Toronto Business Law

Corporate Law

Pawlina Law specializes in business and corporate law. By understanding tight timelines and limited budgets, we can help you navigate complex transactions related to starting, expanding, or selling your business. By assisting you with making informed business decisions and by having things done properly from the outset, we can save you time and money in the long run. We can advise you in a wide rage of services, including:


Incorporation is the creation of a Corporation. Corporations aggregate are by far the most common and important form of business organization in modern Canadian society. They range in size from small corporations, with a single shareholder, no employees and nominal capital, to huge multinational enterprises with hundreds of thousands of shareholders and employees, and issued capital in the billions of dollars.

There are a lot of different types of corporations, including of a For-Profit, Not-For-Profit, Co-operative and Professional Corporations. Incorporation can be done at the federal or provincial/territorial level using the Ontario Business Corporations Act (the “OBCA“) and the Canada Business Corporations Act (the “CBCA“).

When you incorporate your business, it is considered to be a legal entity that is separate from its shareholders. Moreover, the share structure of a corporation could also have tax implication. As a shareholder of a corporation, you will not be personally liable for the debts, obligations or acts of the corporation. It is always wise to seek legal advice before incorporating. Pawlina Law can advise you on whether to pursue incorporation, how to structure your share provisions and all other aspects of incorporation.

Advantages of Incorporation:

  • Limited liability meaning, unless there are special circumstances, only the assets of the corporation will be used to fulfill corporate liabilities. Your personal assets will be safe
  • Ownership is transferable to another person or corporation by transferring the shares of the corporation
  • As long as filings are maintained and the corporation is not dissolved, the corporation’s existence is continuous
  • Separate legal entity meaning the corporation can act on its own with its own assets and liabilities
  • Easier to raise capital than it might be with other business structures as you can issue shares
  • Possible tax advantage as taxes may be lower for an incorporated business

Disadvantages of Incorporation:

  • A corporation is closely regulated
  • More expensive to set up a corporation than other business forms
  • Extensive corporate records required, including documentation filed annually with the government
  • Possible conflict between shareholders and directors
  • You may be required to prove residency or citizenship of directors

Shareholder Agreements

Unanimous shareholder agreements are very common in the case of small corporations that have only a few shareholder-members as they provide certainty in how the corporation will conduct its affairs. Shareholder agreements often form a critical element in the overall documentation of the business relationships between the incorporators and other persons (such as investors) participating in some capacity in the incorporation of a company. A shareholders agreement usually deals with the following subject matter:

  • Procedural matters
  • How and by whom the Corporation will be Managed
  • Promises of the corporation
  • How shareholders and the corporation will deal with current and future shares
  • Provisions for the resolution of any future disputes between shareholders
  • The location of the business in which the corporation is to engage
  • The contributions that each shareholder is expected to make to the business
  • Withdrawal from membership
  • Buy-sell (shotgun) or buyout) provisions
  • Pre-emptive rights to acquire the shares of a departing member of the corporation
  • Addition of new shareholders
  • Restrictions on changing of the business of the corporation
  • Provisions dealing with subscription for share capital and the provision of know-how or other intellectual property to the corporation by its incorporators; and
  • Even such matters as the death, divorce, bankruptcy or retirement of one of the shareholders.

It is important to closely consult closely with each relevant shareholder interest, to ensure that the provisions of the agreement that is put into place are fully consistent with their aims and objectives. Shareholder Agreements are usually complicated. Pawlina Law can assist you with drafting, negotiating and reviewing a Shareholder Agreement.

Term Sheets

A term sheet is usually a nonbinding agreement setting forth the basic terms and conditions under which an investment will be made. A term sheet serves as a template to develop more detailed legal documents such as a Subscription Agreement or a Shareholder Agreement. The term sheet outlines the terms by which an investor will make a financial investment in your company and usually deal with:

  • funding
  • corporate governance
  • liquidation

When negotiating a term sheet, both sides (the entrepreneur and the investor) will usually need to make concessions. If there is limited investors, the investor will have a strong negotiating position. Conversely, should they be multiple investment offers the entrepreneur will be able to demand more favourable terms.

Annual Filings and Resolutions

Every corporation must complete some type of annual filings. For example, all resident corporations have to file a corporation income tax (T2) return every tax year even if there is no tax payable. This includes for profit corporation, non-profit organizations, tax-exempt corporations, and inactive corporations. Federal Corporations, those incorporated under the Canada Business Corporations Act (the “CBCA“), must also file Annual Filings with Corporations Canada.

Both corporations incorporated under the Ontario Business Corporations Act (the “OBCA“), and CBCA corporations must have a series of resolutions prepared and signed by the directors and shareholders of the company. If all the Directors and shareholder are present and in agreeance, Annual Resolutions can be simply signed by all of the relevant parties. If all of the shareholders and directions are either not present or not in agreeance or the company is public, Annual Resolutions must be approved at a meeting of the directors and shareholders.

As part of the Annual Resolutions, the directors of the Corporation must approve the financial statements, approve the directors executing the financial statements; and approve the financial statements being shown to the shareholders. Once the directors have approved the financial statements they are mandated to provide the shareholders with a copy of the financial statements.

As financial statements must be finalized and incorporated into the corporate tax return for the company within six months of the end of the financial year, the annual resolutions cannot be dated prior to the financial statements being prepared which should be no later than six months after the financial year end.

As part of their annual resolutions, the shareholders of the Corporation will elect the directors of the Corporation. Shareholders can also appoint an auditor for the next year. As retaining an auditor or accounts is expensive, most companies do not have their financial statements audited by an auditor. Rather, they either prepare their financial stations themselves or by an accountant, an exempt the Corporation from the Audited Financial Statement requirement. Such an exemption needs to be approved yearly by all the voting and non-voting shareholders.

Rectifying Resolutions

Pawlina Law has the expertise to bring your corporate minute book up to date; an important task when seeking potential investors. A minute book is a physical binder or an electronic folder that acts as a place to store minutes and resolutions in writing of the board of directors and shareholders, the certificate and articles of incorporation, by-laws, unanimous shareholder agreement, and various other important corporate documents.

As a corporation is a separate legal entity, specific documents must exist to document the corporation’s decisions and workings. Often entrepreneurs will incorporate their company themselves to save money in the beginning of their corporation’s existence. At times, there corporations lack some or all of the supporting documents that are required for the proper existence of a corporation. Over time the company grows and is looking for investors, however, potential investors are hesitate to invest with the questionable current state of the minute book. Common deficiencies include:

  • Documents will be missing signatures
  • Annual resolutions and proceedings have not been completed
  • There are missing resolutions and resignations of directors
  • Shareholder Ledgers and registers of directors, officers, shareholders, share transfers are not up to date or missing completely
  • Missing authorizing resolutions for entering into agreements and transactions

Provided the corporation has not been dissolved by the government, then all that is needed to bring the corporation’s document back to order is ratifying and rectifying resolutions which would include omnibus annual resolutions of the directors and shareholders. Pawlina Law can review your corporate minute book and quickly develop a plan for resolving any deficiencies.