Hey guys! Today's post is going to answer questions about what a Certificate of Incorporation really represents.
I am a lawyer and have been doing this for more than ten years. I have had the privilege of working with a range of businesses including various corporations.
Last year, when we first got locked down, I was of course a bit shocked. As time goes on, I started thinking about how I can give something back to our community. One idea was to create this blog as a source of credible, reliable information. In particular, I hope that this first set of blog posts is helpful for guys (and girls) who may be first-time entrepreneurs.
This question -- i.e., what is a Certificate of Incorporation and what does it really represent-- comes up from time to time. In fact, there is some unnecessary confusion about what exactly the Certificate of Incorporation represents. Let me try to clear things up.
It's all good, man. What You Will Learn Today
You already know that the corporation is a separate legal entity. That sounds simple enough at first, but when you stop to think about it you might have questions about how exactly this separate legal entity comes into existence.
Metaphorically speaking: how does the corporation go from being a glimmer in someone's eye to being a legal entity with rights and responsibilities?
In Canada, it makes sense to think of the corporation's birth as divided in to two steps.
In the first step, an application is made to either the federal or provincial government. For example, in Ontario, a Form 1 is submitted to the Ministry of Government and Consumer Services. Provided that the contents of the Form 1 are not obviously out of order, the Ministry will issue a preliminary approval.
In the second step, the corporation drafts its first shareholders' and directors' resolutions. These initial resolutions organize the corporation. They determine the corporation's key actors by electing directors, appointing officers, and issuing shares to shareholders.
We can switch metaphors and say that the first step represents the fertilization of the corporate egg while it is only with the second step that the corporation is fully born.
In practice, Step 1 and Step 2 are connected. In fact, there is an unspoken assumption that the performance of Step 2 will immediately follow the performance of Step 1.
What Does this Have to do With the Certificate of Incorporation?
The two steps of incorporation provide a context for understanding the Certificate of Incorporation.
Let's go through this in terms of first Ontario incorporation and then federal incorporation
Ontario Incorporation: Certificate of Incorporation
A Toronto-based business that chooses to incorporate provincially will need to liaise with Service Ontario.
The incorporator will complete the government's Form 1 in duplicate with original signatures on both copies. (Form 1 is issued by the Minister of Government and Consumer Services pursuant to the Regulations to the Business Corporations Act.)
The incorporator will also obtain and provide to the government an Ontario-biased NUANS name search report.
Unless this documentation is not in order, the government will then issue the corporation's Articles of Incorporation. The Articles of Incorporation include the company's Certificate of Incorporation. As such, the Certificate of Incorporation indicates that the application for incorporation has been approved by the provincial government.
The Certificate of Incorporation issued to an Ontario corporation will indicate its date, the corporation's Ontario corporate number (OCN), and the corporation's complete name.
Federal Incorporation: Certificate of Incorporation
A business that chooses to incorporate federally will receive this documentation from Corporations Canada, which is a division of Innovation, Science and Economic Development (formerly known as Industry Canada.)
After filing the necessary application and NUANS report and assuming that nothing is amiss, the business will receive its Articles of Incorporation (i.e., the "Federal Articles of Incorporation".)
Federal Articles of Incorporation will include:
- Corporate Information Sheet,
- Certificate of Incorporation,
- Form 1,
- Form 2.
The Federal Certificate of Incorporation will include the date of incorporation, a uniquely assigned corporation number, and the full name of the corporation.
Bottom line
Questions about the Certificate of Incorporation come up from time to time. In fact, there is some unnecessary confusion about what exactly the Certificate of Incorporation represents. In this post, I have outlined how the Certificate of Incorporate represents the crystallization of the first step in a two step process.
After the incorporator obtains the Certificate of Incorporation, there is still a need to carry out the second step. Otherwise the business is not properly incorporated.