Articles of Incorporation Basics
If you have the opportunity to start your business off on the right foot, why not capitalize on it? Having an effective and well thought out legal structure is not only conducive for business growth, but it can also save a lot of headaches and future problems down the road. Articles of Incorporation is going as far back, legally, as possible. Understanding what these documents are is critical to understanding how the law can directly impact your business.
Articles of Incorporation are part of a legal document that is submitted to either the provincial, territorial, or federal government which registers a business as a corporation within Canada. For the purposes of this blog post, we will be examining two jurisdictions. The first is Alberta-based corporations which is governed by the Business Corporations Act (Alberta). The second is federally incorporated companies which are governed by the Canada Business Corporations Act.
As a refresher, operating under a corporate entity separates the business from its owners. The liability attributed to the corporation is only in regard to the corporation’s assets, not the assets of the owners of the corporation. This is important if the business is being subject to any legal action or debt recovery; it limits shareholder and director liability.
What is included in the Articles?
Articles of Incorporation include specific information for all corporations. Requirements of the Articles are found in S.6(1) of the ABCA and CBCA. The legislation mandates the inclusion of the name of the corporation, the corporation’s share structure, the number of directors of the corporation, and restrictions. Found on the legal Articles document is the corporation’s address and date of filing.
A business name is always included in the Articles. Often, you will see companies named ###### Alberta Inc., or ###### Canada Inc. This would be the legal name of the business, but the Articles allow you to have a named corporation as well like ABC Company Inc. To make sure there are no other companies with your business’ chosen name, you will have to do a NUANS report to confirm that no duplicates exists.
Directors and Officers
All directors’ names and their addresses must be included in the Articles. Federally, if there are only one or two directors in the company, at least one of them must be a Canadian resident. In Alberta, there is a similar rule, but the Alberta corporation only mandates that one in four directors must be resident. Non-Canadian residents can also be directors of the corporation, however, and in most instances, provinces will still require the company to have an attorney for service or someone in the province to be able to receive mail and more, on behalf of the corporation. When this is not the case, most provinces will require an attorney for service or someone in the province to be listed. Residential addresses for all directors are required to confirm residency status.
Although officers are not legally mandated in corporations, in a small owner-operated business, it is common for the shareholder(s), director(s), and officer(s) to be all the same. For example, if Bryce is the CEO of 123456 Canada Inc, Bryce can also be listed as a director and a shareholder on the Articles. However, officers manage the operations of the business and therefore, the decision to select them should not be taken lightly.
The Articles must include the corporation’s head office address. The head office of the corporation needs to be located in the province or territory in which the business is being registered.
Any restrictions that apply to the business must be included in the Articles. Restrictions generally relate to the company’s share structure and share transfers. Restrictions on share transfers allow shareholders to control who can become a shareholder in the corporation. Having this embedded in the Articles makes sure that changes cannot be made without updating the Articles with the government. In order to update the Articles, shareholders must vote to pass the amendments with a two-thirds vote.
 Business Corporations Act, RSA 2000 c B-9 (ABCA).
 Canada Business Corporations Act, c C-44 (CBCA).
 Ibid at s 105(3.3).
 ABCA, supra note 1 at s 105(3).
Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.