How do you properly add a new shareholder to an existing Ontario corporation?

Adding a new shareholder to an Ontario corporation can happen in two ways: the corporation issues new shares to the incoming shareholder (a primary issuance), or an existing shareholder transfers some or all of their shares to the incoming person (a secondary transfer).

For a primary issuance, the directors must pass a resolution authorizing the issuance, stating the number and class of shares, the consideration, and the name of the allottee. The securities register must be updated, and a share certificate issued if the corporation uses them. If a shareholder agreement exists, the new shareholder typically needs to sign a joinder before the shares are issued.

For a secondary transfer, the transferring shareholder endorses their share certificate (or executes a share transfer form), the corporation's transfer restrictions must be satisfied (right of first refusal exercised or waived, consent obtained if required), the directors approve the transfer, and the securities register and share certificate records are updated.

In either case, there may be tax considerations — particularly if the incoming shareholder is an employee or a non-arm's-length party, or if the shares are being transferred at a value other than fair market value. The minute book should be updated to reflect the new ownership structure. A corporate lawyer can manage all of these steps and ensure the documentation is in order.