Transferring a corporation from one province to another within Canada or from a provincial to the federal jurisdiction is legally referred to as continuance (occasionally referred to as continuation). Continuance enables a company to change its jurisdiction of incorporation without beginning anew as an entirely new company. Rather than being dissolved and restated, the corporation "moves" pursuant to a new law and retains its corporate existence, along with all assets, liabilities, rights, and obligations. The selection of this tactic is frequently due to tax benefits, convenience of business, or exposure to new markets. But the procedure is governed by codes and demands strict compliance with legal necessities. This publication offers an in-depth look at continuance in Canada defining it, how it occurs, the main provisions of law, step-by-step processes, and representative case law in plain language.
What Is Corporate Continuance?
Continuance of a company incorporated under one jurisdiction's laws stops that company from being regulated by those laws and starts regulating that company under another jurisdiction's corporate laws. In practice, the firm "exports" itself out of its initial jurisdiction and "imports" into the new one, without causing a break in its life. The firm still has the same incorporation date and name; all of its contracts, assets, debts, and judicial proceedings remain as if nothing else changed but the law governing them.
Illustration (Example)
Consider ABC Inc., a firm initially incorporated in British Columbia. ABC wishes to conduct further operations in Ontario and prefers to be regulated by the law of Ontario. Instead of dissolving in B.C. and new incorporating in Ontario (which would be expensive and disruptive), ABC is able to carry on into Ontario. Through continuance, ABC Inc. does not change as a legal entity, it retains its date of incorporation, business number, contracts, and employees but upon continuance it is governed by the Ontario Business Corporations Act (OBCA) rather than B.C. law. In effect, ABC "re-registers" in accordance with Ontario law. Externally, customers and suppliers see no difference (other than possibly an address change), since all business obligations continue uninterrupted under the continued corporation.
Legal Framework: Statutory Provisions for Continuance
Continuance is regulated by corporate laws at both federal and provincial levels. Principal statutes are:
1. Canada Business Corporations Act (CBCA): Sections 187-191 address continuance in or out of federal jurisdiction.
2. Ontario Business Corporations Act (OBCA): Sections 180-185 address continuance into or out of Ontario. As an example, OBCA section 180 permits a corporation out of another jurisdiction to continue into Ontario (subject to Ontario's conditions), and section 181 permits an Ontario corporation to send itself out of Ontario to another jurisdiction (with Ontario's Director consent). Similar to the CBCA, the OBCA has shareholder approval by special resolution and dissent rights for material changes.
3. Provincial Corporations Acts: All provinces have similar provisions. For instance, the British Columbia Business Corporations Act (BCBCA) sections 302-311 state how a firm can continue to B.C. or out to another jurisdiction.
Why Continue a Corporation? (Advantages and Factors to Consider)
Continuance is generally a deliberate action. Following are typical reasons a corporation may decide to alter its jurisdiction:
1. Tax or Regulatory Benefits: Certain provinces offer more attractive corporate tax rates or rules for specific industries. The firm may relocate to take advantage of them.
2. Convenience of Operation: When a business of a company has moved mainly to a different province, it can streamline compliance to be incorporated there. For instance, a company that began in one province but is now conducting most business in Ontario may favor operating directly under Ontario's laws and filing systems.
3. Availability of Capital Markets: Federally incorporated companies tend to be viewed as more "national" and might find it more convenient to operate throughout Canada. A provincially incorporated company looking to expand nationally (or list on a stock exchange) would continue federally to get a Canada-wide charter and protection of name.
4. Name Protection: Federal incorporation offers country-wide protection of your business name once federally approved; the name is safe throughout the country. This is different from a provincial corporation, where its name is only safe within that province, and expanding the business elsewhere could lead to conflicts.
5. Steering Clear of Extra-Provincial Registrations: If you are formed in one province but conduct operations in others, you typically need to extra-provincially register in each of them. Some corporations opt to carry on into a jurisdiction (most likely federal) that makes it easier to do business Canada-wide.
It's worth considering whether continuance is the best route or whether merely registering extra-provincially would suffice. If, for instance, you simply require a branch office within another province, you can use your existing incorporation and register as an extra-provincial corporation within it, instead of relocating your home jurisdiction altogether. Continuance is a more complex process, usually undertaken when the company genuinely wishes to relocate its corporate home on a permanent basis.
