Corporate By-Law No. 1 | CBCA s.103 & OBCA s.116 Compliant

Think of the articles of incorporation as the corporation's constitution and the by-laws as its operating manual. The articles filed with Corporations Canada fix the name, the share classes, any restrictions on share transfers and the range of directors. Everything else about governance lives in the by-laws: meetings, quorum, the chair's casting vote, officers, execution of documents and banking. By convention, the broadest by-law is numbered By-Law No. 1, and later ones (borrowing, number of directors) are numbered sequentially. The hierarchy is strict: the statute prevails over the articles, and the articles prevail over the by-laws, so a corporate by-law only fills the space the Act leaves open.

A by-law is a different instrument from a unanimous shareholder agreement under CBCA section 146, a contract among all owners that can restrict the powers of the board. It has nothing to do with a partnership agreement under the provincial Partnerships Acts either, since a partnership has no board and no officers. Federally incorporated not-for-profits follow their own regime and use not-for-profit by-laws drafted under the NFP Act, with membership classes that do not exist in a share corporation.

The federal anchor is the Canada Business Corporations Act, R.S.C. 1985, c. C-44. Under section 103(1), the directors may, by resolution, make, amend or repeal any by-law regulating the business or affairs of the corporation, unless the articles, the by-laws or a unanimous shareholder agreement provide otherwise. The by-law is effective from the date of the resolution, but section 103(2) requires the directors to submit it at the next meeting of shareholders, who may confirm, reject or amend it. A by-law that is rejected or not submitted at that meeting ceases to be effective under section 103(4), and section 103(5) prevents the board from re-adopting a substantially identical by-law until shareholders confirm it.

The by-laws can adjust the defaults: section 114(2) sets the directors' quorum at a majority of the number of directors, and section 139(1) sets the shareholders' quorum at a majority of the voting shares, unless the by-laws say otherwise. Notice of shareholder meetings follows section 135 and the Canada Business Corporations Regulations, 2001 (21 to 60 days), although a non-distributing corporation may set a shorter period in its articles or by-laws. Shareholders may attend by electronic means where the corporation offers a facility, but under section 132(5) a fully virtual meeting is possible only if the by-laws provide for it.

Two constraints cannot be drafted around. At least 25% of the directors must be resident Canadians under section 105(3), with at least one on a board of fewer than four, and section 114(3) applies the same proportion to directors present at a meeting. CBCA corporations must also file their register of individuals with significant control with Corporations Canada, under amendments enacted by S.C. 2023, c. 29. By-laws themselves are not filed; section 20 requires them to be kept with the corporate records. The text is available in the official consolidation of the Canada Business Corporations Act on the Justice Laws website.

The obvious moment is incorporation day. A new company has a certificate and articles but no rules for its first board meeting, and the resolutions that issue shares, appoint officers and open the bank account all presuppose a by-law in place. Practitioners prepare it with the directors' consents to act as one package, drawn from the same set of Canadian incorporation and business templates. The second trigger is a continuance: a corporation importing into the CBCA under section 187 carries by-laws written for another Act, with cross-references that no longer exist. A third is the outdated by-law found in due diligence, still requiring a seal on every contract and silent on virtual meetings.

Banks are another driver, since opening an account or adding a signing officer usually requires a certified copy of the banking provisions. A one-person holding company, where the sole shareholder is also sole director and president, still needs a corporate by-law, because the bank and the auditor will ask for it. And where the owners have signed a unanimous shareholder agreement (USA), the by-law must be read against it, since the USA can remove powers the by-law gives the board.

