Founder glossary. The words, plainly.

Rules for what users may and may not do with a product or service. AI products often use one to restrict harmful or unlawful uses.

A category of investor defined in National Instrument 45-106, generally based on income, net assets or financial assets, or on being a certain kind of institution. Selling shares or SAFEs to accredited investors is one of the most common prospectus exemptions startups rely on.

A short filing a corporation makes with its government registry every year to confirm basic information such as its address and directors. Federal and Ontario corporations each have their own annual return, and missing it repeatedly can lead to the corporation being dissolved.

The document filed with the government to create a corporation. It sets out basics such as the company's name, its share classes and any restrictions on transferring shares.

Under PIPEDA, the loss of, unauthorized access to or unauthorized disclosure of personal information. If it is reasonable to believe a breach creates a real risk of significant harm, the organization must report it to the Privacy Commissioner and notify affected individuals, and it must keep a record of every breach.

Registering a name you do business under in Ontario when it differs from your own legal name, or a corporation's operating name when it differs from its corporate name. It doesn't give you exclusive rights to the name; a trademark registration is what does that.

The internal rules for how a corporation runs, such as how directors are elected and how meetings are held.

A record of who owns the company's shares, options, SAFEs and other securities, and in what amounts. Investors review it closely before they invest.

Canada's Anti-Spam Legislation. It requires consent, sender identification and a working unsubscribe mechanism for commercial electronic messages, such as marketing emails and texts, sent to or opened on computers in Canada.

A Canadian-controlled private corporation, a tax status that can give access to benefits such as the small business deduction and enhanced SR&ED tax credits. Who controls the company, including investors, can affect it.

An initial period in a vesting schedule before any shares or options vest. If the person leaves before the cliff, nothing has vested.

Under CASL, an electronic message that, judging by its content, links or contact details, has as one of its purposes encouraging participation in a commercial activity. An onboarding email with an upgrade offer can count.

A loan to a company that converts into shares at a later financing instead of being repaid in cash. Unlike a SAFE, it usually carries interest and a maturity date.

A contract that sets out how a service provider may handle personal information on a customer's behalf, often attached to a SaaS agreement.

A reorganization in which a new Delaware corporation becomes the parent of a Canadian startup and the shareholders end up holding shares of the US company. It can trigger tax for Canadian shareholders unless it is structured carefully, and the Canadian company usually stops being a CCPC.

The drop in an existing shareholder's ownership percentage when the company issues new shares, for example to investors or employees.

A decision of a corporation's board of directors. Under both the Ontario and federal corporate statutes, a written resolution signed by all the directors entitled to vote is as valid as one passed at a meeting, which is how most startups record board decisions.

A percentage reduction off the price new investors pay in the next round, given to earlier SAFE or note investors as a reward for investing first.

A shareholder agreement term that lets a majority who agree to sell the company require the remaining shareholders to sell on the same terms.

Advertising a price that can't actually be paid because mandatory fees are added later. The Competition Act treats it as a false or misleading representation, unless the added amount is imposed by government, such as sales tax.

The review an investor or buyer does of a company before committing money, usually covering its corporate records, cap table, contracts, intellectual property and employment arrangements.

A written policy saying whether and how an employer electronically monitors employees. Ontario's Employment Standards Act requires one from employers with 25 or more employees in Ontario on January 1 of a year.

Shares of a Canadian company that holders can later exchange for shares of a foreign parent company. They are used in cross-border reorganizations, such as a Delaware flip, to help Canadian shareholders defer tax.

Under CASL, consent a person actively gives to receive commercial electronic messages, after being told the purpose, who is asking and that they can unsubscribe. Unlike implied consent, it doesn't expire, though the person can withdraw it.

Registering a corporation in a province other than the one it was incorporated under. A federal corporation that operates in Ontario also registers in Ontario.

A price for a defined piece of legal work, agreed in writing before the work starts, in place of billing by the hour.

Something of value given in exchange for agreeing to new terms. An employment agreement signed after the employee has already started may not be enforceable unless the employee receives something new for it, which is why agreements should be signed before the first day.

