Articles Of Incorporation Of A Close Corporation Template for Canada

When you're establishing a close corporation in Canada, your Articles of Incorporation serve as the constitutional document that legally creates your corporation and defines its fundamental structure. Unlike regular corporations, close corporations are designed for businesses where you want to maintain tight control over ownership, typically limiting shareholders to a small, select group such as family members or business partners.

When do you need this document?

You need Articles of Incorporation for a Close Corporation when you're starting a family business where you want to keep ownership within the family, establishing a professional corporation with partner restrictions, or creating a small business where you need to control who can become shareholders. This document is also essential when you're converting an existing partnership into a corporate structure while maintaining the same level of ownership control, or when you're establishing a business that requires specific expertise and you want to restrict share ownership to qualified individuals only.

Key legal considerations

Your Articles of Incorporation must include specific provisions that distinguish your close corporation from a regular corporation. The most critical element is the share transfer restriction clause, which typically requires board approval or gives existing shareholders the right of first refusal before shares can be sold to outsiders. You'll need to specify the maximum number of shareholders allowed, usually limited to 50 under Canadian law, and define the classes of shares with their respective rights and restrictions. The document must also outline director requirements, including minimum and maximum numbers, and may include provisions for cumulative voting or other protective measures for minority shareholders. Additionally, you should consider including buy-sell provisions that address what happens when a shareholder dies, becomes disabled, or wants to exit the business.

Legal requirements in Canada

Under the Canada Business Corporations Act (CBCA), your Articles of Incorporation must be filed with Corporations Canada for federal incorporation, or with the appropriate provincial registry if incorporating provincially. The document must include your corporate name (which must be available and comply with naming requirements), the address of your registered office in Canada, the classes and maximum number of shares you're authorized to issue, and any restrictions on share transfers that create the close corporation structure. You must also specify the number of directors, with a minimum of one for most close corporations, though some provinces may require more. The articles must be signed by each incorporator and include their names and addresses. Once filed and approved, you'll receive a Certificate of Incorporation that officially creates your corporation. Remember that close corporations may be subject to additional provincial securities regulations regarding private placements and must comply with ongoing filing requirements to maintain their corporate status.