And in the case of a company having share capital in addition: (n) The amount of the capital stock of the company, and the number of shares into which it is divided and their description.

(0) The number of shares issued and allotted and the amount paid thereon. (p) The par value, and, if without par value, then the market value of its shares according to the last statement of the company.

(q) The total amount of shares issued as preference shares, and the date and manner of creation thereof.

(r) The total amount paid on such preference shares.

(8) The total number and amount of share warrants, and the names, residences, and post-office addresses of the person to whom the shares were issued. (t) The number of shares, if any issued as consideration for any transfer of assets, goodwill, or for value other than money, and the extent to which the same are paid; if none are so issued, this fact is to be stated.

(u) Such other information as may be required by order in council, published in the Quebec Official Gazette.

And, if the company may dispose of its shares at a discount or premium, in addition:

(v) A citation of the law under which such shares were issued at a discount or premium.

(w) The number of shares sold or otherwise disposed of at a discount or premium.

(a) The rate at which such shares were sold or disposed of.

(y) The enumeration of the formalities complied with and the dates when they were so done.

Similar or identical information is required by the Alberta and Ontario Companies Information Acts. Provisions requiring annual returns and the filing of a prospectus on the sale of securities are incorporated in the Companies Act of other Provinces.

In Quebec return must be verified by any two directors of the company and delivered to the Provincial Secretary before the first of September in each year as of the preceding thirtieth of June, and in Ontario by the President and Secretary, but where either is absent the affidavit may be made by a director, and it must be delivered to the Provincial Secretary before the first of May in each year as of the preceding thirty-first of March.

INCORPORATION UNDER THE DOMINION COMPANIES ACT

Dominion companies are constituted in two ways, by special act of Parliament or by letters patent. Separate legislation has been enacted by Parliament for railways, banks, telegraph, telephone, insurance, trust, and loan companies. These companies are governed primarily by their special act of incorporation and secondly the general statute to the extent that it does not conflict with the special act.

General commercial companies are incorporated by the granting of letters patent under the provisions of the Dominion Companies Act, chapter 33 of 1934, effective on October 1, 1934. The 1934 act, repealing the Companies Act, chapter 27 of the Revised Statutes of Canada, 1927, as amended, rearranged and consolidated the old act and introduced a number of revisions designed to afford greater security for investors, shareholders, and creditors; additional safeguards for the investing public were introduced by the 1935 Amendment Act, chapter 55, effective September 15, 1935. Only part I of the act, dealing exclusively with commercial companies with sharo capital and limited liability, will be referred to in this discussion.

Other parts pertain to corporations without share capital which carry on their operations without pecuniary gain; companies clauses applicable to those companies incorporated by special act; and the licensing of British and foreign companies to carry on mining operations in the Northwest Territories and the Yukon Territory.

TYPES OF COMPANIES

Companies with share capital and limited liability may be incorporated under the provisions of part I of the Companies Act as either private companies or public companies. The private company is one which, by its letters patent, (1) restricts the right of the members to transfer its shares; (2) limits the number of shareholders to 50, not including employees and former employees; and (3) prohibits any invitation to the public to subscribe for its shares or debentures. Public companies are those which are not private companies.

If it is desired to impose restrictions on the transfer of shares, and the capital required by the undertaking can be raised without the necessity of offering shares to the public, incorporation as a private company is more convenient, particularly in the establishment of a Canadian subsidiary by an American corporation. A public company is subject to stringent requirements relative to the filing of prospectuses which do not apply to private companies. The restrictions imposed on the transferability of shares in a private company should be set out in the memorandum of agreement, and a clause should be included in the application for letters patent stating that incorporation as a private company is desired, with the request that certain restrictions on share transfers be included in the letters patent. No definite form of restriction is required by the act. A provision that transfers require the previous sanction of the board will be sufficient compliance, but more detailed requirements are frequently incorporated, such as the granting of a prior right of purchase to continuing shareholders in the event a shareholder wishes to sell and a stipulation as to the method of fixing the sale price.

