After incorporation, organizational documents should be prepared. They are usually prepared by lawyers. The organizational documents include the following:
1. Who are the shareholders, the number of shares of each shareholder, and price of shares paid? In Canada, the information of shareholders is not required to be reported to the government. Shareholders’ information is evidenced by the organizational documents of the company; therefore, it is very important to prepare the organizational documents.
2. Who are the directors? Directors are elected by shareholders. The board of directors has a wide range of power, such as appointing CEO and senior officers, authorizing share insurance, approving loan, etc.
3. Who are the officers? Officers are appointed by the board of directors and approved by a board resolution.
4. What are the By-laws? By-laws govern the company’s day-to-day management, such as the procedures for board meetings and shareholders meetings.
5. Who are the accountant, auditor and what is the financial year end? This information needs to be approved by organizational documents.
If a company has more than one shareholder, there should be a shareholders’ agreement. Shareholders’ agreement is not a part of organizational documents. The above-noted organizational documents are necessary. A company can conduct its business without a shareholders’ agreement, but there is no agreement to govern the relationship between the shareholders. We will discuss shareholders’ agreement later.