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  ONTARIO BUSINESS CORPORATIONS ACT 05/12/2009

Important Notice:  The following statute is subject to amendment and legislative changes, so particular attention should be directed to the date of the statute, with reference being made to the official government website for the most current version of a statute at www.e-laws.gov.on.ca.

PART II

INCORPORATION

Incorporation
3. (1) Repealed: 2000, c. 42, Sched., s. 1.
Incorporation
(2) A corporation may be incorporated under this Act with its powers restricted by its articles to lending and investing money on mortgage of real estate or otherwise, or with its powers restricted by its articles to accepting and executing the office of liquidator, receiver, assignee, trustee in bankruptcy or trustee for the benefit of creditors and to accepting the duty of and acting generally in the winding up of corporations, partnerships and estates, other than estates of deceased persons, and shall not by reason thereof be deemed to be a corporation within the meaning of the Loan and Trust Corporations Act, but the number of its shareholders, exclusive of persons who are in the employment of the corporation, shall be limited by its articles to five, and no such corporation shall issue debt obligations except to its shareholders, or borrow money on the security of its property except from its shareholders, or receive money on deposit or offer its securities to the public. R.S.O. 1990, c. B.16, s. 3 (2).
Professional corporations
3.1 (1) In this section and in sections 3.2, 3.3 and 3.4,
“member” means a member of a profession governed by an Act that permits the profession to be practised through a professional corporation; (“membre”)
“professional corporation” means a corporation incorporated or continued under this Act that holds a valid certificate of authorization or other authorizing document issued under an Act governing a profession. (“société professionnelle”) 2000, c. 42, Sched., s. 2.
Professions
(2) Where the practice of a profession is governed by an Act, a professional corporation may practise the profession if,
(a) that Act expressly permits the practice of the profession by a corporation and subject to the provisions of that Act; or
(b) the profession is governed by an Act named in Schedule 1 of the Regulated Health Professions Act, 1991, one of the following Acts or a prescribed Act:
1. Certified General Accountants Association of Ontario Act, 1983.
2. The Chartered Accountants Act, 1956.
3. Law Society Act.
4. Social Work and Social Service Work Act, 1998.
5. Veterinarians Act. 2000, c. 42, Sched., s. 2.
Regulations
(3) The Lieutenant Governor in Council may make regulations prescribing Acts for the purposes of clause (2) (b). 2000, c. 42, Sched., s. 2.
Application of Act to professional corporations
3.2 (1) This Act and the regulations apply with respect to a professional corporation except as otherwise set out in this section and sections 3.1, 3.3 and 3.4 and the regulations. 2000, c. 42, Sched., s. 2.
Conditions for professional corporations
(2) Despite any other provision of this Act but subject to subsection (6), a professional corporation shall satisfy all of the following conditions:
1. All of the issued and outstanding shares of the corporation shall be legally and beneficially owned, directly or indirectly, by one or more members of the same profession.
2. All officers and directors of the corporation shall be shareholders of the corporation.
3. The name of the corporation shall include the words “Professional Corporation” or “Société professionnelle” and shall comply with the rules respecting the names of professional corporations set out in the regulations and with the rules respecting names set out in the regulations or by-laws made under the Act governing the profession.
4. The corporation shall not have a number name.
5. The articles of incorporation of a professional corporation shall provide that the corporation may not carry on a business other than the practice of the profession but this paragraph shall not be construed to prevent the corporation from carrying on activities related to or ancillary to the practice of the profession, including the investment of surplus funds earned by the corporation. 2000, c. 42, Sched., s. 2; 2002, c. 22, s. 8; 2005, c. 28, Sched. B, s. 1 (1).
Deemed compliance
(2.1) A professional corporation that has a name that includes the words “société professionnelle” shall be deemed to have complied with the requirements of subsection 10 (1). 2004, c. 19, s. 3 (1).
