When an incorporation application is filed, the incorporator is required to file a notice of articles with the application.
The notice of articles is a requirement under the Business Corporations Act (BCA) which includes the shares and shareholders of the corporation, its directors, the name of the corporation and registered and records office mailing and delivery address.
This post will explain the purpose and function of the notice of articles, as well as the benefits of having comprehensive articles drafted by a business lawyer.
What Are Articles and What is Their Purpose?
Articles can be considered the constitution of the corporation in which the BC Business Corporations Act (BCA) requires all corporations to have.
The articles are rules that lay out how the corporation should function, how the shareholders of the corporation are dealt including shares and dividends, how the corporation meets the requirements of the BCA, and how the corporation deals with the business it carries out.
Section 12(1) of the BCA states that a corporation is to have articles which set rules for the conduct of the corporation.
The articles are to mandatorily include as per s.12(2):
a) restrictions on the business the corporation may carry out and the powers of the corporation and,
b) the rights and restrictions on all share classes of the corporation.
It is important to include the following information in the articles:
- legal name of the corporation
- complete address of the registered office
- the number of directors
- complete name and addresses of all founding directors
- specify the classes of shares and the maximum number of each class of share that can be issued
- the rights, privileges, and restrictions of each class of shares (e.g. restrictions on issuance, transfer, or ownership of shares)
- business activity restrictions or powers that can be exercised by the corporation
- provisions or restrictions on director(s) ability to borrow
- full names and signatures of the incorporators
Benefits of Having Comprehensive Articles Drafted by a Lawyer
Although s.12(4) of the BCA provides standard article requirements for businesses, such documents should be drafted by experienced corporate lawyers.
Providing incomplete or incorrect information when drafting your articles can lead to unintended financial consequences if something goes wrong in the future. A lawyer can ensure all corporate document information is structured properly and accurately to avert that risk.
A corporate lawyer will design the share structure that maximizes tax efficiency to the shareholders. The standard articles do not provide any guidance for tax benefits when mentioning the share structure of the corporation.
Another benefit is that lawyers can help structure articles to provide built-in safety mechanisms for certain shareholders. If a shareholder conflict were to arise in the future that may lead to potential litigation, the articles can be drafted in such a way that can protect certain shareholders over others.
Every corporation requires notice of articles and having experienced business lawyers to incorporate your company and draft comprehensive articles will better position the corporation for long term success.
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The preceding content is for informational purposes only and does not constitute legal or professional advice. To obtain such advice, please contact our offices directly.