Appendix A - Sample Articles of Incorporation: One Class of Shares

Table of Contents | Appendix B

Form 1 - Blank

Schedule I to Articles of Incorporation

The right to transfer shares of the Corporation shall be restricted in that no shareholder shall be entitled to transfer any share or shares of the Corporation without the approval of:

1. the directors of the Corporation expressed by resolution passed by the votes cast by a majority of the directors of the Corporation at a meeting of the board of directors or signed by all of the directors of the Corporation; OR
   
   
2. the shareholders of the Corporation expressed by resolution passed by the votes cast by a majority of the shareholders who voted in respect of the resolution or signed by all shareholders entitled to vote on that resolution.
   
   

Restrictions on share transfer are normally limited to the consent of the directors and/or the shareholders. If you wish your company to be a private company (referred to in the CBCA as a "non-distributing corporation") and thus not have to comply with prospectus filings or other related procedures set out in the CBCA or provincial securities rules, it is necessary to include in your articles a restriction on the transfer of shares. Many companies also include "private company restrictions" similar to those in sample Schedule II on the next page for the purposes of provincial securities regulation.

The CBCA allows for a number of provisions that may be included in the articles of incorporation. You may also choose to include clauses to satisfy requirements of other legislation (such as the restriction on the number of shareholders and any distribution of shares to the public, which are aimed at excluding the company from regulation by securities laws) or institutions (the limits on borrowing powers specified below are often included to satisfy lending institutions). These provisions are optional, and the ones below provide sample wording used for the most commonly occurring features.

Schedule II to Articles of Incorporation

Other provisions:

1. The number of shareholders in the Corporation, exclusive of employees and former employees who, while employed by the Corporation were, and following the termination of that employment, continue to be, shareholders of the Corporation, is limited to not more than fifty, two or more persons who are the joint registered holders of one or more shares being counted as one shareholder.
   
   
2. Any invitation to the public to subscribe for securities of the Corporation is prohibited.
   
   
3. If authorized by by-law which is duly made by the directors and confirmed by ordinary resolution of the shareholders, the directors of the Corporation may from time to time:
   
   
   1. borrow money upon the credit of the Corporation;
      
      
   2. issue, reissue, sell or pledge debt obligations of the Corporation; and
      
      
   3. mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired to secure any debt obligation of the Corporation.
      
      
   Any such by-law may provide for the delegation of such powers by the directors to such officers or directors of the Corporation to such extent and in such manner as may be set out in the by-law.
   
   Nothing herein limits or restricts the borrowing of money by the Corporation on bills of exchange or promissory notes made, drawn, accepted or endorsed by or on behalf of the Corporation.
   
   
4. The directors may appoint one or more directors, who shall hold office for a term expiring not later than the close of the next annual general meeting of shareholders, but the total number of directors so appointed may not exceed one third of the number of directors elected at the previous annual general meeting of shareholders.

Table of Contents | Appendix B

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