FORMATION OF A COMPANY

Upon application by three or more persons, the Secretary of State may, by letters patent, grant a charter constituting such persons who have subscribed to the memorandum of agreement, and who thereafter become shareholders in the company, a body corporate and politic. There are no requirements in the act that members of a company be either citizens or residents of Canada.

The following particulars must be set out in the application:

(a) Proposed name of the company, the last word of which must be "Limited," or "Ltd."

(b) The purposes for which its incorporation is sought.

(c) Location in Canada of its head office.

(d) Where the shares in its capital stock are to have a par value, the number of such shares and the par value of each share.

(e) Where the shares in its capital stock are to be without nominal or par value the number of such shares which the company is to be authorized to issue.

(f) If shares are to be of both kinds, full particulars as in (d) and (e). (g) Where the shares in its capital stock are to be of more than one class, the respective rights, restrictions, conditions, and limitations attaching to

the shares of each class; if any class of shares which is to have preferred rights as to dividends is to be issued in series either (1) the designation, rights, restrictions, conditions, and limitations attaching to the first series of such class, and a statement that the directors are authorized to fix from time to time before issuance, the designation, rights, etc., attaching to the shares of each subsequent series of such class, or (2) a statement that the directors are authorized to fix from time to time before issuance, the designation, rights, etc., attaching to the shares of each series of such class.

(h) If the company is to be a private company, a request that the company be incorporated as a private company, and the restrictions on the transfer of its shares which are requested to be set out in the letters patent.

(i) The names in full and the address and calling of each of the applicants. (j) The names of the applicants, not less than three, who are to be the first directors of the company. (7.) 25

The application or petition must be signed by each of the applicants in person, and in the presence of a witness who should not be one of the applicants. If it is impracticable for the applicant to sign in person, he may sign by an attorney, but the original power of attorney, or a duly authenticated notarial copy, must be produced. Such power of attorney should be specific, as a general power cannot be accepted. Each signature should be verified by an affidavit, or statutory declaration, made by the witness thereof.

MEMORANDUM OF AGREEMENT

The application must be accompanied by a "memorandum of agreement" in duplicate, signed and sealed by the applicants, each of whom must subscribe for at least one share. The memorandum is an agreement by the parties signing it to become incorporated as a company (private or public). It states the proposed name of the company, the authorized capital stock, value, and description of the shares, and, in the case of a private company, the restrictions to be placed on the transfer of shares. The document concludes with a statement that the persons whose signatures, addresses, and descriptions complete the memorandum undertake to take shares in the amounts set opposite their respective names. Each signature must be attested by a witness who is a nonsubscriber.

Before the letters patent are issued, the applicants must establish to the satisfaction of the Secretary of State the sufficiency and truth of the application and the memorandum of agreement and that the proposed name is not the same or similar to the name under which any other company, society, association, or firm, in existence, is carrying on business in Canada or so nearly resembles the same as to be calculated to deceive, and is not otherwise on public grounds objectionable, or that such existing company or firm is in the course of being dissolved or changing its name and has signified its consent to the use of the said name. (8.)

Complete sets of forms for an application for letters patent, memorandum of association, and affidavits or statutory declarations are obtainable from the Department of the Secretary of State, Ottawa. The letters patent, constituting the charter of the company, recite such of the established averments in the application and memorandum of agreement as to the Secretary of State seems expedient. Notice of the granting of letters patent is published in the Canada Gazette

* Numbers in parentheses refer to sections of the Companies Act.

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by the Secretary of State (9), and the company is deemed to be existing from the date of its letters patent (11). If a company does not go into actual bona fide operation within 3 years after incorporation or for 3 consecutive years does not use its corporate powers, its charter is forfeited (28).

FEES PAYABLE UPON REGISTRATION

The fees payable upon application for letters patent are established by the Governor in Council and depend upon the proposed capital at the following rates:

$50,000 or less: $100 fee.

More than $50,000 and not more than $200,000: $100 fee, plus $1 for each $1,000 or fraction in excess of $50,000.

More than $200,000 and not more than $500,000: $250 fee, plus $0.50 for each $1,000 or fraction in excess of $200,000.

More than $500,000: $400 fee, plus $0.20 for each $1,000 or fraction in excess of $500,000.

