Friends Wants Me To Invest in Their New Business. What Do I Need to Know?

by: Peter Cusimano
Business Lawyer - Barrister & Solicitor

Every business needs money to operate. One way of raising money is seeking out investors to become shareholders in the company. Often times, the founders will speak to family and friends and invite them to purchase shares in their corporation and become shareholders. Although this can be an exciting opportunity, it is important that as a potential investor you proceed with caution and do your homework before investing your money.

Keep in mind the following pointers:

1. learn as much as you can about the business - if you don't understand the business or the operators do not give you adequate information for you to make a proper assessment of the business then it is likely not something you should be investing in
2. learn as much as you can about the people who are operating the business including their background in business
3. recognize that no business is a sure-win and every business is at risk of failure
4. ask to see the financial records of the company and bring them to your accountant for review
5. learn about the competition
6. ask to the see the "minute book" of the corporation. Every corporation is required to have a minute book. If the corporation does not have a minute book, then you must insist that the minute book be brought up to date first. Bring a copy of the minute book to a business lawyer for review
7. ask to see the shareholders' agreement for the company. If the company does not have a shareholders' agreement, ask that one be created as a condition of you advancing any money to the corporation
8. sometimes, buying shares may not be the best way to go, and instead you may wish to instead loan money to the company
9. there can be certain tax issues that need to be considered so it is important that you speak with your accountant to determine what is the best way to proceed
10. certain documents should be prepared including certain resolutions of the directors, a new share certificate, and some other legal documents depending on how the transaction is structured. You should speak to a business lawyer who can advise you and ensure that the proper paper work is prepared

When considering investing in a company as a shareholder, it is best to first speak with your accountant and a business lawyer who can give you proper advice based on their expertise and experience dealing with other businesses.

In my law practice, I deal with businesses and also people who wish to invest. If you are considering investing in a business or you operate a business and are contemplating having additional shareholders in your company, please contact me and I would be please to assist you.

What it Means When a Company Name is Mostly a Number such as "1234567 Ontario Inc."

by: Peter Cusimano
Business Lawyer - Barrister & Solicitor

Usually when you see the name of a company, it is made up of a few words such as "ABC Computer Inc.". However, sometimes you will see a company whose name is mostly just a number, such as "1234567 Ontario Inc."

Does the number have any significance and is there any difference between a company with a number as opposed to a name?

In Ontario, every corporation has a corporation number assigned to it for identification purposes. A corporation may also have a name such as "ABC Computer Inc.". When a corporation has a name, it can be identified using that name and is usually referred to as a "named company".

However, you may also come across a company that has no name other than a number -- these corporations are referred to as "numbered company". In such a case, the Ontario government will simply assign the next available corporation number and the name of the corporation will simply be the corporation number plus the word "Ontario" plus a legal ending (such as Inc., Ltd., or Corp., Incorporated, Limited, or Corporation). As such, the name of a numbered company can be something like: 1234567 Ontario Inc. There is no choice in the number, the government automatically assigns the next available number.

Why would someone choose the name as a number rather than picking an actual name for their corporation?

There are situations where one may prefer to use a numbered company instead of a named company including:

1. it takes time to find a suitable name for a company which can take time and extra expense. By proceeding by way of a numbered company, there is no delay as the government simply assigns the next available number.
2. one does not want to attract attention to the company and as such prefers using a number as opposed to a name
3. a corporation is created for limited use and will not be promoting itself to the public and in such a case, the operators may not be concerned about the name
4. the operators may want to use the corporation for various businesses and do not want to use a named corporation

Is there any legal difference whether a company is a numbered company or a named company?

Generally, there is no legal difference whether a company is a numbered company or a named company.

My legal practice consists of many businesses including named companies and numbered companies. If you are planning to start a business and would like to incorporate, please contact me and I would be pleased to assist you.

I am Moving My Business. Do I need to update my Corporation's Offical Records?

by Peter Cusimano
Lawyer - Barrister & Solicitor

When a corporation is initially set up, the address of the "registered office" is listed on the Articles of Incorporation for the corporation.

When you relocate your office, you will be required to update the official government records to show the new address. In order to change the address, you will need to file a special form with the Ontario government that allows you change the registration of the main address of the corporation.

In addition, you will also need to notify other parties of the change of address including:

1. Canada Revenue Agency
2. your bank
3. your suppliers
4. your customers

If you require assistance in completing or filing the special form with the Ontario government, please contact me and my office will be able to assist you.

What Is Included in a Corporation's "Minute Book"?

by Peter Cusimano
Lawyer - Barrister & Solicitor

A corporation in Ontario is required by law to maintain an official record of certain matters. This record is usually referred to as a "Minute Book" which is essentially a binder that contains the records (or "minutes") of certain items. The minute book is usually divided into various sections as follows:

1. Articles of Incorporation
2. By-Laws of the corporation
3. Minutes of Meetings and Resolutions of the Directors and Officers 
4. Notices and Registrations filed with the government
5. Directors' Register
6. Officer's Register
7. Shareholders' Register
8. Share Transfer Register
9. Shareholders' Ledgers
10. Shareholders' Agreement (if any)
11. Share Certificates (originals or copies)

The minute book is set up when the corporation is first created. On an annual basis, the corporation is required to hold an "annual meeting". The minutes of the annual meeting are recorded in the minute book. In addition, decisions (or "resolutions") passed by the directors are also recorded in the minute book from time to time.

If you have created a corporation, but you have not yet created the "minute book", my office can assist you in preparing all the necessary documents. In addition, if you have a minute book, but it has not been updated in a number of years, my office can also help you bring the minute book up to date.

In my legal practice I deal with the minute books of companies on a daily basis. If you would like me to assist with your corporation's minute book, please contact me.

How Should Letters, Emails, Contracts, etc, from My Company be Signed?

by Peter Cusimano
Lawyer - Barrister & Solicitor

It is important that all documents that originate from your company be properly signed. Often times people do not pay attention to this minor detail which can have severe consequences.

The proper way to sign all documents that originate from your company is to include the full legal name of the corporation and then sign on behalf of the company.

For example, if your company's name is ABC Computer Inc., and you are Joe Smith, President, then the proper way to sign all documents is as follows:

ABC COMPUTER INC.

          John-Smith-signature 

per: John Smith
       President

The above format signifies that the document is from the corporation and not the individual.
In addition, "per:" refers to "on behalf of". Essentially, John Smith is signing on behalf of the corporation, and not in an individual capacity. The title "President" signifies the title or authority of the person signing the document in their capacity as an authorized signing officer of the company.

You should use the above format for all documents where a signature is required including:

• letters
• emails
• invoices
• cheques
• contracts / agreements
• price quotes / estimates / purchase orders

If you want to discuss other ways to protect your company, please contact me.