Issuing Shares in an Ontario Corporation

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The basic rules

Issuing shares is how an Ontario corporation brings in owners and money. It happens at incorporation, when a partner or investor joins, when a key employee is rewarded, and in family and tax planning. The Business Corporations Act (the OBCA) sets a short list of rules that apply every time, and getting them right is part of the share issuance and transfer work we do for owner-managed companies.

The directors decide. Section 23(1) says shares may be issued at the times, to the persons and for the consideration the directors determine, subject to the articles, the by-laws, any unanimous shareholder agreement and the pre-emptive rights rule in section 26.
Shares have no par value. Section 22(1) requires shares to be in registered form and without nominal or par value.
Full payment first. Section 23(3) says a share shall not be issued until the consideration is fully paid in money, or in property or past service worth not less than the money the corporation would have received.
No further calls. Section 23(2) makes issued shares non-assessable: the holders are not liable to the corporation or its creditors in respect of them.
Stated capital is tracked. Section 24(1) requires a separate stated capital account for each class and series, and section 24(2) adds the full consideration received to the right account.

The articles set the outer limits: which classes exist, what rights they carry, and any maximum number. The directors work within them. How classes are designed is covered in the share structure part of our corporate law page.

How a share issue is done, step by step

Check the articles. Confirm the class you want to issue exists, has the rights you intend and has room under any maximum. If it does not, the articles have to be amended first, which section 168(5) requires to be authorized by special resolution of the shareholders. Ontario’s fee table lists articles of amendment at $150 online.
Check the shareholders’ agreement and pre-emptive rights. Under section 26, if the articles or a unanimous shareholder agreement give existing shareholders a right of first offer on new shares, the shares must be offered to them first on the terms provided. A unanimous shareholder agreement may also restrict the directors’ power to issue shares at all, as explained in what a unanimous shareholder agreement is.
Agree the consideration. Money is simplest. If the shares are issued for property or past service, section 23(4) requires the directors to determine the money the corporation would have received if the shares had been issued for money, and either the fair value of the property or service or that it is worth not less than that amount.
Pass a directors’ resolution. The resolution names the subscriber, the class and number of shares and the consideration. Section 129(1) lets the directors do this by written resolution signed by all of them.
Receive payment, then issue. The shares are issued once the consideration is fully paid (section 23(3)), and the stated capital account is credited (section 24(2)).
Issue a certificate, or not. Section 54(1) lets a share be represented by a certificate or be uncertificated; section 54(2) lets the directors provide by resolution for uncertificated shares unless the articles say otherwise, in which case the holder receives a written notice under section 54(3).
Update the records. Section 141(1) requires the securities register to show each holder, their address and the number and class of shares, and the date and particulars of each issue. If the issue changes who has significant control, the register of individuals with significant control must be updated within 15 days of the corporation becoming aware of it (section 140.2(4)).

The resolutions, register entries and subscription form all go in the minute book, described in what goes in an Ontario corporation’s minute book.

Share issuance rules under the OBCA
Question	What the OBCA provides	Section
Who decides to issue shares?	The directors, subject to the articles, by-laws, any unanimous shareholder agreement and pre-emptive rights	23(1)
Can shares have a par value?	No: shares are in registered form and without nominal or par value	22(1)
When can a share be issued?	Only when fully paid in money, property or past service of at least equivalent value	23(3)
Is a promissory note from the subscriber “property“?	No, not for the subscriber or someone not at arm’s length with them	23(6)
Who values non-cash consideration?	The directors	23(4), (5)
What if the directors get the value wrong?	Directors who voted for or consented to the issue can be liable to make good the shortfall	130(1)
Different classes with different rights	Allowed if the articles set them out; voting and the right to remaining property on dissolution must each attach to at least one class	22(3), (4)
Series within a class	Allowed if the articles authorize it; no series may have priority over another series of the same class for dividends or return of capital	25
Existing shareholders’ right to buy first	Only if the articles or a unanimous shareholder agreement provide for it	26
Certificates	Certificated or uncertificated	54

What changes the answer

Issuing shares for property or past work

Shares can be issued for property, such as equipment or a business, or for past service. The directors must value it under section 23(4), and section 23(5) lets them take into account reasonable organization and reorganization expenses and payments reasonably expected to benefit the corporation. A promise to pay later is not enough: section 23(6) says a document evidencing the debt of the person receiving the shares, or of someone not dealing at arm’s length with them, does not count as property. If directors approve an issue for non-cash consideration contrary to section 23, section 130(1) makes them jointly and severally liable to make good the shortfall. Their wider duties are set out in directors’ duties under the OBCA.

