There are many good reasons to incorporate under British
Columbia's Business Corporations Act (BCA),
which came into force in March 2004. Although the BC BCA
has some similarities to the Canada Business Corporations
Act (CBCA), it also includes a number of unique
features and contains flexibility not found in the CBCA or
other Canadian provincial corporate statutes.
The following are a few of the reasons to consider incorporating
your company in British Columbia:
1. Director Residency and Privacy
Under the CBCA, at least 25 per cent of a
corporation's directors must be residents of Canada. This often
puts foreign businesses with Canadian subsidiaries in the
uncomfortable position of having to choose between elevating an
otherwise unqualified Canadian-resident employee to the position of
director or asking their lawyer to act, which many lawyers are
hesitant to do. The residential address of each director of a
CBCA corporation must be set forth in the forms that are
filed and publicly available under the CBCA.
The BC BCA does not contain any residency requirements
for directors. In addition, under the BC BCA, directors
are afforded privacy of their residential address as they may use
their office address rather than their residential address in
publicly searchable databases.
2. Flexibility in Tax Planning
The BC BCA provides flexibility in corporate and tax
permitting par value shares;
permitting companies to hold their own shares and permitting
subsidiaries to hold shares of their parent company;
permitting fractional shares;
providing for optional court approval for amalgamations (which
may be advantageous in qualifying for United States securities
registration exceptions); and
providing for inter-jurisdictional amalgamations.
3. Flexibility in Alterations
Under the CBCA, the majority required to pass a special
resolution is fixed at two-thirds. The BC BCA allows
companies to choose any level of majority between two-thirds and
three-quarters. Also, under the BC BCA, a company's
articles may give the directors the power to effect capital
alterations and amendments to the articles without shareholder
approval. Finally, the BC BCA permits share rights that
are accessible only to particular shareholders of a class of
shares. For example, a share may have ten votes when held by one
shareholder — but only one vote when held by another
shareholder. These are powerful tools to consider when structuring
the share capital of a company that will have more than one
4. Unlimited Liability Corporations
British Columbia is one of only three Canadian jurisdictions
that provide for unlimited liability corporations (ULCs), the other
two being Alberta and Nova Scotia. ULCs have been used by United
States-based companies for tax advantages. Recent amendments to the
Canada-United States tax treaty have largely eliminated these
advantages, as discussed in an
article in our August 2009 issue and in
another article of the Business Law Quarterly.
However, to the extent that ULCs remain a useful vehicle, there are
several reasons that the BC BCA is preferable to the other
statutes, including low annual fees for ULCs and flexibility
regarding directors' residency and corporate
5. Waiver of AGMs and Financial Statements
The BC BCA allows companies to waive, by unanimous
resolution of the shareholders, the requirement to hold an annual
general meeting or any previous annual general meeting. Moreover,
under the BC BCA, companies are not required to file
financial statements with the registrar (though they are required
to keep them in the records office) and private companies may
waive, by unanimous resolution, the requirement to produce and
publish financial statements.
Broad Powers of Rectification
Both the CBCA and the BC BCA provide for the
rectification of errors in a company's records by court order
or application to the applicable corporate registration. However,
the BC BCA also provides for a broad remedial power under
which a court may correct "corporate mistakes"
— a broader power to correct errors in the conduct of a
company's business or affairs. The BC BCA also
provides for the correction, by unanimous resolution, of errors in
the creation, allotment or issuance of shares. This simple method
of confirming the issued and outstanding share capital can save
thousands of dollars in court costs in the event a serious error is
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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