Step-by-Step Process: Relocating a Corporation to a New Jurisdiction
It is a multi-step process in both the exporting jurisdiction (the jurisdiction the business is departing) and the importing jurisdiction (the jurisdiction the business is entering). What follows is a step-by-step guide to a typical continuance process:
Step 1: Internal Corporate Approval
1. Board of Directors Resolution: The procedure would typically begin with the board. The directors must pass a resolution making the proposal for continuance and approving the draft plan of continuance (including jurisdiction to relocate to and proposed articles of continuance). This resolution would also commonly enable calling for a meeting of the shareholders to vote on the proposal.
2. Shareholders' Special Resolution: Continuance is a fundamental change; hence it must be approved by the shareholders. Under laws such as CBCA and OBCA, continuance can be authorized by a special resolution (usually at least two-thirds of shareholders voting) of the shareholders. It can be by a vote at a shareholders' meeting or by unanimous written resolution. Significantly, all classes of shareholders normally vote on it, even though some classes would not usually have a right to vote, since continuance impacts the conditions of the corporation's charter.
3. Notice of Dissent Rights: In calling the meeting, the corporation needs to notify shareholders of their dissent rights. Shareholders opposing relocating the company can opt to dissent (i.e. officially object) and insist on being purchased out for the fair value of their shares. Federal and provincial legislation grant dissenting shareholders an appraisal remedy when a corporation continues on to another province. Basically, a dissenting shareholder can force the company to buy out their shares at fair market value, instead of having to fall under a new jurisdiction they didn't consent to. These rights should be described in the meeting notice, and any shareholder who plans to dissent must adhere to the procedure.
4. Class or Separate Votes (if necessary): In certain situations, if the continuance would entail changes that impact some classes of shares (e.g., if the law in the new jurisdiction demands a different structure of shares or limitations), a separate class vote may be necessary. For example, Ontario's OBCA mandates a separate class vote for some rights changes even if classes can't generally vote on it, to make sure no class is inappropriately prejudiced. This is a technical nuance and usually your lawyers will determine whether any class votes are required.
Step 2: Confirm Eligibility and Prepare for the New Jurisdiction
1. Review the Destination Law: Ensure that the jurisdiction you wish to enter does allow your corporation to continue into it. All Canadian jurisdictions reciprocally permit continuances, but some may not.
2. Legal Opinion (if applicable): If you intend to proceed into a foreign jurisdiction (e.g., relocating a Canadian company to Delaware or the other way around), or if you are from a jurisdiction that doesn't sanction outright export, the registry of the new jurisdiction might request a legal opinion. For instance, the continuance of an Ontario corporation into a U.S. state might need an opinion letter by a lawyer admitted to practice in that state to establish that the continuance is recognized by the laws of the state. Likewise, Canada's federal regulator may request an opinion letter that the foreign laws are sufficient for continuity purposes (property, liabilities, etc.) prior to the approval of the exportation.
3. Name Availability: Ensure your corporate name will be valid in the new jurisdiction. If you're relocating provinces, check for a name search (NUANS or the local equivalent) to confirm that there won't be a conflict with a company name already in existence at the destination. If there is a conflict, you might have to take a numbered name or an alias in the new jurisdiction. (At the federal level, a NUANS report must be obtained in order to obtain a name clearance, other than when using a numbered company.)
4. Pre-Filings: A few jurisdictions (such as Alberta or Ontario) may need a preliminary application or form. Ontario, for example, needs some information to file Articles of Continuance (such as share structure details, directors, Ontario NUANS name report, etc.). It's smart to pick up the forms or templates for the new jurisdiction's continuance filings ahead of time and start filling them out. Moreover, find out the fees charged.
5. Good Standing in Current Jurisdiction: Ensure your corporation is in good standing where it's currently incorporated. Typically, you'll need to have all your annual filings up to date and any owed fees or taxes paid. Many jurisdictions require a proof of good standing as part of the continuance (for example, a Certificate of Status or a tax clearance letter). If your business is not in good standing (e.g., outstanding annual returns, etc.), you need to correct that first before proceeding out.
Step 3: Application to Current (Exporting) Jurisdiction
1. Authorization to Proceed Out: Your current jurisdiction typically needs to authorize you to depart before you can leave. This typically means submitting an application for authorization to proceed out (occasionally referred to as a Letter of Satisfaction or Certificate of Discontinuance request). For instance, a company from British Columbia has to apply to the BC Registrar pursuant to BCBCA for permission to continue outside B.C. If the corporation is an Ontario public (offering) company, you need to file with the Ontario Securities Commission's approval as referred to above.
