How to Become a Shareholder of a Corporation as an Incorporator

colexlegal
Sep 18
2 min read

An incorporator is an individual or entity that, whether acting alone or with others, initiates the formation of a corporation by signing and filing articles of incorporation. The incorporators are also responsible for designating the corporation's first directors and initial registered office address.

On the other hand, shareholders are individuals or entities who own shares in a corporation. Shares are typically issued by the corporation's directors. However, the articles of incorporation, bylaws, or a unanimous shareholders' agreement (USA) may outline alternative methods for acquiring shares.

In Ontario and most Canadian jurisdictions (except British Columbia), being an incorporator does not automatically make one a shareholder. Shareholding occurs after incorporation.

Methods for Incorporators to Become Shareholders:

An incorporator can become a shareholder through the following methods:

Share Issuance by Directors: The most common method involves the corporation's directors issuing shares to the incorporator, as they would to any other individual or entity.
The Articles, Bylaws, or USA: The incorporators may not require the directors to issue shares to them if the articles of incorporation, bylaws or the USA provide alternative methods for acquiring shares, which could include provisions for incorporators to become shareholders.

What an Incorporator Should Do

If an incorporator intends to own shares in the corporation, they should ensure that shares are issued to them by the first director(s) immediately following incorporation. Alternatively, the articles of incorporation can be drafted to include provisions allotting shares to the incorporators.

At Colex Legal, we represent founders and entrepreneurs in incorporation matters, ensuring that your interests in a corporation are protected. Feel free to reach out to us if you have any questions regarding a corporation and how to protect your interests as an incorporator or shareholder. Our telephone number is 613-558-5363, or you can email us at info@colexlegal.ca.

[This post does not constitute legal advice or opinion; please reach out if you have any questions]