The articles are guidelines that govern a corporation. Articles contain information, expectations and protocol for the corporation. Your business’ Articles of Incorporation is a legal document and helps prove the business’ separation from the individuals who run it. Articles primarily refer to the details on the shares classes (not number) of the corporation, but they also include contact information, restrictions, provisions and other bylaws for the business.
Saskatchewan Corporate Registry allows you to update your own custom articles, if the pre-defined options are not suitable for your corporation.
1. The Corporation Name
Every Canadian corporation must have a name. You have the choice of:
- Choosing an operating name that contains 3 mandatory elements:
- A distinctive element (a unique term)
- A descriptive element (an industry or business type term)
- A legal ending (ltd, corp, inc., limited, corporation, incorporated)
- Operating as a numbered corporation
Saskatchewan corporations with operating names need to first conduct a name search through Information Services Corporation’s Corporate Registry. Reserving a name is a mandatory preliminary step to filing your Articles of Incorporation. You must choose and include your legal ending when you search and reserve a name.
Numbered corporations do not need to complete a primary step, rather request a numbered corporation from Information Services Corporation’s Corporate Registry. A numbered corporation contains three parts, a 9-digit number (also known as the entity number), and a legal ending. A 9-digit number will be generated for you. You do not get to choose the numbers in your corporation. You will simply be granted an available number.
Businesses choose to operate as a numbered corporation when a name is not important to their business. This ensures faster processing time and saves the expense of a name search and reservation. You have the option of applying for a numbered corporation and applying for an operating name later. This option requires a filing fee.
2. Incorporation Date
Every corporation must chose an incorporation date. This does not mean your business started selling or opened on this date, or that you started earning revenue on this date. It is simply the date your corporation came into existence and became an entity, like a birthday. It provides a baseline to start tracking expenses and activity. It is the date you will use at the tax year start date to file your first corporation income tax return.
The most significant repercussion of your incorporation date is the determination of your annual return date. Every corporation must pay a year renewal fee and form, called a return, to remain active.
3. Share Details
Your share details 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.
Any person may hold shares in a corporation. In addition to an individual, a “person” may include a legal entity such as a trust, a mutual fund or another corporation.
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.
3.1 Share Classes
All incorporated businesses must issue at least one class of shares. Shares represent a portion of ownership in the corporation. They are considered property, like a car or a house. 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.
3.2 Share Structures
Where there is more than one class, you must set out the rights, provisions, restrictions and conditions for each class. You must assign the inherent 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 need only one class of shares, that class will carry all these rights.
Articles of Incorporation with more than one class of shares often start with the division of unlimited common shares and preferred shares. Usually the common shares have the right to vote, the right to receive dividends after those who hold preferred shares, and the right to share in the property upon dissolution. Preferred shares usually have no voting rights but are given the right, before the common shares, to receive dividends and to share in the property on dissolution.
If you need 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 corporation (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 exercises ownership of the company (by voting for elected directors, major activities etc.), but may only be entitled to receive dividends after the preferred shareholders.
A new corporation may not need different classes of shares at the time of incorporation. If your corporation needs a more complex share structure, than one class (common), seek professional advice to make sure you have the best structure and to properly prepare any changes to your Articles of Incorporation.
3.3 Share Transfers
Share owners can transfer (sell) their shares and the rights that go with them. Such a transfer must conform to any conditions or restrictions that apply set out in the articles. The most common share transfer article is a statement that indicates current shareholders must receive approval from the directors of the corporation.
Corporations with only one sole operator-shareholder may not find it necessary to state conditions a regarding share transfers.
3.4 Other Provisions and Restrictions
You have the choice to add other applicable conditions, called provisions and restrictions, if any. There is no requirement to include provisions or restrictions regarding the shares as well as other parts of the corporation. Your provisions and restrictions will form the basis of your corporation’s bylaws.
For example, some incorporators decide to include provisions and restrictions that:
- Prevents the sale of the corporation’s shares.
- Explains the directors’ powers to receive financing and the delegation and limits of those powers.
- Satisfies the requirements of other legislations, regions or institutions.
- Increases the size of the majority required when shareholders vote.