More than one class of shares

If a corporation has only one class, section 22(3) gives every holder equal rights, including the right to vote and the right to the remaining property on dissolution. Under section 22(4), the articles can create several classes, each with its own rights, privileges, restrictions and conditions, as long as each of those two rights attaches to at least one class. Owners often use separate classes for family members or a holding company, with their accountant’s advice; see what a holding company is, and when Ontario owners use one.

Series

Section 25(1) lets the articles authorize a class to be issued in series, and can let the directors fix each series’ terms. If they do, section 25(4) requires articles of amendment designating the series to be sent to the Director before the shares of the series are issued.

Stated capital in related-party exchanges

Section 24(3) allows a corporation, in some exchanges with people who do not deal with it at arm’s length, or with the consent described in the section, to add only part of the consideration to stated capital. These provisions are used in reorganizations planned with tax advice, which we leave to your accountant.

Family members and employees

Bringing a spouse, children or a key employee in as shareholders raises questions about control, value and what happens if they leave. We look at those in bringing family members into your company. A shareholders’ agreement is usually signed at the same time.

Example

For example, imagine Elena and Raj own a Richmond Hill software company, each holding 100 common shares. They want to bring in Mei, their lead developer, with 20 common shares: 10 for $10,000 in cash and 10 in recognition of two years of past service. The articles allow unlimited common shares, and there is no pre-emptive right.

The directors pass a written resolution under section 129(1) issuing the 20 shares. For the 10 shares issued for past service, they determine under section 23(4) what the corporation would have received for them in money, and that Mei’s past service is worth not less than that. They issue the shares only after Mei pays the $10,000 and the service is accepted as full payment, add the consideration to the common share stated capital account, and record Mei in the securities register. Mei now holds about 9% of the votes, so the significant control register does not change. Their accountant reviews the tax side for Mei before the resolution is signed.

Common mistakes

Issuing shares the articles do not allow. Check the class and any maximum first; an amendment needs a special resolution.
Issuing before payment. Section 23(3) requires full payment first.
Taking an IOU. A promissory note from the subscriber is not property under section 23(6).
No valuation for non-cash consideration. The directors must make the section 23(4) determination, and can be liable under section 130(1) if it is wrong.
Ignoring a pre-emptive right. If the articles or a unanimous shareholder agreement provide one, existing holders must be offered the shares first.
Not updating the registers. The securities register and, where it changes, the significant control register must reflect the issue.

What to do this week

Read your articles for the share classes, their rights and any maximum number.
Read your shareholders’ agreement for pre-emptive rights or limits on issuing shares.
Decide the consideration, and if it is not cash, how the directors will value it.
Talk to your accountant about the tax effect for the company and the new shareholder.
Prepare the directors’ resolution, subscription and register entries before anything is signed.
Check whether the issue changes the register of individuals with significant control, explained in what the significant control register is.
If you would like the issue prepared and recorded properly, a first consultation takes 30 minutes, by video or in person, and you can request one here.

Frequently asked questions

Do the shareholders have to approve a share issue?

Not usually. Section 23(1) gives the decision to the directors, unless the articles, by-laws or a unanimous shareholder agreement say otherwise. Creating a new class does need a special resolution to amend the articles (section 168(5)).

Can shares be issued for free?

No. Section 23(3) requires full payment in money, property or past service of at least equivalent value before a share is issued.

What is a special resolution?

Under section 1(1), a resolution passed by at least two-thirds of the votes cast at a special meeting called for the purpose, or consented to in writing by every shareholder entitled to vote at such a meeting.

Do I need share certificates?

No. Section 54 allows certificated or uncertificated shares. If shares are uncertificated, the holder receives a written notice with the information a certificate would show.

Is a share transfer the same as a share issue?

No. An issue creates new shares from the corporation; a transfer moves existing shares from one holder to another and goes in the register of transfers under section 141(2).

Does issuing shares need a government filing?

Not by itself. A change to the articles, such as a new class, does: articles of amendment are filed through the Ontario Business Registry. Directors and officers are reported through the annual and notice filings described in what annual filings an Ontario corporation has.

Sources

This page is general information about Ontario law, not legal advice for your situation. It reflects the law as of October 26, 2026.

How are shares issued in an Ontario corporation?