In the case of campanies having no-nominal or no-par-value shares, if the amount at which the shares may be sold is not set out in the letters patent, the amount of each share is fixed at $100 for the purpose of calculating the fee. When an amount at which shares may be sold is fixed by the letters patent, the fee is calculated according to the foregoing tariff on the aggregate of the capital so fixed. Upon supplementary letters patent increasing the capital the fee is according to foregoing tariff, but on the increase only; in other words, the fee is the same as for the incorporation of a company with capital equal to the increase. The fee upon supplementary letters patent for other purposes is $100.

PROVINCIAL REGISTRATION REQUIREMENTS FOR DOMINION COMPANIES

While Dominion companies have the power to carry on business throughout Canada, and to maintain actions in Provincial courts, they may be required to comply with Provincial filing provisions and to pay certain fees. Consequently such registration requirements as exist are not restrictions on the powers of Dominion companies but are in effect revenue- and information-producing provisions.

Dominion companies are not required to register or pay license fees under the Ontario Extra-Provincial Corporations Act.26 The Ontario Companies Information Act requires a public company to file a prospectus with the Provincial Secretary upon the sale of its securities within the Province, and all corporations doing business in the Province must file an annual return containing certain particulars set out in the statute.

The Quebec Extra-Provincial Corporations Act 27 provides that, for the purposes of the act, companies incorporated by or in virtue of an act of the Parliament of Canada are not extra-Provincial companies; Dominion companies, therefore, are not required to obtain a license or pay a fee in Quebec. However, every company doing business or selling securities in the Province is required to file with the Provincial Secretary a prospectus and an annual return as provided by the Quebec Companies Information Act.

A Dominion company carrying on business in Saskatchewan is required not later than the first day of January in each year to file with the registrar a statement in prescribed form, certifying that the company is so carrying on business, accompanied by a fee of $5, whereupon the registrar issues a certificate of renewal of registration.28 Dominion companies are required to register and pay the same fees when doing business in Alberta, British Columbia, and Manitoba as an extra-Provincial company, but in Alberta the maximum fee for a Dominion company is $150. In Nova Scotia such companies must pay the same annual registration fees and taxes as a Nova Scotia company, and in Prince Edward Island only the annual

taxes.

PROSPECTUSES AND OFFERS TO THE PUBLIC

The act requires that any prospectus offering any securities of the company to the public for subscription or purchase must be filed with the Secretary of State, and must comply with certain specific requirements as to form and content. Every subscriber must receive a prospectus and have an opportunity of reading it before his application for securities is accepted in a manner to become binding upon him. Penalties are provided against underwriters who offer any securities of a company for public subscription before a prospectus has been filed with the Secretary of State, or without causing the requirement to be complied with, respecting the delivery of a prospectus to a subscriber or applicant at least 24 hours before his application is accepted. House-to-house canvassing is prohibited. În view of the stringent requirements and the rigorous administration thereof, sections 73 to 82 inclusive pertaining to prospectuses should be carefully examined (see appendix), and competent legal assistance should be obtained before offering shares to the public.

The Provinces have enacted legislation under the title of Securities Frauds Prevention Act or Companies Information Act or as a part of the Companies Act requiring the filing of information returns before the sale of securities within the Province or the licensing of brokers. Full details relative to the requirements in the individual Provinces can be obtained from the respective Provincial Secretaries.

CAPITAL

The act does not establish a minimum capital requirement. The authorized capital of a company having shares with a nominal or par value, with respect to those shares, is the total nominal amount thereof. All or any part of the authorized capital of a company, except shares having priority as to capital or being subject to redemption, may consist of shares without nominal or par value; the capital with respect to these shares is the aggregate amount of the consideration received by the company, exclusive of such part that may be set aside as distributable surplus. The directors of a company may make bylaws increasing or decreasing the capital stock subject to confirmation by the shareholders at a special general meeting called for that purpose and the issuance of supplementary letters patent by the Secretary of State. (Subsecs. 2, 3, and 4 of 12, 48, 49.)

2 Companies Act, 1933, sec. 208, subsec. 7.