You’ve Incorporated: Now What?
By-laws
Although not required by legislation, a corporation’s by-laws regulate its business and affairs including the procedures for meetings of directors and shareholders, signing authority, directors’ remuneration, and indemnification. To be effective, the by-laws and any amendments or repeals must first be approved by the directors, then passed by the shareholders at their next meeting.
It is normal practice to prepare, as “By-Law Number 1” of the corporation, a general by-law dealing with meetings, notice, quorum, officers, proxies, execution of documents, banking and other matters of a continuing nature.
The purpose of this general by-law is to fix the rules governing the operation of the corporation, to the extent permitted by the governing statute and articles, and to take advantage of the flexibility permitted. By-laws may contain not only general by-law matters, but also virtually any matter of importance to the corporation.
First Meeting (Directors)
At a first meeting of the directors, particularly where there are more than one director or shareholder, a resolution should be passed to:
- enact company by-laws;
- adopt the forms of share certificates;
- allot and authorize the issuance of shares;
- appoint officers; and
- adopt any pre-incorporation contracts.
Second Meeting (Shareholders)
Once the initial directors’ meeting has been held, notice should then be given to, or written waiver of notice received from, each of the shareholders and directors of a meeting of shareholders called in accordance with the by-laws to:
- confirm the by-laws passed earlier by the directors;
- appoint the auditor or, if pursuant to s. 148 of the OBCA no auditor is required, appoint accountants; and
- appoint the directors for the remaining fiscal year.
Resolutions
Other business of a corporation is carried out by way of resolution passed as required by a simple majority of the directors, e.g., the election of the president, appointment of officers, approval of financial statements, allotment and issue of shares, and declaration of dividends; or by a simple majority of shareholders, e.g., the election of directors and the appointment of auditors.
In some instances, including amendment of the articles, amalgamation, or the sale of all or substantially all of the assets of a corporation, a “special resolution” is required. A special resolution is a resolution passed by a majority of not less than two-thirds of the votes cast by the shareholders who voted in respect of that resolution. There are also resolutions that require unanimous written approval of shareholders, including those not otherwise entitled to vote (e.g., dispensing with auditors (OBCA, s. 148)).
Other business of a corporation is carried out by way of resolution passed as required by a simple majority of the directors, e.g., the election of the president, appointment of officers, approval of financial statements, allotment and issue of shares, and declaration of dividends; or by a simple majority of shareholders, e.g., the election of directors and the appointment of auditors. In some instances, including amendment of the articles, amalgamation, or the sale of all or substantially all of the assets of a corporation, a “special resolution” is required. A special resolution is a resolution passed by a majority of not less than two-thirds of the votes cast by the shareholders who voted in respect of that resolution. There are also resolutions that require unanimous written approval of shareholders, including those not otherwise entitled to vote (e.g., dispensing with auditors (OBCA, s. 148)).