Simply Legal : Incorporation Checklist

By: Simply Legal  09-12-2011
Keywords: Directors, Shareholder

If you’re giving your corporation a specific name your name choice will need to be approved by the government.

If you don’t have your name choice approved yet we’ll submit an approval request to the government on your behalf as part of our incorporation service.

If you already have approval of your name you’ll need to provide us with the name approval information you received from the government.

For a British Columbia incorporation, if you already have your name choice approved we’ll need to know the Reservation Number (which starts with NR) and the Expiry Date indicated in the approval you received. If you don’t have your name approved yet we’ll submit an approval request to the government on your behalf. For a British Columbia name approval, up to 3 name choices can be included in a single request. If the name choice(s) listed in a name request are not approved, another name request must be submitted which will be subject to additional fees. For that reason, many people decide to include 2 or 3 choices in each request but that is optional.

For a Federal incorporation, the government requires that a NUANS Report be obtained prior to name approval. If you don’t have a NUANS Report we’ll obtain the NUANS Report on your behalf as part of our incorporation service. If you already have a NUANS Report for your name choice, we’ll need to know the Reservation Number and Production Date indicated in your NUANS Report. If you already have your name choice approved by the government we’ll also need to know the Client Number and Request Number indicated in the approval you received. If you don’t have your name approved yet we’ll submit an approval request to the government on your behalf.

If you’re creating a numbered corporation then no government approval is required and also, for Federal incorporations, no NUANS Report is required.

A numbered corporation is what we call a corporation that has for its name a number assigned by the government followed by “B.C. Ltd.” in the case of a British Columbia corporation and “Canada Ltd.” in the case of a Federal corporation.

Before proceeding with a particular name choice you should also research whether any other businesses have a similar name so as to minimize the possibility that your name choice will be rejected or could infringe upon the name or trade-mark rights of someone else. For example, you could review telephone listings, business directories and other available publications and search the internet.

You’ll need to know whether you want your corporation to have a simple single class share structure or our standard multi-class share struc¬ture. See below.

One Class Structure

Class A Common shares
Voting, dividend and equity participating shares

Multi-Class Structure

Class A Common shares
Voting, dividend and equity participating shares

Class B Common shares
Non-voting, dividend and equity participating

Class C Preferred shares
Non-voting, dividend, equity participating, redeemable and retractable with price adj. clause

Our Class A Common shares are the only voting shares in our share structures and, as such, will be the only shares that entitle a shareholder to vote in the election of directors each year.

Our Class A Common shares and Class B Common shares are discretionary dividend shares, which means the holders of the Class A Common shares and Class B Common shares will be entitled to receive dividends at the discretion of the directors. The Class A Common shares and Class B Common shares are also equity participating shares and will be treated equally in any liquidation, winding up and dissolution of the corporation and any related distribution of assets, subject to the priority given to the Class C Preferred shares (see below).

Our Class C Preferred shares are redeemable by the corporation and retractable by the shareholder at a redemption price that is set by the directors at the time of share issuance and also contain a price adjustment clause for tax rollover purposes pursuant to section 85 of the Income Tax Act (Canada). The shareholders of the Class C Preferred shares will be entitled to receive dividends at the discretion of the directors and will be entitled to receive the redemption price for their Class C Preferred shares in connection with any liquidation, winding up and dissolution of the corporation and any related distribution of assets in priority to any other class of shares. The Class C Preferred shares should be used only with tax and legal advice. No Class C Preferred shares can be issued with our online service.

All of our standard classes of shares contain no par value shares. Par value is simply the minimum value at which the par value shares can be issued. In other words, there is no minimum value assigned to the classes of shares in our share structures which is an accepted and standard practice.

Our multi-class structure also allows the directors to dividend to one or more dividend classes of shares to the exclusion of other classes.

The owners of a corporation are called shareholders. A corporation must have at least one shareholder. A shareholder’s ownership is evidenced by the number and class of shares they hold. For example, if a shareholder holds 100 Class A Common shares and no other shares are issued then that shareholder owns all of the issued shares which makes that shareholder the 100% owner of the corporation. On the other hand, if another shareholder is issued additional 100 Class A Common shares then each of the shareholders will own 50% of the corporation (i.e. 100 shares each or 50% of the total number of shares issued).

You need to know the full name and address of each share¬holder and the number and class of shares they will be given as part of your incorporation.

If your corporation will have only one shareholder then it really doesn’t matter how many shares are issued in terms of the percentage of ownership the shareholder will have in the corporation. For example, you could issue 100 shares or 1000 shares to the shareholder. Regardless of the number, the shareholder will own 100% of the total number of shares issued and, as a result, will be the 100% owner of the corporation (assuming no other shares are issued).

A corporation must have at least one director. The directors of a corporation are ultimately responsible for the management of the corporation’s business but can delegate some of their responsibilities to others, e.g. a President.

You need to know the full name and address (which can’t be a PO box) of each individual who will be a direc¬tor. Please note that at least 25% of the directors of a Federal corporation must be Canadian residents. There is no residency requirement for British Columbia corporations.

A corporation is not required to have any officers, e.g. a President. If your corporation will have one or more officers then you need to know their full names, addresses (which can’t be a PO box) and titles (e.g. President).

A corporation is not required to have an auditor so long as all of the shareholders agree to waive the auditor requirement and not appoint one.

An auditor is an independent accountant that reviews the financial statements and the financial affairs of a corporation to help ensure the statements accurately reflect the corporation’s financial affairs.

Auditors can be expensive so most small business corporations decide to rely on the financial statements prepared by their accountant and not to require the appointment an independent auditor to audit their accountant’s work. However, if you want an auditor to be appointed as part of the incorporation process you will need to provide us with the auditor’s name. Otherwise we’ll prepare a waiver of the auditor requirement for the corporation’s first year that you can have signed by the shareholders after the incorporation is completed.

A Federal corporation must have a registered office where its corporate records must be kept and any lawsuits against the corporation will be served.

A British Columbia corporation must have a registered office and a records office which must be in British Columbia and are usually located at the same place. The records office is where the corporate records must be kept and the registered office is where lawsuits will be served on the corporation if the corporation is ever sued.

You will need to know the address where the registered office, if a Federal corporation, or the registered and records office, if a British Columbia corporation, will be located (which can’t be a PO box).

Keywords: Directors, Shareholder

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