2. Supporting Documents: You will usually file with the application:
- Shareholders' Resolution: Certified copy of the shareholders' special resolution consenting to the continuance (from Step 1).
- Good Standing Certificate: e.g., a Certificate of Status and/or tax clearance letter showing no unpaid taxes.
- Other affidavits or forms: A director or officer affidavit that the company is solvent and not in contemplation of defrauding creditors, etc. may be required by some jurisdictions.
- Fee for authorization: Pay the continuance-out application fee as demanded.
3. Continuance-Out Certificate Issuance: If everything goes smoothly, the present jurisdiction will issue a certificate for approval of export. Various names are used: it may be termed as a "Certificate of Continuance" (for the purpose of going out federally) or a "Certificate of Authorization to Continue Out" or perhaps a letter of satisfaction. For example, BC grants a Certificate of Consent under its procedure, while Ontario grants a letter or certificate to authorize. This letter is important; it essentially reads "Province X has no objection to this company withdrawing from our registry."
Step 4: Application in the New (Importing) Jurisdiction
Now you will proceed into the destination jurisdiction:
1. Articles of Continuance (or Import): Create the Articles of Continuance (alternatively referred to as Articles of Domestication or Continuation) for the new jurisdiction. This is similar to a new Articles of Incorporation, but it's for a company that already exists and is moving in. It will set out the corporation's name, share structure, any adjustments needed to comply with the new law, the first directors, registered office address in the new jurisdiction, etc. Essentially, you're providing all details that a new incorporation would require, but noting it's a continuance of an existing corporation. If any provisions of your corporation's constitution fall short of the new legislation, they need to be revised during the continuance.
2. Supporting Documentation: In addition to the Articles of Continuance, you will typically submit:
- Your old jurisdiction's authorization document (obtained in Step 3) i.e., include the Certificate of Discontinuance or letter of satisfaction from the previous province.
- A NUANS Name Report (if a name change or name approval is required in the new jurisdiction and not pre-cleared).
- Director/Officer Consents: If new directors are being appointed or as per law, provide their consent forms.
- Registered Office Notice: Certain jurisdictions require a special form or notice in the articles of the registered office location and agent.
- Filing Fee: Remit the new jurisdiction's continuance fee (usually comparable to an incorporation fee).
3. Special Needs for Foreign Continuance: If the new location is outside Canada, more steps may apply. For instance, to carry on into another nation, you may need to have documents translated or send through a local attorney there.
4. Approval and Certificate of Continuance: The corporate registry of the new jurisdiction will consider the filing. Assuming all is well, they will issue a Certificate of Continuance according to their law. Issuance of this certificate is the formal point the corporation is continued into the new jurisdiction you are now subject to the new law.
5. New Corporation Number/Identity: The ongoing corporation tends to receive a new corporation number or ID in the new jurisdiction. A federal corporation would receive a federal corporation number; an Ontario corporation would receive an Ontario corporation number, etc. The name of the company would now be on the registry of the new jurisdiction as a continuing valid corporation from the date of continuance.
Step 5: Post-Continuance Steps and Clean-Up
1. Notice to Old Jurisdiction: On completion of continuance, you are required to notify the old jurisdiction that the continuance has been done. Typically, you mail them a copy of the Certificate of Continuance issued by the new jurisdiction. The old jurisdiction will then issue a Certificate of Discontinuance (if they have not done so as part of the process) and strike off the company from their register. Under statutes such as CBCA and BCBCA, the corporation is deemed to no longer be a corporation under the previous Act as of the date of continuance.
2. Update Canada Revenue Agency (CRA) and Tax Accounts: A change in jurisdiction may impact your tax accounts. In case you changed provinces, your corporation's corporate income tax might now be distributed differently provincially
3. Renew Licenses and Permits: Inform any licensing authorities of the change.
4. Contracts and Bank Accounts: Typically, the contracts remain with the same legal party (no re-execution is required since the corporation remains the same entity). Nonetheless, it is prudent to notify significant counterparties (such as banks, major customers, suppliers) that the company has continued to [New Jurisdiction] so that they can revise their records (particularly bank records for company's registered office or incorporation information).
5. Corporate Records and By-laws: Renew the Minute Book. Place the Certificate of Continuance and new Articles in your corporation's minute book. The bylaws of the corporation might have to be updated to comply with the new Act.
6. Business Name Registrations: If you were making use of any trade names (DBAs) registered in the previous province, you might be required to re-register them in the new province since the old province's registration could have been contingent on the fact that you were a corporation within that province or have now been terminated.