- Specifies the form of your corporate name for use outside Canada.
- Details how shareholders will fill a vacancy on the Board of Directors.
- Specifies what constitutes a quorum of directors.
- Enables the shareholders and directors to control who holds shares in a corporation.
- Prevents a shareholder from transferring shares or securities without the prior consent.
3.5 Authorized Number of Directors
Every corporation must have at least one director.
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. Typically incorporators will opt to have a minimum and maximum number (range) of directors rather than a fixed number.
This offers more flexibility and growth options, and will help you avoid the expense of submitting Articles of Amendment if you decide to change the number at some time in the future.
4. The Registered Office
Every Saskatchewan Corporation must have a registered office within Saskatchewan. A registered office contains two addresses. One physical, one mailing. The address for both can be the same, however, the physical office cannot be a post office. The physical office is where you’ll primarily do business administration from and where the business can physically be found.
5. Directors and Officers
Corporations are led and managed by directors and officers. The collective group is called a Board of Directors.
A corporation’s members (directors) are typically chosen by the subscribers (shareholders) of the corporation, generally at an annual general meeting or AGM, to maintain the activity of the corporation and look after the shareholders’ interests.
The board has the ultimate decision-making authority and, in general, is empowered
to
- Set the company’s policy, objectives, and overall direction
- Adopt bylaws
- Name members of the advisory, executive, finance, and other committees
- Hire, monitor, evaluate, and fire the executive director and other senior officers
- Determine and pay the dividends
- Issue additional shares
Though all its directors might not be engaged in the corporations day-to-day operations, the entire board can be held liable (under the doctrine of collective responsibility) for the consequences of the firm’s policies, actions, and failures to act.
Board members usually include senior-most executives (typically called executive directors and / or officers) as well as experts or respected individuals chosen from the wider community. Officers are typically charged with a certain operational responsibility. Examples of officers includes:
- Chief Executive Officer (CEO); President; Executive Director:
- Ultimate responsibility for the corporation’s activities
- Signs off on contracts and other legally-binding actions
- Reports to the corporation’s board of directors
- Chief Operating Officer (COO); General Manager; Vice President
- Managing the corporation’s day-to-day affairs and logistics
- Can be a role of the CEO or reports directly to the CEO
- Chief Financial Officer (CFO);Treasurer
- Responsible (directly or indirectly) for almost all of the corporation’s financial matters
- Secretary; Administrator
- Responsible for maintaining and keeping records, documents, and “minutes” from shareholder meetings
- Chair
- Highest ranking officer in a firm’s board of directors
- Calls and presides over the board meetings
- May or may not have actual executive authority
- In small businesses, typically the same person holds the position of chair and chief executive officer
- Past President; Past Chair; Ex-Officio
- Holding a position or membership due to completing an elected position of office for the stated term.
- Supports the transition of the corporation’s board, provides history and past context for current decisions
Corporations must indicate the first name, last name, contact information and residential address of each director and officer. If the director holds an Officer Position, the position must be indicated under that director’s name. Also indicate whether or not each director is a resident Canadian.
It is important to indicate the residential address of each director. This information allows the Corporate Registry to send notices to the directors if required.
6. Power of Attorney
A Power of Attorney refers to the written legal authority given by one party (the principal) to another (the agent or attorney) to act on the principal’s behalf. It may be a general Power of Attorney that authorizes the agent to act generally on behalf of the principal, or special Power of Attorney that is limited to a specific act or situation.
Listing a Power of Attorney is only mandatory for a Saskatchewan corporation that does not have a director reside in Saskatchewan.
7. Incorporator
The Articles of Incorporation must provide the name, address and telephone number of the incorporator. The incorporator must also sign the articles, which is represented by checking a confirmation box in the online Corporate Registry portal). In order to sign, the incorporator must be competent and of sound mind, at least 18 years of age and not in a state of bankruptcy.
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 another corporation, the name provided must be the name of the incorporating corporation; the address must be its registered office; and the Articles must be signed by a person authorized to sign on behalf of the corporate body.
Conclusion
Incorporating a business is an involved, lengthy process. Use the resources of SK Startup Institute, Information Services Corporation, and a lawyer to support you through the process.
