Items are presented in the order of appearance in the form. Please see Annexes A and B for examples of completed Initial Registered Office Address and First Board of Directors forms.

If you are incorporating online, you will be prompted to provide the Initial Registered Office Address and First 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

Indicate the address of the registered office. This must be a street address; a post office box number is not sufficient. Provide a mailing address if this is different from the registered address.

You must provide the street address of the registered office, as well as a mailing address, if different from the 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

Indicate the first name, last name and address of each director. Indicate whether or not each director is a resident Canadian.

It is required to indicate the address of each director. This information allows Corporations Canada and others to send notices to the directors if required. Corporations Canada does not publish the address 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 field online. The signed form is to be kept with the 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 be confident that your transaction will be processed with complete security.