bannarTop

GLOBAL INFO

Canada

COUNTRY:

CANADA

The comments below address incorporation under federal Canadian law and the provinces of Ontario and Quebec, with general comments about the remaining provinces.

QUESTION:

ANSWER:

1.      What are the main company forms in your country?

Limited liability companies or corporations (referred to as corporations), where the shareholder’s exposure is limited to the amount or percentage of investment, may be incorporated in all the provinces of Canada as well as under federal law (under the Canada Business Corporations Act).  The federal corporation allows for easier registration to do business in all of the provinces of Canada.  This questionnaire provides specific information for incorporation under Ontario, Quebec and federal laws.  The requirements for incorporation under the laws of other provinces will vary from province to province but are generally similar to the information set out below.

A corporation may be either a prívate corporation (not open to the public for investment), or a public corporation which may trade its securities “over the counter” or through  a stock exchange which is an additional step that is only available if the corporation qualifies to be listed on the exchange.  Each province also permits establishment of no-share capital corporations for non-profit kinds of activities such as social clubs or charities.  Insurance companies are required to be established under the Insurance Companies Act (Canada).  Professional corporations are allowed for professionals such as lawyers, doctors, dentists, engineers and architects to take advantage of the lower available corporate tax rate, provided such corporation registers under the applicable regulating body or college.

Unlimited liability corporations may be established under the corporate laws of British Columbia, Alberta and Nova Scotia, but are not available at the federal level.  These kinds of corporations are generally used where tax advantages are available to the shareholders.

 

2.      Which is the most preferred company form by foreign investors?

A federal corporation offers easier entry into the various provinces and can be less expensive to incorporate, but has annual maintenance costs that provincial corporations may not be required to cover.

A foreign investor may use an unlimited liability corporation if they wish to have the profits of the Canadian-based corporation included in the parent company’s income.  If they carry on business in other provinces, they would need to register to do business in those other provinces.

To conduct business or to hold property only in a single province, it may be preferable to incorporate in that province.

 

3.      What are the basic capital requirements of this company? (minimum amounts, types of capital, deadline of capital contribution)

There are no minimum capital requirements.  Capital is represented by shares of the Corporation, which can be either (i) all of one class (which would carry the right to vote and to receive the remaining property of the corporation on liquidation) or (ii) multiple classes, each with different rights  - some voting, some non-voting, preferential rights to dividends, etc., including serial issues.

Except for Quebec corporations, every subscription for shares must be fully paid before shares are considered to be properly issued.  Payment may be in cash or property, as determined by the directors.  Capital may be contributed to a specific class of shares without requiring the issue of new shares.

Under Quebec law, a subscription for shares does not need to be fully paid for shares to be properly issued.

 

4.      What are the basic rules of shareholders liability for company debts in this company?

A shareholder is not liable for any act, default, obligation or liability of the corporation except in circumstances where the shareholder has assumed the power of a director pursuant to what is called a Unanimous Shareholder Agreement.  After liquidation of a corporation, each shareholder’s liability is limited to the amount received by such shareholder as a result of the liquidation.

Under Quebec law, each shareholder is indebted to the corporation for any unpaid amount owing in respect of issued shares.

 

5.      What are the basic management requirements for this company? (only natural persons, or nationals can be managers etc.)

The administration of the corporation may be exercised either by a sole Director or a Board of Directors, each of whom are natural persons of the age of majority (18 years), not bankrupt and not incapable of managing property.  Under Ontario and Federal law, at least 25% of the members of the Board must be Canadian residents (a sole Director, therefore, must be a Canadian resident).

The Directors of the corporation, by statutory obligation, must exercise their powers and discharge their duties to the corporation honestly, in good faith with a view to the best interests of the corporation, and as a responsibly prudent person would do in comparable circumstances.

Under Quebec law, there is no restriction as to residency which applies to the qualification of a director, with the exception that a majority of directors must be resident in Québec in the case of an insurance company incorporated under the Act Respecting Insurance and registered in Quebec.