Corporate acts not invalid
(3) No act done by or on behalf of a professional corporation is invalid merely because it contravenes this Act. 2000, c. 42, Sched., s. 2.
Voting agreements void
(4) An agreement or proxy that vests in a person other than a shareholder of a professional corporation the right to vote the rights attached to a share of the corporation is void. 2000, c. 42, Sched., s. 2.
Unanimous shareholder agreements void
(5) Subject to subsection (6), a unanimous shareholder agreement in respect of a professional corporation is void unless each shareholder of the corporation is a member of the professional corporation. 2000, c. 42, Sched., s. 2; 2005, c. 28, Sched. B, s. 1 (2).
Special rules, health profession corporations
(6) The Lieutenant Governor in Council may make regulations,
(a) exempting classes of health profession corporations, as defined in section 1 (1) of the Regulated Health Professions Act, 1991, from the application of subsections (1) and (5) and such other provisions of this Act and the regulations as may be specified and prescribing terms and conditions that apply with respect to the health profession corporations in lieu of the provisions from which they are exempted;
(b) exempting classes of the shareholders of those health profession corporations from the application of subsections 3.4 (2), (4) and (6) and such other provisions of this Act and the regulations as may be specified and prescribing rules that apply with respect to the shareholders in lieu of the provisions from which they are exempted;
(c) exempting directors and officers of those health profession corporations from the application of such provisions of this Act and the regulations as may be specified and prescribing rules that apply with respect to the directors and officers in lieu of the provisions from which they are exempted. 2005, c. 28, Sched. B, s. 1 (3).
Consequences of occurrence of certain events
3.3 (1) Despite any other Act, a professional corporation’s certificate of authorization or other authorizing document remains valid and the corporation does not cease to be a professional corporation despite,
(a) the death of a shareholder;
(b) the divorce of a shareholder;
(c) the bankruptcy or insolvency of the corporation;
(d) the suspension of the corporation’s certificate of authorization or other authorizing document; or
(e) the occurrence of such other event or the existence of such other circumstance as may be prescribed. 2000, c. 42, Sched., s. 2; 2001, c. 8, s. 1 (1); 2001, c. 23, s. 6 (1).
Invalidity of certificate
(2) Subject to the regulations, a certificate of authorization or other authorizing document becomes invalid and the corporation ceases to be a professional corporation on the revocation of the certificate. 2000, c. 42, Sched., s. 2; 2001, c. 8, s. 1 (2).
Regulations
(3) For the purposes of subsection (1), the Lieutenant Governor in Council may make regulations,
(a) prescribing events and circumstances for the purposes of clause (1) (e);
(a.1) providing that, despite clause (1) (a), (b), (c), (d) or (e), whichever applies, a professional corporation’s certificate of authorization or other authorizing document ceases to be valid and the corporation ceases to be a professional corporation because of a failure to meet the terms and conditions described in the regulation;
(a.2) prescribing terms and conditions that apply with respect to the events and circumstances referred to in clauses (1) (a), (b), (c), (d) and (e);
(a.3) prescribing exceptions to the events and circumstances referred to in clauses (1) (a), (b), (c), (d) and (e);
(b) prescribing the manner in which shares of a shareholder are to be dealt with on the occurrence of any event mentioned in clauses (1) (a) to (e), the time within which they are to be dealt with and any other matter related to dealing with the shares. 2000, c. 42, Sched., s. 2; 2001, c. 23, s. 6 (2).
Name change
(4) A corporation that ceases to be a professional corporation shall change its name to remove from it the word “professional” or “professionnelle”. 2001, c. 8, s. 1 (3).
No limit on professional liability
3.4 (1) Subsection 92 (1) shall not be construed as limiting the professional liability of a shareholder of a professional corporation under an Act governing the profession for acts of the shareholder or acts of employees or agents of the corporation. 2000, c. 42, Sched., s. 2.
