What are best practices for issuing shares to founders when incorporating in Ontario?

Issuing shares correctly to founders at the time of incorporation sets the foundation for all future corporate governance and avoids expensive corrections later. There are several best practices worth following for Ontario corporations.

First, issue shares promptly at incorporation and document the issuance properly with a directors' resolution, updated securities register, and (if applicable) share certificates. Do not let founders operate the business informally without shares having been formally issued — this creates ambiguity about ownership from the start.

Second, decide on the consideration for the shares and document it. Founders typically subscribe for shares at a nominal price at incorporation. The consideration — even if nominal — should be clearly stated in the directors' resolution.

Third, if there are multiple founders, agree on the vesting schedule (if any) and shareholder agreement before or at the time of share issuance. Addressing these terms after the business starts operating becomes progressively more difficult as positions harden.

Fourth, if there is any likelihood of bringing in investors in the future, design the share structure at incorporation (with multiple classes if needed) to avoid the need for a costly reorganization later.

Finally, store all documentation in a proper minute book maintained by a corporate lawyer or through a reliable corporate services provider.