Incorporation: Considerations and Process
| Author | J. Anthony Vanduzer |
| Pages | 125-167 |
CHAPTER 4
INCORPORATION:
CONSIDERATIONS
AND
PROCESS
A.
INTRODUCTION
The
process
of
incorporation
was
briefly
described
in
Chapter
3. In
this
chapter
we
will examine
the
process
in
detail.
We
will look
at
both
the
legal requirements
and
some
of the
practical aspects
of
incorporation,
as
well
as
some
of the
considerations related
to
which jurisdiction
an
incorporator
should choose.
B.
THE
PROCESS
OF
INCORPORATION
AND
ORGANIZATION
1)
Incorporation
Under
most Canadian corporate statutes,
a
corporation
may be
incor-
porated
by one or
more corporations
or
individuals,
or a
combination
of
both. Although there
are no
qualifications that must
be met by
cor-
porate incorporators, under
the
CBCA
individual incorporators cannot
be any of the
following:
•
less than eighteen years
of
age;
• of
unsound mind
as
found
by a
court
in
Canada
or
elsewhere;
or
125
126 THE LAW OF
PARTNERSHIPS
AND
CORPORATIONS
•
have
the
status
of
bankrupt
(CBCA,
s.
5).1
The
incorporators must
file
certain
prescribed
material with
the
Corporations Directorate
of
Industry Canada
if
incorporation
is
under
the
CBCA.
If
incorporation under
the
laws
of a
province
is
chosen, then
the
prescribed
documents must
be
filed
with
the
branch
of the
provin-
cial government having responsibility
for
incorporations.2
Under
the
CBCA
it is
necessary
to
file
the
following:
•
articles
of
incorporation
(s. 6,
Form
I);3
•
notice
of
registered
office
(s.
19(2),
Form
3);
•
notice
of
directors
(s.
106, Form
6);
• a
name-search report
on the
proposed name
of the
corporation;
and
• the fee of
$250.4
a)
Articles
As
noted
in
Chapter
3, the
articles
are by far the
most important
of the
documents
filed
on
incorporation because they
set out the
fundamen-
tal
characteristics
of the
corporation:
its
name,
the
province within
Canada where
its
registered
office
is to be
situated,
the
class, number,
and
characteristics
of
shares authorized
to be
issued,
the
number
of
directors,
any
restrictions
on
transferring shares,
and any
restrictions
on the
business
the
corporation
may
carry
on.
Each
of
these items
is
discussed below
in
turn.
Similar
provisions
are in
other corporate statutes modelled
on the
Canada
Busi-
ness
Corporations
Act,
R.S.C.
1985,
c.
C-44
[CBCA].
E.g.,
Ontario
Business
Cor-
porations
Act,
R.S.O.
1990,
c.
B-16
[OBCA],
s.
4(2);
and
Alberta
Business
Corporations
Act,
R.S.A.
2000,
c. B-9
[ABCA],
s. 5.
Under
the
British
Columbia
Companies
Act,
only individuals
may
incorporate
a
company
(Companies
Act,
R.S.B.C.
1996,
c. 62
[BCCA],
s.
5(1)).
See
section
C
("Jurisdiction
of
Incorporation")
in
this
chapter
for a
discussion
of
considerations relevant
to
choosing
a
jurisdiction
for
incorporation.
Under
the
BCCA,
ibid.,
it is
necessary
to
file
articles
and a
memorandum
of
asso-
ciation
(s. 8).
The fee is
reduced
to
$200
if
incorporation
is
done online.
The
CBCA
forms
are
available
from
and may be
filed
through
the
Electronic
Filing
Centre
on the
Cor-
porations
Directorate
website,
ing/engdoc/index.html>.
In
Ontario,
incorporation
forms
may be
obtained
from
the
government
of
Ontario website
and
then
filed
through
two
primary service
providers
under
contract
from
the
Ministry
of
Consumer
and
Business
Services.
In
British
Columbia,
the
necessary
forms
are
contained
in the
schedules
to the
BCCA,
above
note
1, and can be
downloaded
from
the
website
of the
Ministry
of
Finance
—
Corporate
and
Personal
Property
Registries
and
filed
electronically.
1
2
3
4
Incorporation: Consideration
and
Process
127
i)
Names
The
problems associated with corporate names
are
both legally com-
plex
and
practically important.
On a
practical level,
it is
difficult
to
find
a
name that
is not
already
in
use. Once
an
enterprise chooses
a
name
and
starts
to use it, the
name begins
to
have value associated with
it.
Apart
from
any
personal attachment
to a
corporate name,
its
financial
value based
on its use may be
substantial.
It may be
recognized
by
con-
sumers
or
business customers
as
indicative
of
prestige, product quali-
ty,
or
service. This sort
of
value
is
commonly
referred
to as
goodwill.
The use of the
name
by
someone else
may be
severely damaging
to the
goodwill associated with
the
name.
One
policy behind name regulation
is the
protection
of the
legitimately created goodwill
of a
particular
business against appropriation
by
others. There
is
also
a
general public
interest
in the
regulation
of
names.
The
courts have stated that "the
danger
to be
guarded against
is
that
the
person seeing
or
hearing
one
name will think
it to be the
same
as
another which
he has
seen
or
heard
before."5
In
other words, name regulation seeks
to
prevent confusion
in
the
marketplace.
Legally,
name regulation
is a
tangle
of
provincial
and
federal
juris-
dictions.
The
CBCA
and the
provincial corporate statutes have provi-
sions
regulating
the use of
names
by
corporations incorporated under
them.
In
addition,
the
federal
Trade-marks
Act6
grants
rights
in
names
based
on
their
use in
association with goods
and
services. Each
province regulates
the use of
names
in its
jurisdiction
by
corporations
(other than
the
names they
are
incorporated
with),
wherever they
are
incorporated,
and the
provincial common
law
protects certain interests
in
names through
the
tort
of
passing-off.
The
following subsections
outline
briefly
the
legal
framework
for
corporate names.
aa)
Corporate
Law
Rules
Regarding
Names
The
CBCA,
like other corporate statutes
in
Canada, regulates
the use of
names
of
corporations
to
ensure that they
are
neither confusingly sim-
ilar
to
other names used
by
businesses
nor
deceptively
misdescriptive.
The
starting point
is
section
12(1)(a),
which provides that
a
CBCA
cor-
poration
may not be
incorporated with
or
carry
on
business using
a
name that
is
"prescribed, prohibited
or
deceptively
misdescriptive."
If
a
name
is
contrary
to
this provision,
the
Director
who
administers
the
5
John
Palmer
Co. v.
Palmer-McLdlan
Shoepack
Co.
(1917),
45
N.B.R.
8, at 56
(C.A.).
6
R.S.C. 1985,
c.
T-13
[TA].
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