Deemed acts
(2) For the purposes of professional liability, the acts of a professional corporation shall be deemed to be the acts of the shareholders, employees or agents of the corporation, as the case may be. 2000, c. 42, Sched., s. 2.
Professional liability
(3) The liability of a member for a professional liability claim is not affected by the fact that the member is practising the profession through a professional corporation. 2000, c. 42, Sched., s. 2.
Joint and several liability
(4) A person is jointly and severally liable with a professional corporation for all professional liability claims made against the corporation in respect of errors and omissions that were made or occurred while the person was a shareholder of the corporation. 2000, c. 42, Sched., s. 2.
Same
(5) The liability of a member under subsection (4) cannot be greater than his or her liability would be in the circumstances if he or she were not practising through the professional corporation. 2001, c. 8, s. 2.
Same, partnerships and limited liability partnerships
(6) If a professional corporation is a partner in a partnership or limited liability partnership, the shareholders of the corporation have the same liability in respect of the partnership or limited liability partnership as they would have if the shareholders themselves were the partners. 2001, c. 8, s. 2.
Articles of incorporation
4. (1) One or more individuals or bodies corporate or any combination thereof may incorporate a corporation by signing articles of incorporation and complying with section 6. R.S.O. 1990, c. B.16, s. 4 (1).
Idem
(2) Subsection (1) does not apply to an individual who,
(a) is less than eighteen years of age;
(b) has been found under the Substitute Decisions Act, 1992 or under the Mental Health Act to be incapable of managing property or who has been found to be incapable by a court in Canada or elsewhere; or
(c) has the status of bankrupt. R.S.O. 1990, c. B.16, s. 4 (2); 2006, c. 34, Sched. B, s. 2.
Contents of articles
5. (1) Articles of incorporation shall follow the prescribed form and shall set out the prescribed information. 1994, c. 27, s. 71 (2).
Director’s consent
(2) The corporation shall keep at its registered office address the consent, in the prescribed form, to act as a first director,
(a) of each individual who is named in the articles as a first director and who is not an incorporator; and
(b) of each individual who is named in the articles as a first director and who is an incorporator, if the articles are sent to the Director in a prescribed electronic format and the electronic signature of the individual is not set out on the articles under clause 273 (4) (a) because the regulations provide that the signature is not required. 2006, c. 19, Sched. G, s. 2.
Inspection of consent
(2.1) Upon request and without charge, the corporation shall permit a director, shareholder or creditor to inspect a consent mentioned in subsection (2) during the normal business hours of the corporation and to make a copy. 1999, c. 12, Sched. F, s. 2.
Provisions in articles
(3) The articles may set out any provisions permitted by this Act or permitted by law to be set out in the by-laws of the corporation. R.S.O. 1990, c. B.16, s. 5 (3).
Where articles, etc., prevail
(4) Subject to subsection (5), if a greater number of votes of directors or shareholders are required by the articles or a unanimous shareholder agreement than are required by this Act to effect any action, the provisions of the articles or of the unanimous shareholder agreement prevail. R.S.O. 1990, c. B.16, s. 5 (4).
Votes to remove director
(5) The articles shall not require a greater number of votes of shareholders to remove a director than the number specified in section 122. R.S.O. 1990, c. B.16, s. 5 (5).
Certificate of incorporation
6. An incorporator shall send to the Director articles of incorporation and, upon receipt of the articles, the Director shall endorse thereon, in accordance with section 273, a certificate which shall constitute the certificate of incorporation. R.S.O. 1990, c. B.16, s. 6.
Certificate of incorporation
7. A certificate of incorporation is conclusive proof that the corporation has been incorporated under this Act on the date set out in the certificate, except in a proceeding under section 240 to cancel the certificate for cause. R.S.O. 1990, c. B.16, s. 7.
Assignment of number
8. (1) Every corporation shall be assigned a number by the Director and such number shall be specified as the corporation number in the certificate of incorporation and in any other certificate relating to the corporation endorsed or issued by the Director. R.S.O. 1990, c. B.16, s. 8 (1).