A contract term that says which jurisdiction's law is used to interpret the contract. It is often paired with a clause saying where disputes will be heard, and the two don't have to point to the same place.

Under Ontario's PHIPA, a person or organization with custody or control of personal health information because of its health care work, such as a regulated health professional or the operator of a group practice. Custodians carry the main legal obligations under PHIPA.

Under CASL, consent the law treats as given in limited situations, such as a purchase in the past two years or an inquiry in the past six months. It runs out after those periods unless the person gives express consent.

A promise in a contract to cover the other party's losses from specific events, such as a claim that your product infringes someone's IP.

Someone who provides services to a business while in business on their own account, rather than as an employee. What the contract calls the relationship does not decide it; courts look at the relationship as a whole.

The people who own or control a significant number of a corporation's shares, or who otherwise have influence over it. Corporations keep a register of these individuals.

A written agreement that transfers ownership of intellectual property, such as code, designs or content, from the person who created it to the company.

A contract term that caps how much one party can owe the other if something goes wrong, and often excludes certain kinds of losses.

A right attached to preferred shares to be paid out of the proceeds of a sale or wind-up before common shareholders, often equal to the amount the investor put in. The terms decide whether the investor also shares in what is left over.

An international system, administered by WIPO, for seeking trademark protection in many countries through one application. Canada joined in 2019; a Canadian applicant first needs a Canadian application or registration and then files through CIPO.

Any relationship between an influencer and a business that could affect how people judge the influencer's independence, such as payment or commissions, free products, discounts, or a personal or family relationship. The Competition Bureau's guidance is that these connections should be disclosed clearly and prominently, visible without having to expand the post.

The company's official records, including its articles, by-laws, resolutions and registers of directors and shareholders.

Rights an author has under the Copyright Act to the integrity of a work and to be associated with it. They cannot be assigned, but they can be waived, which is why IP agreements often include a waiver.

A term that lets an investor adopt better terms the company later gives to other investors in a similar instrument.

A contract that limits how a party may use and disclose confidential information it receives. It protects specific information shared with a specific party; it doesn't transfer ownership of IP.

The international system that sorts goods and services into numbered classes for trademark applications. A Canadian application lists the goods and services and groups them by class, and government fees depend on the number of classes.

A term that stops someone from working for a competitor or starting a competing business. Ontario's Employment Standards Act prohibits most non-competes with employees, with exceptions for certain executives and the sale of a business.

A term that stops someone from approaching the company's clients or employees for a period after they leave.

A name search report used when incorporating a company with a name rather than a number, to check for conflicts with existing names and trademarks.

The terms under which open source code can be used. Some licences require you to share your own code if you distribute software built with it.

Under Ontario's PHIPA, identifying information about a person that relates to their physical or mental health, the health care they receive, or who provides it, among other things. Notes, recordings and transcripts of a client visit can all contain it.

Ontario's Personal Health Information Protection Act, 2004. It governs how health information custodians, such as many clinics and practitioners, collect, use and share personal health information.

The Personal Information Protection and Electronic Documents Act, Canada's federal privacy law for personal information collected in the course of commercial activity.

The value of a company immediately after new investment comes in. Post-money SAFEs use it so investors can see the ownership percentage they are buying.

The value of a company immediately before new investment comes in. Adding the new money gives the post-money valuation.

A class of shares with rights ahead of common shares, such as a liquidation preference or special voting rights. Investors in priced rounds usually receive them, while founders and employees usually hold common shares.

A financing in which investors buy shares at an agreed price per share, which sets a valuation for the company. SAFEs usually convert into shares at a priced round.

The right of an existing investor to buy enough of a future round to keep their ownership percentage from being diluted.

An initial period of employment. Ontario's Employment Standards Act doesn't require notice of termination for an employee employed less than three months, but a probation clause only limits what is owed at common law if the written employment agreement says so clearly.

