In this presentation, FMC's Alex Kilgour looks at the fundamental aspects of forming a company. From initial startup decisions to the stages of a businesses life, this presentation captures the entire process.

1. CCR SmartStart Bootcamp 2012
Forming Your Company
Presented by Alex Kilgour
May 29, 2012
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2. Overview
A. Why incorporate?
B. Corporate Structure – who’s in charge/responsible/liable?
C. How to incorporate – what initial decisions have to be made?
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3. Stages in the Life of a Business
• Founder(s)
• Outside investor(s)
• Public company
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4. Operating a Business
• Sole proprietorship
• Partnership (general or limited liability (LLP)
• Corporation
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5. Why Incorporate?
• Limited liability
• Taxation of capital gains vs. employment income
• Ease of carrying on business (corporation as legal person)
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6. What is meant by a Legal Person?
• A corporation may hold property (tangible and intangible)
• A corporation is able to contract
• A corporation may commence a legal action
• A corporation may exist after its initial shareholders
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7. Who’s in Charge? (Part One)
• Shareholders (owners appoint/elect directors)
• Directors (directors select officer(s), e.g. CEO, CFO)
• Officers (officers select employees/consultants)
• Employees/consultants
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8. Who’s in Charge? (Part Two)
• Shareholders vote on certain fundamental decisions but do not
contract on the part of the corporation
• Directors supervise management of the corporation (strategy
and oversight, e.g., approving contracts)
• Officers manage the day to day activities of the corporation
(e.g., hiring staff, signing contracts, etc.)
• Employees/consultants carry out the day to day activities
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9. Shareholders and Shares
• A shareholder holds shares issued to it by the corporation
• Shares are issued for money, assets or past services (and
nothing else)
• Majority rules (or does it?)
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10. Shareholder Approval Rights (Annual)
• Shareholders elect directors on an annual basis
• Shareholders receive annual financial statements only (but do
not approve)
• Shareholders appoint or waive the appointment of an auditor
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11. Shareholder Approval Rights (Fundamental)
• Statutory in the OBCA or CBCA (amending articles, etc.)
• Contractural (shareholders’ agreement)
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12. Shareholders’ Agreement – Why?
• Restrict transfer of shares
• Set out approval rights between shareholders and directors
• Govern the sale of shares by the corporation and other
shareholders
• Other matters of importance to the shareholders, e.g., founder
share repurchase rights
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13. What Do Directors Approve?
• Annual financial statements
• Issuance of shares and granting of options
• Hiring of CEO and other senior officers
• Any other material decisions not decided by the shareholders
and not delegated by the Board to the CEO
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14. How to Incorporate?
• Incorporation is a right granted by the state
• Federally (Canada Business Corporations Act (CBCA))
• Provincially (Business Corporations Act (Ontario (OBCA))
• Internet using website of Industry Canada or Ontario Ministry
of Government Services
• Lawyer
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15. Initial Decisions
• Name of the company (number or name?)
• First director(s)
• Types and terms of classes of shares
• Ownership of corporation (i.e. number of shares issued to each
founder)
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16. Initial Documents
• Articles of Incorporation (government form)
• By‐laws (drafted by lawyer)
• Organization resolutions of shareholders and directors
(drafted by lawyer)
• Subscriptions for shares (drafted by lawyer)
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17. Initial Agreements
• Shareholders’ Agreement
• Employment Agreements
• Consulting Agreements
• Confidentiality and Proprietary Information Agreements
• Stock Option Plan
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18. Articles of Incorporation
• Name of the corporation (number or name)
• Province where registered office is located (CBCA only)
• Name of Incorporator (does not have to be first director)
• Registered office address
• Class(es) of shares and any maximum number of shares
• Terms and conditions of each class of shares
• Restrictions on share transfers (shareholder/board approval)
• Minimum or maximum number of directors (1 and 10)
• Restrictions on business of the corporation (nil)
• Other provisions (authority to Board to appoint
directors between meetings of shareholders)
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19. By‐laws
• Procedural in nature ‐ no single prescribed form ‐ enhance or
vary the procedures set out in the CBCA or OBCA
• Financial year, bankers, accountants
• Execution of contracts
• Corporation ability to borrow
• Shareholder meetings (notice, quorum, proxies, ballot voting)
• Board meetings (notice, quorum, place of meetings, electronic
meetings, Chairman, vacancies, removal of directors)
• Officers – President, Secretary, Treasurer
• Limitation of liability and indemnity for directors
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20. • Thank you to Ontario Centres of Excellence for the opportunity
to speak with you today!
• Questions?
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21. Alex Kilgour, FMC
alex.kilgour@fmc‐law.com
(613) 783.9679
www.fmc‐law.com