Company By-laws in Ontario

What Are They?

The by-laws of a corporation are rules which establish how the business and affairs of a corporation are conducted.  Common by-laws address things like:

  • how documents will be signed (and contracts entered) on behalf of the corporation;
  • the dated for the corporation’s financial year-end;
  • the procedure to be used in connection with meetings of directors and shareholders, for example the forms for directors resolutions;
  • the provision for committees of directors; and
  • the roles of the officers of the corporation (ex. CEO, CFO etc);

It is useful to incorporate operational rules even though Ontario legislation address some company rules by default. In some cases, the default legislative rules can also be amended by the company in their own by-laws.

Who Creates the Company By-Laws?

Unless the articles, existing by-laws, or a shareholder agreement provide otherwise, it is the directors of the company that make company by-laws.  Directors create by-laws by passing a director’s resolution with the required majority of the members of the board.

Likewise, any shareholder entitled to vote at a meeting of shareholders can also propose a by-law for directors to vote on.

Once the directors make, amend, or repeal a by-law, they must submit it to the shareholders at the next meeting of shareholders, who may confirm, reject, or amend it.

If a special resolution is not considered to provide sufficient consent, the articles may specify what greater number of votes is required to alter such a provision in the articles. If it is not desirable to put the provision in the articles to avoid public knowledge of its terms, a Unanimous Shareholders’ Agreement can specify that a greater number of votes of directors or shareholders is required to change some or all of the provisions of the by- laws. Neither a USA nor the by-laws of a corporation is a public document.

When Do I Need By-laws for My Company?

Any company with more than one founder, director or shareholder should have at least basic by-laws in place to govern how the daily affairs of the company are going to be run. By-laws are important for setting the ground rules, signing authority and allocating the power to conduct important management functions such as a entering contracts or conducting banking.

 

The following two tabs change content below.
John Wires is a Toronto business lawyer who comes from a corporate litigation background. John is the founder of Wires Law, a law firm serving corporate, technology and e-commerce clients across Canada. He was called to the Bar of the Law Society of Upper Canada in 2011 and has appeared in the Ontario Superior Court, the Ontario Court of Appeal and private arbitrations. John graduated from law school with first class honours specializing in both International Trade and Corporate Commercial Law. Having litigated shareholder and employee disputes he understands the value of companies protecting their businesses with the proper upfront legal work many Canadian businesses lack.