• The directors' clause fixes the election, term and removal of directors within the range set by the articles, and sets the quorum (a majority, or a fixed number for small boards). It allows meetings by telephone or videoconference under section 114(9), which requires the consent of all directors, and written resolutions under section 117.
• The officers' clause creates the offices of president, secretary and treasurer and delegates powers under section 121, excluding the matters section 115(3) reserves to the board. Where an officer is on the payroll, the by-law points to a separate employment agreement for officers who are employees.
• The shareholder meetings clause covers the annual meeting timeline of section 133, notice, record dates, quorum, the chair's role, voting, proxies and electronic meetings.
• The conflict of interest clause organizes the disclosure required by section 120 and the abstention of the interested director on the vote.
• The execution of documents clause sets out who signs contracts, deeds and share certificates, confirms under section 23 that a corporate seal is optional, and validates electronic signatures.
• The banking and borrowing clause designates the financial institutions, the signing officers for cheques and transfers, and the board's borrowing power under section 189.
• The protection of directors and officers clause organizes indemnification within section 124 and authorizes liability insurance.

Ontario corporations are governed by the Business Corporations Act, R.S.O. 1990, c. B.16, whose section 116 reproduces the federal mechanism: directors make the by-law, shareholders confirm it at the next meeting. Ontario repealed its resident director requirement in section 118(3) on July 5, 2021, so an Ontario company may have an entirely non-resident board. The same amendments let a non-offering corporation pass a written ordinary resolution by a majority of voting shares, with notice to the shareholders who did not sign. Notice of meetings under section 96 runs from 10 to 50 days for a non-offering corporation.

Alberta corporations follow the Business Corporations Act, R.S.A. 2000, c. B-9, where the board adopts by-laws and submits them to shareholders under section 102. Alberta removed its director residency requirement in 2021, which makes it a common choice for private companies with directors abroad. Annual returns go to the Alberta Corporate Registry rather than to Corporations Canada.

British Columbia is the exception every practitioner flags. The Business Corporations Act, S.B.C. 2002, c. 57, has no by-laws: governance rules sit in the company's Articles, alongside a Notice of Articles filed with the registry. A BC company cannot adopt a By-Law No. 1 as such; its governance provisions must be written into its Articles. Our template still works as a drafting base, adopted by the resolution those Articles require.

Quebec corporations are governed by the Business Corporations Act, CQLR c. S-31.1, which follows the CBCA model: by-laws adopted by the board take effect immediately and go to shareholders at the next meeting. The Act states that the articles prevail over the by-laws in case of conflict. There is no residency requirement, but changes to directors must be declared to the Registraire des entreprises.

You start by choosing the governing statute: the CBCA or the provincial Act under which the company was incorporated. That choice drives every statutory reference in the document, from the adoption mechanism to the notice periods. You then enter the corporation's exact name and number as they appear on the certificate of incorporation. The questionnaire asks how many directors the articles allow and whether you want a fixed quorum or the statutory majority, which matters for two-person boards.

The next screens cover officers, and whether one person may hold several offices, the norm in owner-managed companies. The banking step asks for the institution and the signing authority for cheques and transfers. The final step generates the corporate by-law with a directors' resolution of adoption and a shareholders' confirmation, ready to sign. Keep the signed confirmation with the by-law: the bank, the auditor and a future purchaser will ask for it.

The most common failure we see is a by-law that was never confirmed. Directors adopt it on incorporation day, nobody holds a shareholder meeting for two years, and the by-law lapses under section 103(4). The fix is simple: put confirmation on the agenda of the first annual meeting, or have every voting shareholder sign a written resolution under section 142. The second mistake is ignoring director residency at meetings. A CBCA board of three whose only resident Canadian is absent can act only if that director approves the business in writing or by phone, under the exception in section 114(4).

Founders who download a US template create a third set of problems. Delaware-style bylaws refer to a certificate of incorporation, stockholders and the Delaware General Corporation Law, and a purchaser's lawyer will reject them in due diligence. Banking clauses are the fourth trap: the by-law names one signing officer, the bank's resolution names two, and transactions freeze while someone works out which document governs. Finally, many by-laws never authorize electronic meetings, leaving directors in three cities unable to meet validly online.