 

6.      How long does the registration procedure of this company take?

Incorporation of an Ontario or a Quebec corporation can be done online through an authorized service company and is immediate on receipt and acceptance of the electronic Articles of Incorporation by, and payment of the filing fee and service fee to, the service company.

Incorporation of a federal corporation can also be done online, either through an authorized service company or on the website of Corporations Canada.  The Articles are usually accepted within 24 hours of filing and paying the fee, providing they pass examination, and the certificate will bear the date of receipt of the application.

Paper filing of Articles is also available but takes time to deliver the documents, process and receive (approx. 15 days).  More immediate service (over-the-counter) requires personal attendance at the government office to file the documents and pay the filing fee.

 

7.      What are the main costs of formation of this company in local currency?

(All amounts noted herein are in Canadian dollars.)

 

Ontario charges $360 to paper-file Articles.  Through a service provider, it costs $300 plus the service provider’s fee (approx. $31 plus HST) for online service.

Canada charges $200 to incorporate, whether by paper or online. If the said corporation is registered in Quebec, there is an additional disbursement of $325.

Additional charges:

·       for a name search report  for a corporate name other than a “number name”, approx. $80;

·       for filing an Ontario Initial Return online, approx. $20 (paper filing also available but takes time and there is possibility of error in posting to the corporation’s file);

·       application fees, which vary by province, are charged for  authorization to do business in that other province;;

·       municipal or other local government business licences may be required, each of which may require a fee;

·       trade name registration, to operate under a name that is different than the proper corporate name, approx. $100.

 

Quebec charges $326 to paper-file Articles.  Through a service provider, it costs $326 plus the service provider’s fee (approx. $150 plus applicable taxes) for online service.

Additional charges:

·       for a name search report for a corporate name other than a “number name”, approx. $95 for Quebec and $140 for Canada;

·       there is no cost for a trade name registration, to operate under a name that is different than the proper corporate name;

·       the filing of a Quebec Initial Return is free;

·       the fee for filing the Annual registration of a Quebec corporation is $86.

 

8.      What is the average attorney’s fee of the formation of this company in local currency?

(All amounts noted herein are in Canadian dollars.)

 

The average fee charged by Ontario and Québec lawyers for the formation of a new corporation is in the range of $1,000-$1,500, depending on the complexity of the corporation’s share capital plus the costs to incorporate, other disbursements such as minute book, and taxes.

 

9.      What are the basic publicity requirements of this company (filing of company changes, financial reports, etc.)

A corporation must file its corporate income tax return annually, within six months after the fiscal year end, including any annual returns required as part of the tax return (Ontario’s annual return is a schedule to the T2 corporate tax return and for Quebec to the CO-17 corporate tax return).

Any change to directors or the head office location requires the filing of a Notice of Change.  Ontario also requires a Notice of Change for changes in officers.

Federal corporations must file annual returns each year (separate from tax return) which requires payment of a filing fee.

Any changes to the share structure of the corporation, other than the issue or transfer or redemption of shares, must be made by Articles of Amendment with filing fee of $150 (Ontario), $169 (Québec) or $200 (Federal).

Public corporations must make varied filings to the provincial securities commission through SEDAR.

 

10.   What are the main auditor requirements?

If a corporation is not public, it can dispense with audit requirements provided all of the shareholders of the corporation consent in writing.  Separate consents are required each year.  An accountant will suffice for a review of the financial records, if required.  Most auditors/accountants assist with the completion and filing of the corporate income tax return.  Where financial statements are not required to be audited, the accountants report may be either (i) a Review Engagement, which provides a moderate level of assurance; or (ii) a Notice to Reader, which provides no assurance.

If an auditor is appointed, it will audit the financial records and provide its report for presentation to the shareholders at their annual meeting.  An auditor is to be notified of any meeting of shareholders and is entitled to attend and be heard thereat on matters relating to his duties.