Federal vs. Provincial Incorporation Considerations
When relocating a corporation within Canada, one choice is whether to incorporate federally or in a given province. There are advantages and disadvantages to consider with each:
Federal Incorporation (CBCA):
Advantages:
1. Nationwide Business Scope: A federally incorporated business has the ability to conduct business anywhere in Canada or any territory. There is freedom to locate the head office or where the annual meetings are held without the necessity of actually changing the incorporation.
2. Name Protection Across Canada: Federal incorporation provides wide name protection after your name is registered, no other corporation across Canada can register the same or confusingly similar name under a federal or provincial Act.
3. Expansion Ease: If you intend to be in more than one province, federal status can make early expansion easier.
4. Perceived Prestige: A "Canada Inc." at times has a prestige or conveys a national presence, which is handy if working with clients or investors across provinces or abroad.
Disadvantages
1. Additional-Provincial Filings Necessary: Although federal businesses are allowed to do business anywhere, they also need to register and file records in any province where they have an office or substantial operations.
2. Administrative Complexity: There may be a little more paperwork in a few instances; for instance, you need to have a federal corporate register and then have to follow local regulations (such as Quebec language regulations, or supply local agents in certain provinces).
3. Not Suitable for Some Industries: Certain businesses have to incorporate provincially because of provincial regulatory requirements. For instance, an attorney in Ontario is not allowed to practice via a federally incorporated professional corporation; they require an Ontario professional corporation. Therefore, federal jurisdiction may not be available for regulated professions that only work in one province.
Provincial Incorporation (such as OBCA in Ontario):
Advantages:
1. Local Focus and Simplicity: If your operations are local to a single province, incorporating there can be less complicated. You only deal with the local registry and local legislation. Provincial incorporation procedures can sometimes be quicker for approvals (Ontario name approvals can occur same-day in an easy filing).
2. Reduced Ongoing Burden (for single-province companies): You only make filings in one jurisdiction. If you never branch out, you never make the extra-provincial filings at all. All corporation upkeep is with a single government.
Disadvantages:
1. Limited Name Protection: Only in that province is your name protected. If "ABC Inc." is incorporated in Ontario and someone incorporates "ABC Inc." in B.C., there isn't a built-in conflict because two different jurisdictions endorsed it. This makes expansion difficult.
2. Expansion Takes Additional Steps: The instant you wish to conduct business in another province; you need to register there as an extra-provincial corporation. That's an added procedure and expense per province. If you find yourself operating in numerous provinces, some businesses later choose to carry on federally to make having one overlying incorporation easier.
3. Fees and Expenses: Fees for incorporation and annual maintenance can be more expensive, depending on the province.
4. Perception and Scope: A provincially incorporated company will at times be perceived as more "local," though in reality it makes little difference.
Also Read: Federal vs. Provincial Incorporation in Ontario: A Comprehensive Guide
Significant Case Law and Jurisprudence on Transferring Corporations
Morguard Investments Ltd v. De Savoye [1990] 3 SCR 1077.
A Supreme Court of Canada. The Supreme Court highlighted that there is one Canada and there exists a "real and substantial connection" test for the acknowledgment of other provinces' court decisions. Justice referred to "the flow of wealth, skills and people across state provincial lines" in the contemporary economy and asserted that comity and respect between provinces' judiciaries are necessary. Relevance: When a corporation relocates to a new province, Morguard ensures that any legal judgments or claims don't disappear at the border, a court judgment in the previous province can be enforced in the new one. It supports the notion that corporations (and their liabilities) could move across Canada's common market freely without legal vacuum.
Hunt v. T&N plc [1993] 4 SCR 289
Another Supreme Court case extending Morguard. Here, the Court overturned a Quebec statute attempting to bar documents from being forwarded to a BC court, in the context of an asbestos action. The SCC reasserted that the Morguard principles are essential to Canada's constitutional framework and that the legislation of one province may not frustrate the course of proceedings in another. Relevance: This case reaffirms that relocation of a corporation to a new jurisdiction will not enable it to evade detection or legal responsibility from the previous jurisdiction. All the provinces' courts are capable of addressing issues regarding other provinces' laws when the need arises, and the federation anticipates cooperation and not interference.