Idem
(2) Where no name is specified in the articles that are delivered to the Director, the corporation shall be assigned a number name. R.S.O. 1990, c. B.16, s. 8 (2).
Idem
(3) Where, through inadvertence or otherwise, the Director has assigned to a corporation a corporation number or number name that is the same as the number or name of any other corporation previously assigned, the Director may, without holding a hearing, issue a certificate of amendment to the articles of the corporation changing the number or name assigned to the corporation and, upon the issuance of the certificate of amendment, the articles are amended accordingly. R.S.O. 1990, c. B.16, s. 8 (3).
Idem
(4) Where for any reason the Director has endorsed a certificate on articles that sets out the corporation number incorrectly, the Director may substitute a corrected certificate that bears the date of the certificate it replaces. R.S.O. 1990, c. B.16, s. 8 (4).
Idem
(5) The file number that was assigned to each corporation by the Minister prior to the 29th day of July, 1983 shall be deemed to be that corporation’s number. R.S.O. 1990, c. B.16, s. 8 (5).
Name prohibition
9. (1) Subject to subsection (2), a corporation shall not have a name,
(a) that contains a word or expression prohibited by the regulations;
(b) that is the same as or, except where a number name is proposed, similar to,
(i) the name of a known,
(A) body corporate,
(B) trust,
(C) association,
(D) partnership,
(E) sole proprietorship, or
(F) individual,
whether in existence or not, or
(ii) the known name under which any body corporate, trust, association, partnership, sole proprietorship, or individual, carries on business or identifies himself, herself or itself,
if the use of that name would be likely to deceive; or
(c) that does not meet the requirements prescribed by the regulations. R.S.O. 1990, c. B.16, s. 9 (1).
Exception to subs. (1)
(2) A corporation may have a name described in clause (1) (b) upon complying with conditions prescribed by the regulations. R.S.O. 1990, c. B.16, s. 9 (2).
Documents filed
(3) There shall be filed with the Director such documents relating to the name of the corporation as may be prescribed by the regulations. R.S.O. 1990, c. B.16, s. 9 (3).
Restrictions on corporate name
10. (1) The word “Limited”, “Limitée”, “Incorporated”, “Incorporée” or “Corporation” or the corresponding abbreviations “Ltd.”, “Ltée”, “Inc.” or “Corp.” shall be part, in addition to any use in a figurative or descriptive sense, of the name of every corporation, but a corporation may be legally designated by either the full or the abbreviated form. R.S.O. 1990, c. B.16, s. 10 (1).
Languages
(2) Subject to this Act and the regulations, a corporation may have a name that is in,
(a) an English form only;
(b) a French form only;
(c) a French and English form, where the French and English are used together in a combined form;
(d) a French form and an English form, where the French and English forms are equivalent but are used separately. 1994, c. 27, s. 71 (3).
Same
(2.1) A corporation that has a form of name described in clause (2) (d) may be legally designated by the French or English version of its names. 1994, c. 27, s. 71 (3).
Other restrictions
(3) For the purposes of subsections (1) and (2), only letters from the Roman alphabet or Arabic numerals or a combination thereof, together with such punctuation marks and other marks as are permitted by regulation, may form part of the name of a corporation. R.S.O. 1990, c. B.16, s. 10 (3).
Other languages
(4) Subject to the provisions of this Act and the regulations, a corporation may have in its articles a special provision permitting it to set out its name in any language and the corporation may be legally designated by that name. R.S.O. 1990, c. B.16, s. 10 (4).
Legibility
(5) Despite subsection (4), a corporation shall set out its name in legible characters in all contracts, invoices, negotiable instruments and orders for goods or services issued or made by or on behalf of the corporation and in all documents sent to the Director under this Act. R.S.O. 1990, c. B.16, s. 10 (5).
Unauthorized use of “Limited”, etc.
