Articles of incorporation are the constating document filed with the corporate registry that fixes a corporation’s name, the classes and maximum number of shares it may issue, and the rights, privileges, restrictions and conditions attached to each class — the document a sponsor’s counsel reads first to see what a target is actually authorized to issue, not just what it has issued.
For a federally incorporated target, the requirement is set out in the Canada Business Corporations Act, s. 6: the articles must state “the classes and any maximum number of shares that the corporation is authorized to issue” and, where there is more than one class, “the rights, privileges, restrictions and conditions attaching to each class of shares.” They must also fix the number of directors (or a minimum and maximum range), name the registered-office province, and record any restriction on the businesses the corporation may carry on or on the issue, transfer or ownership of its shares. British Columbia companies work from the equivalent framework in the province’s own Business Corporations Act — the mechanics differ by statute, but the same core question travels across every Canadian jurisdiction a target might be incorporated in.
The trap for a buyer is that the articles set the ceiling, not the actual position. A target can be authorized to issue an unlimited number of Class A and Class B shares and still have issued only a small fraction of that authorized pool — so the articles alone never tell a sponsor how many shares are outstanding, who holds them, or whether prior issuances were properly authorized by director resolution. That is what the minute book is for. Diligence reads the two together: the articles for what the corporation is allowed to do, the minute book and securities register for what it actually did.
A sponsor is underwriting a share purchase of an Ontario-incorporated target. The articles authorize an unlimited number of Class A common shares and an unlimited number of Class B non-voting preferred shares, with the Class B carrying a fixed non-cumulative dividend and no vote except on matters affecting the class directly — exactly the kind of “rights, privileges, restrictions and conditions” CBCA s. 6 requires to be spelled out. The cap table the seller circulates shows only Class A shares outstanding, held 70/30 between the two founders. Counsel’s job before the LOI firms up is narrow but non-negotiable: confirm the Class B shares were never issued (a clean answer) rather than issued and simply omitted from the cap table the seller sent over (a very different, and much worse, answer).
See also: Corporate minute book · Share purchase agreement · Holding company.
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