Illustration of Continuance in Practice
To make continuance operational in everyday instances, let us consider a couple of hypothetical illustrations:
Example 1: From British Columbia to Ontario
XYZ Inc. is a clean energy company originally from British Columbia. And over time, XYZ's operations have changed- it now operates large projects in Ontario with an office in Toronto and barely any activity remaining in B.C. The company determines it makes business sense to press on into Ontario so it can be closer to its main market and regulators.
Process: The board of XYZ prepares a plan of continuance and holds a special shareholder meeting. Shareholders approve Ninety percent of the shareholders (with a few dissidents who are purchased for fair value). XYZ makes an application to the B.C. Registrar to be authorized to vacate. B.C. grants a consent (following XYZ demonstrating it's current with filings and taxes). XYZ then files Articles of Continuance with Ontario's Ministry of Public and Business Service Delivery, along with the B.C. authorization letter and a NUANS name report. Ontario gives approval and issues a Certificate of Continuance, marking XYZ Inc. as an Ontario corporation regulated by the OBCA from such date.
Outcome: XYZ continues uninterrupted in Ontario. All of its agreements with clients and suppliers continue. Its Ontario power purchase agreements are still in effect (the only amendment is that they may change the definition of the company as an Ontario corp rather than a B.C. corp at next amendment). XYZ returns the Ontario certificate to B.C.'s registry, which records officially that XYZ is removed from B.C.'s corporate registry.
Challenges and Special Considerations
Although continuance is a handy tool, there are a number of practical considerations and possible challenges to consider:
1. Tax Implications: Altering the jurisdiction of incorporation may have an impact on tax situations. Provincial Taxes: Corporations are subject to provincial income tax depending on where they have a permanent establishment. If you transfer your registered office and central mind and management from one province to another, your provincial tax allocation can change. Additionally, make sure any provincial tax credits or incentives you benefited from in the previous province are handled or taken care of. GST/HST: If relocating between an HST province and a non-HST province, your tax reporting could shift.
2. Licenses and Permits: Most licenses for business are provincial. For instance, a contractor's license, a food establishment permit, or other regulatory licenses don't carry forward when you carry on your corporation. You might have to obtain new licenses in the new jurisdiction and potentially forfeit the existing ones.
3. Employees and Employment Law: Employment regulations (such as minimum wage, overtime, notice of termination) are primarily provincial. If you move the head office of a corporation, you will need to follow the employment standards of the new home province for workers there. Current employment agreements are to be checked to ensure they remain valid.
4. Timing and Continuity of Operations: Whenever possible, you choose a continuance timing that best avoids disruption. For instance, stay away from the very end of a fiscal year or period of major transaction closings to complete the continuance to maintain accounting and legal filings as uncomplicated as possible.
The Role of a Business Lawyer in Continuance
1. Legal Feasibility Review: Evaluates whether continuance is permitted and advisable and determines required approvals or consents.
2. Prepare Key Documents: Drafts directors' and shareholders' resolutions, Articles of Continuance, and other compliance materials.
3. Coordinate Filings: Ensures proper legal documentation is filed in the proper sequence to prevent rejection.
4. Deal with Shareholder Communication: Prepares notices and meeting materials, handles dissenting shareholders according to the law.
5. Address Legal Complexities: Resolves unique issues like existing legal orders or opposition from stakeholders.
6. Ensure Post-Continuance Compliance: Updates bylaws and internal documents to match the new jurisdiction's legal requirements.
Why Consider Moving One Corporation to Another?
Shifting your corporation's jurisdiction in Canada through continuance is a potent tool to transform your business to respond to new demands or opportunities. It enables a corporation to re-domicile under a new federal or provincial act without sacrificing its identity or interrupting its business. Everything that is good about your current corporation (its contracts, licenses, goodwill) is preserved, yet you acquire whatever benefits the new jurisdiction has to offer. But a continuance is a legal process that has to be gone through with caution. It's two corporate laws (old and new) and following both of them.
Canada's jurisprudence, augmented by court rulings favoring interprovincial collaboration, encourages businesses to relocate freely to wherever best suits their business. As long as you honor the regulations and stakeholders' interests, continuance can be a fairly easy process. Several businesses have been able to continue jurisdictions to realize tax benefits, simplify their compliance, or set themselves for expansion.
Essentially, corporate continuance is about versatility; it allows your company the ability to grow outside the boundaries of the province (or nation) in which it started. With a comprehensive legal manual such as this and proper professional assistance, you can complete a continuance with confidence, having your corporation established in the jurisdiction most conducive to its future aspirations, while preserving continuity of its previous successes.
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.
