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From your first articles of incorporation to the share purchase agreement that sells the company, our Toronto corporate lawyers handle the documents that decide who owns what, who decides what, and who is liable when something goes wrong.
Arrange a Call →Ontario corporations must file an Initial Return under the Corporations Information Act within 60 days of incorporation, and report every change of directors, officers or registered office within 15 days. Lexaltico LLP keeps your record clean from day one.
A corporate lawyer structures and documents how a business is owned and run. That includes incorporating under the Ontario Business Corporations Act or the Canada Business Corporations Act, drafting shareholder and partnership agreements, preparing commercial contracts, running acquisitions and sales of businesses, maintaining minute books and statutory registers, and advising directors on their duties and personal liabilities.
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Corporate law is the body of rules that governs how a business is formed, financed, controlled, sold and wound up. In Ontario that means two principal statutes: the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16, usually called the OBCA, and the Canada Business Corporations Act, R.S.C. 1985, c. C-44, the CBCA. Layered on top are the Corporations Information Act, which governs public filings, the Business Names Act, the Personal Property Security Act for secured lending, the Competition Act for merger clearance, and the Employment Standards Act, 2000 for everyone the company hires. A corporate lawyer's job is to make those statutes work for your commercial objective rather than against it.
Most disputes we are asked to fix later were created by a document that was never written. Two founders who never signed a shareholder agreement discover that neither can force the other out. A buyer who skipped a Personal Property Security Act search inherits a lender's security interest over the assets it just paid for. A company that adopted an American termination clause finds it unenforceable in Ontario because it contracts below the Employment Standards Act minimums. The cost of the missing document is almost always a small fraction of the cost of the litigation that follows it.
Lexaltico LLP acts for founders, owner-managed businesses, professional corporations, family enterprises and the purchasers and vendors who transact with them. We work out of 55 University Avenue in downtown Toronto and act for clients across Ontario. This page is the overview; each linked page below goes deeper on a single subject, from incorporation mechanics to franchise disclosure obligations under the Arthur Wishart Act.
The structure question is settled before anything else, because it determines liability exposure, tax treatment and how easily outside capital can be brought in. A sole proprietorship is the business and its owner treated as one legal person. A general partnership under the Partnerships Act (Ontario) is two or more persons carrying on business in common with a view to profit, and it can arise by conduct alone without anyone signing anything. A corporation is a separate legal person with its own liability, its own tax return and shares that can be transferred.
| Feature | Sole Proprietorship | General Partnership | Corporation (OBCA/CBCA) |
|---|---|---|---|
| Separate legal person | No | No | Yes |
| Owner liability for business debts | Unlimited, personal | Unlimited, and joint with every other partner | Generally limited to capital invested, subject to guarantees and statutory director liabilities |
| Governing statute | Business Names Act | Partnerships Act (Ontario) | OBCA or CBCA |
| Formation formality | Business name registration | Can arise by conduct; no filing required to exist | Articles of incorporation filed with the registry |
| Bringing in an investor | Not possible without restructuring | Requires unanimous consent of existing partners by default | Issue shares under the articles |
| Access to the small business deduction | No | No | Available to a Canadian-controlled private corporation |
| Continues after an owner departs | No | A partnership at will can be dissolved on notice by any partner | Yes, perpetual existence |
The default rules in the Partnerships Act are the reason so many partnerships end badly. Section 24 divides profits equally regardless of who contributed the capital, entitles no partner to a salary for working in the business, and requires unanimous consent to admit a new partner. Section 25 says a majority cannot expel a partner unless the partners have expressly agreed otherwise in writing. And a partnership at will can be dissolved by any partner simply giving notice to the others. Every one of those defaults can be displaced, but only by a written partnership agreement.
Both statutes produce a corporation with limited liability, share capital and a board of directors, and the tax treatment is identical. The differences are practical. A CBCA corporation is created by Corporations Canada and carries the strongest available name protection across the country, but at least 25 per cent of its directors must be resident Canadians under section 105(3), and where there are fewer than four directors at least one must be a resident Canadian. An OBCA corporation has no director residency requirement at all: that condition was removed from the OBCA effective July 5, 2021, which is why Ontario has become the default choice for corporations with non-resident founders.
A federal corporation that carries on business in Ontario must still register extra-provincially in Ontario and file the returns that go with it, so federal incorporation adds a compliance layer rather than removing one. Conversely, an Ontario corporation expanding into Alberta or British Columbia will need to register there. The right answer depends on where you will actually operate, how nationally distinctive your name needs to be, and whether your investors expect a particular statute.
Since July 5, 2021, a non-offering OBCA corporation can pass most ordinary shareholder resolutions in writing signed by the holders of a majority of the shares entitled to vote, rather than requiring every shareholder to sign. Under the CBCA, written resolutions in lieu of a meeting still require the signatures of all shareholders entitled to vote. For a company with a dissenting minority shareholder, that difference matters a great deal.
