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Corporation - Structure

DIRECTORS

The directors of a corporation are members of its board of directors. The board of directors is responsible for managing the activities of the corporation and for making decisions regarding those activities. The directors of the corporation are elected by the shareholders. A director is not required to be a shareholder unless provided otherwise in the articles of the corporation. Only an individual can be a director.

OFFICERS

The officers of the corporation are named by the board of directors and they are responsible for overseeing the daily operations of the corporation. They are also given legal authority to act on the corporation’s behalf in most of its business-related activities. Only an individual can be an officer.

SHAREHOLDERS

The shareholders are the individuals, corporations, or other entities who own the shares of the corporation’s stock. They are considered to be the owners of the corporation, although it is managed by the board of directors. The shares give the shareholders the right to vote regarding certain decisions regarding the corporation (including the election of directors), to receive dividends declared by the corporation, and to receive a share of the remaining property of the corporation upon liquidation. The shareholders participate in the profits and losses of the corporation.

SHARES

Shares are units of equity ownership interest in the corporation. The number of shares held by a shareholder determines the proportion of equity ownership help by such shareholder in the corporation. There are several categories of shares that may be issued, but usually, the shares of a Quebec corporation provide for the following rights:

1. The right to vote regarding certain decisions regarding the corporation (including the election of directors)
2. The right to receive dividends declared by the corporation, and
3. The right to receive a share of the remaining property of the corporation on liquidation.

ARTICLES OF INCORPORATION

The articles of incorporation are the documents provided by the corporate registry which establishes the existence of the corporation. It contains basic information about the corporation as well as its share capital (the description of the shares which can be issued by the corporation) and other relevant information.

BY-LAWS

Corporate by-laws are the rules adopted by the board of directors and ratified by the shareholders regarding the internal management of the corporation, including the relationships between the corporation and its shareholders, directors, officers, and others.

RESOLUTION

A resolution is a document that details the actions and decisions of the corporation’s board of directors or its shareholders. The corporation speaks through resolutions of its board of directors. As such, any decision regarding the corporation’s business needs to be put in the form of a resolution. The corporation’s resolutions are stored in the corporation’s minute book.

Examples of corporate decisions that require a resolution:

  • Change of director;
  • Change of officer;
  • Changer of address; 
  • Change of shareholder
  • Amendments to your stock option plan;
  • Amendment of the articles of incorporation;
  • Share transactions/ transfers ; and
  • Other structural changes to the corporation.

WHAT IS A CORPORATE MINUTE BOOK?

The corporate minute book is a set of documents that constitute the official and primary record of the activities of the corporation, beginning at incorporation. It contains all the relevant records relating to directors, officers, and shareholders of the corporation. It is also used to store all important corporate documents, such as documents concerning the formation and the management of the corporation. As such, it stores all material corporate transactions that affect and involve the corporation.

The minute book usually contains the following documents:

  • The Articles of Incorporation ;
  • The by-laws;
  • Minutes of the directors’ and shareholders’ meetings
  • Directors’ and shareholders’ resolutions;
  • Share certificates issued to the shareholders of the corporation;
  • Shareholder, officer, and director registers and ledgers;
  • Share transfers and any other documents relevant to transactions of the corporation.

WHY DO I NEED A CORPORATE MINUTE BOOK?

Firstly, all corporations registered under the Quebec Business Corporations Act or the Canada Business Corporations Act are required to keep an up to date and organized corporate minute book. 

Then, it is very important to keep excellent paper records of the management of the corporation for many practical reasons. Over the life of the corporation, the corporation’s representatives will be asked to provide the corporate records of the corporation on numerous occasions, namely in connection with:

  1. Any financing of the corporation: the corporate minute book shall be subject to examination by lenders and investors;
  2. Legal opinions: the corporation’s counsel shall rely on the documents in the corporate minute book to provide a legal opinion to any potential lenders or investors;
  3. Sale of the assets or the shares of the corporation: the corporate minute book will be the first set of documents examined by the purchaser;
  4. CRA tax audit: in the event of a tax audit, the auditor will ask to see the minute book.

Any major decisions regarding the corporation shall require the examination of the corporate minute book and/or proof of evidence of approval from the board of directors of the corporation. 

For all the above reasons, maintaining an up-to-date and well-organized minute book brings the following obvious advantages: 

  1. It leaves the impression that your business is organized and is more likely to meet the lenders’ or investors’ requirements;
  2. It enables you to avoid the painful and expensive process of reinventing the wheel by recreating and ratifying all past actions.
CONTACT US
  • 514-667-5737
  • info@dev.nsclex.com
  • 1250, boul. René-Lévesque O., Suite 2200, Montréal, Québec, H3B 4W8

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