Incorporation: Considerations and Process

• Author: J. Anthony VanDuzer
• Profession: Faculty of Law University of Ottawa
• Pages: 146-194

146

Chapter 4

INCORPOR ATION:

CONSIDER ATIONS

AND PROCESS

a. INtrODUCtION

The process of incorporation was brief‌ly described in Chapter 3. In this

chapter we will exami ne the process in detail. We will look at both the

legal requirements and some of the practica l aspect s of incorporat ion,

as well as some of the considerations related to which jurisdiction an

incorporator should choose.

B. the prOCeSS OF INCOrpOratION aND

Orga NIz atION

1) Incorporation

Under most Can adian corporate statutes, a cor poration may be incor-

porated by one or more corporations or individuals, or a combination of

both. Although there are no qualif‌ic ations that must be met by corpor-

ate incorporators, under the Canada Business Corporations Act (CBCA)

individual incorporators cannot be any of the following:

  

 

  CBCA, s. 5).1

1 Similar prov isions are found in other corpor ate statutes modelled on the Canada

Incorporation: C onsiderations and Proces s 147

The incorporators must f‌ile certain prescr ibed material with Cor-

porations Canada, a unit of Industry Canada, i f incorporation is under

the CBC A. If incor porating under the l aws of a province or territory,

one must f‌ile the prescribed documents with the branch of the prov-

incial or ter ritorial government that has responsibility for incorpora-

tions.2 Under the CBCA it is necessary to f‌ile the following:

 3

  

and 106, Form 2);

 

with certai n supporting informat ion; and

 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 fundamental

characterist ics of the corporation: its name; the province or territory

within Canada where its registered off‌ice is to be situated; the class,

number, and characteristics of shares it is authorized to issue; the num-

ber of directors; any restrictions on transferring shares; and any restric-

tions on the business the corporation may carry on. Each of these items

is discussed below in turn.

Business Corporatio ns Act, R.S.C. 1985, c. C-44 [CBCA]. E.g., Ontario Business

Corporations Act, R .S.O. 1990, c. B.16 [OBCA], s. 4(2); Alberta Busines s Cor-

porations Act, R.S .A. 2000, c. B-9 [ABCA], s. 5. The British Columbia Bus iness

Corporations Act, S.B .C. 2002, c. 57 [BCBCA] has no such req uirement.

2 See section C (“Jurisd iction of Incorporation”) in this chapt er for a discussion of

consideration s relevant to choosing a juris diction for incorporation.

3 Under the BCBCA, it is nece ssary to f‌ile an incorp oration application, including

an agreement sig ned by the incorporators, and a rticles (ss. 10–12).

4 The fee is reduced to $200 if incorporation is done online. The CBCA forms and

other inform ation regarding incorpor ation are available online: w ww.ic.gc.ca/eic/

site/cd-dgc.nsf /eng/home. Forms may be f‌i led through the Online Fi ling Centre

on the Corporat ions Canada website, http://st rategis.ic.gc.ca/cgi-bin /sc_mrksv/

corpdir/cor pFiling/registe r.cgi?lang=e. On i ncorporation, the corporat ion’s name

appears on the web site. In Ontario, incorpor ation forms may be obtaine d from

the government of Ont ario website and then f‌iled t hrough several prima ry service

providers who oper ate under contract from the Mini stry of Government Ser vi-

ces. See onli ne: www.ontario.ca/en/se rvices_for_busi ness/STEL02_ 039947. The

service prov iders charge additiona l fees. In British Columbia, t he necessary forms

are contained i n the schedules to the BCBCA and c an be downloaded from the

website of the Min istry of Finance’s Corpor ate Online: www.corporate online.gov.

bc.ca/corporateonline/colin/accesstransaction/menu.do?action=overview&f‌iling

TypeCode=ICORP&from=mai n and f‌iled electronically.

THE LAW OF PARTNERSHIPS AND COR PORATIONS148

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 alre ady in use. Also, once an enterprise chooses a

name and starts to use it, the name begins to have value associated with

it. Apa rt from any personal attachment one may have to a corporate

name, it m ay acquire substantia l f‌inanci al value through use. A name

may be recognized by consumers or business customers as ind icative

of prestige, product quality, or service. This sort of value is commonly

referred to as goodwill. The use of the name by someone else may be se-

verely damaging to the goodwill assoc iated 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 reg ulation of name s. 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 a s another

which he h as seen or heard before.”5 In other words, name regulation

seeks to prevent confusion in the marketplace.

Legally, name regulation is a t angle of provincial and federal juris-

dictions. The CBCA and the provincial corporate statutes have provi-

sions regulati ng the use of names by corporations incorporated under

them. In addition, the federal Trade-marks Act6 grants r ights in names

based on their use in a ssociation w ith goods and ser vices. Each prov-

ince also regulates the use of names by corporations (other tha n t he

names they are incorporated wit h) w ithin its territorial jurisdiction,

wherever they are incorporated, and provincial common law protects

certain interests in names through the tort of passing-off. The follow-

ing subsect ions outline brief‌ly the legal framework for t he use of cor-

porate names.

a. Corporate L aw Rules Regarding Names

The CBCA, like other corporate statutes in Ca nada, regulates the use

of names of corporations incorporated under the Act to ensure that

they are neither confusingly similar to other names used by businesses

nor deceptively m isdescript ive. The starting point for understanding

the legislat ive scheme is section 12(1)(a), which provides that a CBCA

corporation may not be incorporated with or carry on busines s using a

name th at is “prescribed, prohibited or deceptively misdescr iptive.” If

a name is contrary to this provision, the di rector who admini sters the

CBCA may refuse to incorporate a corporation that proposes to use it

5 John Palmer Co. v. Palmer-McLellan Shoepack Co. (1917), 45 N.B.R. 8 at 56 (C.A.).

6 R.S.C. 1985, c. T-13 [TA].