Capital Structure Advisory

$499

By choosing to specify share capital provisions that are tailored to the strategic needs of the company, incorporators can lay the groundwork for long-term goals and challenges that the company might face in its need for capital. Our capital structure advisory services will provide guidance to assist the company in meeting its objectives and to avoid conflicts later on.

 

Description

The federal custom word name corporation allows the incorporator(s) of a company to specify the share capital provisions relating to the rights and restrictions for the classes of shares that they specify.  This is the same for the word name and also the numbered name corporations in Ontario. The federal word name corporation, however, restricts choice to a maximum of two classes of shares each with standard provisions.

This service is not geared to the needs of professional corporations and personal real estate corporations as their ability to transfer shares to others is limited and the tax and estate planning issues relating to the share structure of these companies are addressed in our personal taxation and estate planning service.

We provide advisory services to help companies to tailor their structure and governance to suit their unique needs, strategies, and goals. Here are some key motivations for taking this customized approach, which we provide:

  1. Flexibility and Control: By specifying their own provisions, incorporators can design a share structure that aligns with their vision for the company. This can include creating different classes of shares with varying voting rights, dividend rights, or rights upon dissolution. Such customization allows for greater control over the company’s decision-making processes and the distribution of profits.
  2. Attracting Investment: Custom share provisions can be used to attract specific types of investors. For example, a company might issue non-voting shares to investors who are interested in the financial return of their investment but not in the day-to-day management of the company. Alternatively, certain shares might have enhanced voting rights to appeal to investors who wish to have a greater say in company decisions.
  3. Strategic Alliances and Partnerships: Tailored share capital provisions can facilitate strategic alliances or partnerships by offering specific rights or restrictions that align with the goals of the alliance. For example, a company might issue shares with particular rights to a strategic partner, ensuring that the partner’s interests are protected and that they have an appropriate level of influence in the company.
  4. Succession Planning: Custom provisions can also be crucial for family-owned businesses or closely held companies, where there is a desire to keep control within a certain group. Different classes of shares can be used to distinguish between active and passive owners, ensuring that control remains with those actively involved in the business while still providing for financial benefits to passive owners.
  5. Market Competitiveness: In a competitive market, having a unique share structure can be a differentiating factor that makes a company more attractive to investors, partners, or potential acquirers. Custom provisions can highlight the company’s innovative approach, financial stability, or long-term vision, making it stand out from competitors.
  6. Regulatory Compliance and Tax Considerations: In some jurisdictions, custom share provisions can help in optimizing tax liabilities or ensuring compliance with specific regulatory requirements. This might include structuring shares in a way that takes advantage of tax incentives or meets the legal criteria for certain types of funding or operational activities.
  7. Risk Management: Tailored share provisions can be an effective tool for risk management, allowing incorporators to define and limit the transferability of shares, set pre-emption rights, or establish specific conditions for dividends and capital distribution. This can protect the company’s interests and its shareholders’ investments under various circumstances.
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