Organizing the Business Corporation

• Author: Tina Kamakaris/Jane Kamakaris/Louis Kamakaris
• Pages: 477-508

477

Chapter 27 Organizing the Business Corporation

CHAPTER 27

is chapter covers the initial organization of a newly incorporated business corporation,

including organizing its structure and documenting the organization in the corporate

minute book.

KEEPING CORPORATE RECORDS

e Ontario Business Corporations Act (OBCA) sets out the types of records that business

corporations must keep:

140.(1) Records.--A corporation shall prepare and maintain, at its registered

oce or at such other place in Ontario designated by the directors,

(a) the articles and the by-laws and all amendments thereto, and

a copy of any unanimous shareholder agreement known to

the directors;

(b) minutes of meetings and resolutions of shareholders;

(c) a register of directors in which are set out the names and

residence addresses, while directors, including the street and

number, if any, and an e-mail address if one is provided, of

all persons who are or have been directors of the corporation

with the several dates on which each became or ceased to

be a director;

(d) a securities register complying with section 141; and

(e) a register of ownership interests in land complying with

section 140.1.

Business corporations keep the above records in a binder-like book known as a minute

book, or digitally in a virtual minute book, which are the ocial records of business

corporations. e directors (directors and board of directors used interchangeably)

must make the contents of the minute book available to shareholders and creditors at

the corporation’s registered oce during regular business hours. In practice, however,

many non-oering corporations keep their minute books in the oces of their respective

lawyers who maintain them on an ongoing basis.

ORGANIZING

THE BUSINESS

CORPORATION

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478 Legal Office Procedures

CORPORATE SUPPLIES

You require the following supplies, available from legal stationers, to complete the initial

organization of the newly incorporated corporation. e client usually reimburses your rm

for the cost of these supplies when your rm bills the client for the incorporation services.

Minute book ere are various styles, most being loose-leaf variations of three-ring type

binders, or “virtual” minute books, typically maintained through third party providers. See

Precedent 27.1 for an example of a paper minute book and a DoProcess software virtual

minute book. e minute book contents for both formats are generally the same, e.g. paper

or electronic copies of articles of incorporation, by-laws, minutes of directors, etc. Order

the type your rm usually orders or as the client instructs.

By-laws 1 and 2 ese by-laws may be purchased as part of the minute book package, or

they may be generated from computerized rm precedents or from legal software programs.

Seal ere are various types; see Precedent 27.1. A corporate seal is an impression

of the corporation’s name made by a mechanical device, usually at places of corporate

signatures. e OBCA does not require corporations to have a seal since the signature of

the authorized ocers is sucient to bind the corporation.

Share certificates Firms usually purchase share certicates in blank and legal

software lls in the content and the types of shares they represent. Share certicates, in

blank or pre-printed, are available from legal suppliers. e share certicates are said to

be “with restrictions” because they usually contain restriction clauses printed on the face

of them, which restriction clauses refer to the fact that non-oering corporations cannot

sell shares without director approval.

BY-LAWS AND RESOLUTIONS

By-laws and resolutions are minute book records which represent the formal business activities

of the corporation. Following is an overview of by-laws and resolutions to help you understand

their role in the initial organization of a newly incorporated business corporation and beyond.

BY-LAWS

What are by-laws Basically, by-laws are the permanent business rules of a corporation.

By-laws are adaptations of the OBCA. us, while the OBCA applies to all corporations

in general, by-laws are adaptations of the OBCA which apply to the specic corporation

which enacts them.

Who enacts and confirms by-laws e directors enact most of the corporation’s

by-laws and submit them to the shareholders for conrmation at the next meeting of

shareholders, at which, the shareholders may conrm, amend, or reject the by-laws. If the

shareholders conrm them at the next meeting of shareholders, the by-laws continue in

eect and become permanent. If the shareholders reject a by-law, or if the directors fail to

submit a by-law to the shareholders for conrmation, the by-law ceases to be eective as of

the date of the next meeting of shareholders. In eect, the eective date of a by-law is the

date it is enacted (passed), not the date conrmed (approved) by the shareholders. Any by-

laws which the shareholders enact are eective on the date the shareholders enact them and

require no further conrmation since the shareholders are the owners of the corporation.

Copyright © 2022 Emond Montgomery Publications. All Rights Reserved.

479

Chapter 27 Organizing the Business Corporation

Methods of enacting and confirming by-laws e directors may enact by-laws

either at a meeting of directors or in writing, i.e. by the signatures of all of the directors instead

of at a meeting of directors. Similarly, the shareholders may conrm by-laws either at a meeting

of shareholders or in writing, i.e. by the signatures of a majority of the shareholders instead of at

a meeting of shareholders. Here is a summary of how by-laws may be enacted and conrmed:

ENACTING AND CONFIRMING BY-LAWS

ENACTED CONFIRMED EFFECTIVE DATE

By directors at

meetings of directors

or

In writing (signed by

all of the directors,

instead of a meeting)

By shareholders at

next meeting of

shareholders

or

In writing (signed

by a majority of the

shareholders, instead

of a meeting)

From date enacted by directors until conrmed

by shareholders at next meeting of shareholders,

after which, by-laws become permanent

or

From date enacted by directors until conrmed

in writing (signed by a majority of the

shareholders, instead of a meeting), after which,

by-laws become permanent

RESOLUTIONS

What are resolutions Resolutions are formal business decisions which are recorded

in the minute book of the business corporation. ey are decisions before and resolutions

after they are passed. Generally, there are ordinary resolutions, which can be resolutions

of either directors or shareholders, and special resolutions, which are resolutions of

shareholders only. ere are no special resolutions of directors.

Who makes resolutions e directors and the shareholders may make resolutions.

e OBCA prescribes the matters which may be done by resolutions of directors and

those which may be done by resolutions of shareholders: for example, the OBCA requires

that a corporation elect ocers by resolutions of directors, pass by-laws by ordinary

resolutions of shareholders, and make amendments to the articles of incorporation by

special resolutions of shareholders. Generally, shareholders make resolutions relating

to the structural and nancial matters of the corporation, and directors make all other

resolutions. If the directors and the shareholders are the same people, they do the job of

the directors and that of the shareholders as if they were two separate individuals.

Methods of passing resolutions Resolutions may be passed either at meetings, or

instead of meetings, in writing, i.e. by way of signatures. To pass, resolutions of directors

in writing require the signatures of all of the directors; special resolutions of sharehold-

ers in writing require the signatures of all of the shareholders; ordinary resolutions of

shareholders in writing require the signatures of a majority of the shareholders, unless the

articles require a greater majority. e corporation must, within ten business days, give

written notice to the shareholders who did not sign that resolution and include a copy of

the text of that resolution and reasons for the business dealt with by the resolution.

INITIAL ORGANIZATION

A newly incorporated business corporation is in existence as of the date set out in the

certicate of incorporation; however, the corporation is merely a shell at this point.

Legal TIP

A general difference

between by-laws and

resolutions is that

by-laws are rules,

whereas resolutions

are decisions.

Legal TIP

Resolutions of directors

or shareholders require

no confirmation.

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