Share ownership answers who receives the money. It does not answer who decides, what happens when a shareholder dies, divorces, becomes disabled or simply stops contributing, or how a departing shareholder's shares are priced. Those questions belong in a shareholder agreement. A unanimous shareholder agreement under section 108 of the OBCA, or section 146 of the CBCA, goes further still: it can strip the directors of some or all of their power to manage the corporation and transfer that power, together with the corresponding duties and liabilities, to the shareholders themselves. A person who later acquires shares is deemed to be a party to it.
The clauses that earn their keep are the exit mechanics: rights of first refusal, tag-along rights protecting a minority when the majority sells, drag-along rights allowing a majority to deliver 100 per cent of the company to a buyer, shotgun buy-sell provisions, and a valuation method that is agreed while everyone is still friendly. Life insurance funding turns a death into a liquidity event rather than a forced sale.
Where relationships have already broken down, the OBCA supplies statutory remedies. The oppression remedy in section 248 allows a complainant to ask the Superior Court to correct conduct that is oppressive, unfairly prejudicial or that unfairly disregards their interests, and the court's remedial jurisdiction is deliberately broad. Section 246 permits a derivative action brought with leave on the corporation's behalf. Section 185 gives dissenting shareholders appraisal rights on certain fundamental changes. These are powerful but expensive; a well-drafted agreement is the cheaper protection.
Every private acquisition in Ontario is structured either as a share purchase, in which the buyer acquires the shares of the company and everything the company owns and owes, or as an asset purchase, in which the buyer selects specific assets and assumes only specified liabilities. Vendors generally prefer share sales because gains on qualified small business corporation shares may be sheltered by the lifetime capital gains exemption. Buyers generally prefer asset purchases because they leave historical liabilities behind and reset the tax cost of depreciable property. The negotiation between those two preferences is usually the most valuable hour of the deal.
Regulatory clearance can apply. Part IX of the Competition Act requires pre-merger notification to the Commissioner of Competition where both a party-size threshold, currently $400 million in Canadian assets or Canadian revenues, and an annually indexed transaction-size threshold are exceeded, with a statutory waiting period following the filing. Even where no notification is required, the Commissioner may apply to the Competition Tribunal to challenge a completed merger for up to three years after closing. Acquisitions by non-Canadians may also trigger notification or review under the Investment Canada Act.
One repealed statute is worth knowing about. Ontario's Bulk Sales Act was repealed in 2017, so asset purchasers no longer need to comply with bulk sales procedures. Successor liability has not disappeared, however: it now runs through tax legislation, the Workplace Safety and Insurance Act and the employment successor provisions of the Employment Standards Act, 2000, all of which are dealt with by due diligence and indemnities rather than by a bulk sales affidavit.
File the Initial Return under the Corporations Information Act through the Ontario Business Registry, identifying directors, officers and the registered office.
File a Notice of Change whenever a director or officer is appointed or resigns, or the registered office address changes.
Hold the first annual meeting of shareholders within 18 months of incorporation, and thereafter no later than 15 months after the previous annual meeting and within 6 months of the financial year end.
Place the annual financial statements before shareholders. The OBCA requires them to be sent at least 10 days before the meeting; the CBCA requires 21 days.
Maintain the minute book, the securities register, the register of ownership interests in Ontario land, and the register of individuals with significant control required of privately held OBCA corporations since January 1, 2023.
None of this is glamorous, and all of it is checked in due diligence. The single most common reason a sale of a small Ontario company is delayed is a minute book that has not been updated since incorporation, which forces the parties to reconstruct share issuances, director appointments and resolutions before a buyer's counsel will sign off on title to the shares.
Directors should also understand the liabilities that attach personally. Under section 131 of the OBCA, directors are jointly and severally liable to employees for up to six months of unpaid wages and up to twelve months of accrued vacation pay, and parallel liability arises under section 81 of the Employment Standards Act, 2000. Directors can also be assessed personally for unremitted source deductions and net HST. A due diligence defence is available, but it depends on records showing that the director actually exercised care, diligence and skill.
Routine corporate work is quoted as a fixed fee: incorporation and organization, a standard shareholder agreement, a commercial services agreement, an employment agreement template, an annual resolutions package. Transactional work with an uncertain scope, such as an acquisition or a contested shareholder exit, is quoted with a budget by phase so you can see what diligence, drafting and negotiation each cost separately. Government filing fees and search costs are disbursements and are shown at cost.
We coordinate with your accountant before structuring anything with tax consequences, because the corporate and tax analyses have to be run together rather than sequentially. If you already have counsel elsewhere in Canada, we act as Ontario counsel on the Ontario elements. To discuss a structure, a transaction or a governance clean-up, contact our corporate group.
Our lawyers offer a introductory call for most matters. Call, email, or book online. Do not sign anything before speaking with us.
55 University Ave, Suite 1100
Toronto, ON M5J 2H7
2 Sheppard Ave East, Suite 303, Toronto, ON M2N 5Y7
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