A rule that lets a company sell securities without filing a prospectus. Startups raising money in Ontario generally rely on one, and some exemptions require filing a report with the Ontario Securities Commission.

Quebec's modernized private-sector privacy law. It can apply to businesses outside Quebec that handle personal information of people in Quebec.

A director who meets the residency definition in the Canada Business Corporations Act. At least 25% of a federal corporation's directors must be resident Canadians, or at least one if the corporation has fewer than four directors. Ontario removed its director residency rule on July 5, 2021.

A right for existing shareholders or the company to buy shares on the same terms before a shareholder can sell them to an outsider.

The contract between a software-as-a-service company and its customers, covering access to the product, fees, data, service levels and liability.

A short contract in which an investor gives a company money now in exchange for the right to shares later, usually when the company raises a priced round.

A rule in the Income Tax Act that lets a person transfer certain property to a taxable Canadian corporation in exchange for shares and defer tax on the gain, by filing a joint election with the CRA. It is often used when founders move a business or shares into a corporation.

The part of a SaaS contract that commits to measurable service standards, such as uptime, and what the customer gets if they aren't met.

The contract under which someone buys existing shares from a shareholder, rather than new shares from the company. It is used when a founder sells shares or when a buyer acquires a company by buying all of its shares.

The contract under which an investor buys newly issued shares directly from the company. It records the price, the number of shares and the investor's statements about which prospectus exemption applies.

A contract among a company's shareholders that sets out who decides what, what happens to a shareholder's shares if they leave, and how shares can be sold.

A term that lets one shareholder offer to buy another's shares at a stated price, and requires the other to either sell at that price or buy the offeror's shares at the same price.

A short separate agreement giving one investor extra rights alongside a standard document such as a SAFE, for example pro rata rights or access to financial information.

A business whose worldwide taxable sales, together with those of associated businesses, are $30,000 or less in a calendar quarter and over the last four consecutive quarters. Small suppliers don't have to register for GST/HST, though they can choose to; once over the threshold, registration becomes mandatory.

A shareholder decision passed by at least two thirds of the votes cast, or signed in writing by all shareholders entitled to vote. Corporate statutes require one for major changes such as amending the articles.

A federal tax incentive program that gives credits or refunds for eligible research and development work done in Canada.

A deduction under the Income Tax Act that can reduce the taxable benefit an employee has when exercising stock options, if conditions are met. For options granted by a CCPC, the taxable benefit is generally deferred until the shares are sold. Tax treatment depends on the facts, so employees should get tax advice.

A plan that lets a company grant employees and others the right to buy shares later at a set price, usually subject to vesting.

A third-party service, such as a cloud host, that a provider uses to process its customers' personal information.

A shareholder agreement term that lets minority shareholders join a sale by the majority on the same terms.

A short, mostly non-binding summary of the main terms of an investment or deal, agreed before the full legal documents are drafted.

A word, logo or other sign that identifies your goods or services. Registering it in Canada through CIPO gives you exclusive rights to use it across the country for the goods and services listed.

A proceeding in which someone challenges a trademark application after CIPO advertises it in the Trademarks Journal. Under the Trademarks Act, a statement of opposition must be filed within two months after the advertisement.

A shareholder agreement among all of a corporation's shareholders that restricts, in whole or in part, the directors' powers to manage the business. Both the Ontario and federal corporate statutes recognise it.

The way a recipient can stop receiving commercial electronic messages. CASL requires one in every such message, it must be easy to use at no cost, and requests must be given effect within 10 business days.

The permission a creator gives a brand to use content the creator made, defined by where it can appear, for how long and whether the brand can edit or advertise with it.

The maximum valuation at which a SAFE converts into shares. If the next round is priced above the cap, the SAFE investor converts at the cap price and receives more shares.

Earning shares or options over time. If a founder leaves early, the company can usually buy back the founder's unvested shares.

A US copyright concept under which the hiring party is treated as the author of certain works. Canadian copyright law has no equivalent for contractors, so "work for hire" language in a Canadian contract may not transfer ownership; a signed written assignment is what does.