11. (1) No person, while not incorporated, shall trade or carry on a business or undertaking under a name in which “Limited”, “Incorporated” or “Corporation” or any abbreviation thereof, or any version thereof in another language, is used. R.S.O. 1990, c. B.16, s. 11 (1).
Idem
(2) Where a corporation carries on business or identifies itself to the public by a name or style other than as provided in the articles, that name or style shall not include the word “Limited”, “Incorporated” or “Corporation” or any abbreviation thereof or any version thereof in another language. R.S.O. 1990, c. B.16, s. 11 (2).
Change of name if objectionable
12. (1) If a corporation, through inadvertence or otherwise, has acquired a name contrary to section 9 or 10, the Director may, after giving the corporation an opportunity to be heard, issue a certificate of amendment to the articles changing the name of the corporation to a name specified in the certificate and, upon the issuance of the certificate of amendment, the articles are amended accordingly. R.S.O. 1990, c. B.16, s. 12 (1); 2004, c. 19, s. 3 (2).
Written hearing
(1.1) A hearing referred to in subsection (1) shall be in writing in accordance with the rules made by the Director under the Statutory Powers Procedure Act. 1998, c. 18, Sched. E, s. 20.
Failure to perform undertaking
(2) Where an undertaking to dissolve or change its name is given by a corporation and the undertaking is not carried out within the time specified, the Director may, after giving the corporation an opportunity to be heard, issue a certificate of amendment to the articles changing the name of the corporation to a name specified in the certificate and, upon the issuance of a certificate of amendment, the articles are amended accordingly. R.S.O. 1990, c. B.16, s. 12 (2).
Idem
(3) Where an undertaking to dissolve or change its name is given by a person who is not a corporation and the undertaking is not carried out within the time specified, the Director may, after giving the corporation that acquired the name by virtue of such undertaking an opportunity to be heard, issue a certificate of amendment to the articles changing the name of the corporation to a name specified in the certificate and, upon the issuance of the certificate, the articles are amended accordingly. R.S.O. 1990, c. B.16, s. 12 (3).
Corporate seal
13. A corporation may, but need not, have a corporate seal. R.S.O. 1990, c. B.16, s. 13.
Registered office
14. (1) A corporation shall at all times have a registered office in Ontario at the location specified in its articles, in a resolution made under subsection (3) or in a special resolution made under subsection (4). 1994, c. 27, s. 71 (4); 2000, c. 26, Sched. B, s. 3 (3).
Idem
(2) The head office of every corporation incorporated prior to the 29th day of July, 1983 shall be deemed to be the registered office of the corporation. R.S.O. 1990, c. B.16, s. 14 (2).
Change of location
(3) A corporation may by resolution of its directors change the location of its registered office within a municipality or geographic township. 1994, c. 27, s. 71 (5).
Change of municipality, etc.
(4) A corporation may by special resolution change the municipality or geographic township in which its registered office is located to another place in Ontario. 1994, c. 27, s. 71 (5).
Validity
(5) Failure to file as set out in subsection (3) or (4) does not affect the validity of the resolution. R.S.O. 1990, c. B.16, s. 14 (5).
Corporate powers
15. A corporation has the capacity and the rights, powers and privileges of a natural person. R.S.O. 1990, c. B.16, s. 15.
Capacity to act outside Ontario
16. A corporation has the capacity to carry on its business, conduct its affairs and exercise its powers in any jurisdiction outside Ontario to the extent that the laws of such jurisdiction permit. R.S.O. 1990, c. B.16, s. 16.
Corporate power
17. (1) It is not necessary for a by-law to be passed in order to confer any particular power on the corporation or its directors. R.S.O. 1990, c. B.16, s. 17 (1).
Power limited by articles, etc.
(2) A corporation shall not carry on any business or exercise any power that it is restricted by its articles from carrying on or exercising, nor shall the corporation exercise any of its powers in a manner contrary to its articles. R.S.O. 1990, c. B.16, s. 17 (2).
