What is a corporation?
A corporation is an entity that has its own legal rights and responsibilities. It is formed under the authority of a statute.
Corporations can carry business in their own organized way that is separate from its owners and creators.
Concerns about corporations and history:
Name identification should be different from it’s business members.
Degree of involvement (individuals or business entities) in the business activity of a corporation.
Separation of business from its members based on liabilities and assets of a corporation.
Continuation of business after the death of one or more of its members.
Canadian corporation’s rules come from Continental Europe and British law.
The British parliament passed number of statues, each of which was designed to incorporate a joint stock company, and to give the company the power to sue or to be sued.
Usually certain railways, telecommunication and transportation companies and crown corporations are created under a single purpose statute of the Canadian parliament.
There are three ways in which a corporation can be formed in Canada:
Memorandum of Association
This system of incorporation comes from England. British Columbia, Nova Scotia and Newfoundland still follow this system. Applicants register a document, called a memorandum of association that sets out their agreement regarding the corporation. A company will be formed once this document is registered with the appropriate government office.
Letters Patent
In Ontario, nonprofit organizations are usually formed using this method. Applicants apply to the Ministry of Consumers and commercial relations and upon approval ministry will issue letters patent.
Corporations created for charitable, religious and other non-profit purposes are subject to a legal regime different from that of business corporations.
Documents filed by the applicants under memorandum of association or letters patent system must state the specific type of business the corporation will be doing.
Boundaries of objects are set forth and corporations cannot operate out of these boundaries.
Authorized capital of the corporation has t be specified if it is planning to offer shares.
Corporation documents must place a limit on the amount that it can charge for initial issue of shares.
Articles of Incorporation
Articles of Incorporation system was adapted from the United States. Both Ontario government and Federal government follow this system for incorporation under articles of incorporation system.
Articles of incorporations is a document signed by the applicants and given to government office for review.
Upon approval of this document (correction of articles, conforming to statute and regulations) government agency will issue certificate of incorporation.
A statement of maximum number of shares or the value to be obtained therefrom is no longer required.
Early corporations needed a minimum of seven incorporators, later it was changed to three. But now a days a corporation can have only one director as long as it is a non-offering private corporation. This director of a corporation and his or her company can also incorporate a new company.
Director:
Director is a person elected by corporation’s shareholders.
Disclaimer:
This presentation is for educational purposes only. It does not constitute a legal advice or opinion of any kind. Please do not use any of its contents without seeking a professional advice.
References:
The fundamentals of corporate law and procedure
By
Mark Walma and Patricia McCann – Smith
Publisher: Edmond Montogomery Publications Limited, Toronto, Canada
Mansoor Suhail (Mani)
Accountant
MA TAX – BSBA – EA – ICIA – RA
Tax for Canada and U.S.A
Web: www.theaccountingandtax.com and www.taxservicesguru.com
Blog: http://taxservicesguru.blogspot.ca
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