Acting outside powers
(3) Despite subsection (2) and subsection 3(2), no act of a corporation including a transfer of property to or by the corporation is invalid by reason only that the act is contrary to its articles, by-laws, a unanimous shareholder agreement or this Act. R.S.O. 1990, c. B.16, s. 17 (3).
Where notice is not deemed
18. No person is affected by or is deemed to have notice or knowledge of the contents of a document concerning a corporation by reason only that the document has been filed with the Director or is available for inspection at an office of the corporation. R.S.O. 1990, c. B.16, s. 18.
Indoor management rule
19. A corporation or a guarantor of an obligation of a corporation may not assert against a person dealing with the corporation or with any person who has acquired rights from the corporation that,
(a) the articles, by-laws or any unanimous shareholder agreement have not been complied with;
(b) the persons named in the most recent notice filed under the Corporations Information Act, or named in the articles, whichever is more current, are not the directors of the corporation;
(c) the location named in the most recent notice filed under subsection 14 (3) or named in the articles, whichever is more current, is not the registered office of the corporation;
(d) a person held out by a corporation as a director, an officer or an agent of the corporation has not been duly appointed or does not have authority to exercise the powers and perform the duties that are customary in the business of the corporation or usual for such director, officer or agent;
(e) a document issued by any director, officer or agent of a corporation with actual or usual authority to issue the document is not valid or not genuine; or
(f) a sale, lease or exchange of property referred to in subsection 184 (3) was not authorized,
except where the person has or ought to have, by virtue of the person’s position with or relationship to the corporation, knowledge to that effect. R.S.O. 1990, c. B.16, s. 19; 2006, c. 34, Sched. B, s. 3.
20. Repealed: 2006, c. 34, Sched. B, s. 4.
Contract prior to corporate existence
21. (1) Except as provided in this section, a person who enters into an oral or written contract in the name of or on behalf of a corporation before it comes into existence is personally bound by the contract and is entitled to the benefits thereof. R.S.O. 1990, c. B.16, s. 21 (1).
Adoption of contract by corporation
(2) A corporation may, within a reasonable time after it comes into existence, by any action or conduct signifying its intention to be bound thereby, adopt an oral or written contract made before it came into existence in its name or on its behalf, and upon such adoption,
(a) the corporation is bound by the contract and is entitled to the benefits thereof as if the corporation had been in existence at the date of the contract and had been a party thereto; and
(b) a person who purported to act in the name of or on behalf of the corporation ceases, except as provided in subsection (3), to be bound by or entitled to the benefits of the contract. R.S.O. 1990, c. B.16, s. 21 (2).
Non-adoption of contract
(3) Except as provided in subsection (4), whether or not an oral or written contract made before the coming into existence of a corporation is adopted by the corporation, a party to the contract may apply to a court for an order fixing obligations under the contract as joint or joint and several or apportioning liability between the corporation and the person who purported to act in the name of or on behalf of the corporation, and, upon such application, the court may make any order it thinks fit. R.S.O. 1990, c. B.16, s. 21 (3).
Exception to subs. (1)
(4) If expressly so provided in the oral or written contract referred to in subsection (1), a person who purported to act in the name of or on behalf of the corporation before it came into existence is not in any event bound by the contract or entitled to the benefits thereof. R.S.O. 1990, c. B.16, s. 21 (4).
 

Burlington Business Lawyer Christopher R. Neufeld is a corporate attorney admitted to practice law in both Ontario (Canada) and New York (U.S.A.).  Christopher's legal practice focuses primarily on business law, in particular corporate commercial transactions.  The law firm of Neufeld Legal Professional Corporation is headquartered at 719 Catalina Crescent, Burlington, Ontario L7L 5B9, and as such is in immediate proximity to downtown Toronto, Mississauga, Hamilton, Oakville, Brampton, Milton, Guelph and Kitchener Waterloo. Your franchisee lawyer. COPYRIGHT 2009.

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