Incorporation: Considerations and Process

• Author: J. Anthony VanDuzer
• Pages: 159-210

159

CHAPTER 4

INCORPORATION:

CONSIDERATIONS

AND PROCESS

A. INTRODUCTION

The process of incorporation was brief‌ly desc ribed 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 corpor-

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

individual incorporators cannot be any of the following:

• less than eighteen years of age;

• incapable; or

THE LAW OF PARTNERSHIPS AND COR PORATIONS160

• have the status of bankrupt (CBCA, s 5).1

If incorporation is under the CBCA, the incorporators must f‌ile cer-

tain prescribed material with Corporations Canada, a unit of Innova-

tion, Science and Economic Development Canada (formerly Industry

Canada). If incorporating under the laws of a province or territory, one

must f‌ile the prescribed documents with the branch of the provincial

or territorial government that has responsibility for incorporations.2

Under the CBCA it is necessary to f‌ile the following:

• Articles of Incorporation (s 6, Form 1);3

• Initial Registered Off‌ice Address and First Board of Directors (ss

19(2) and 106, Form 2);

• a name-search report on the proposed name of the corporation,

along with certain supporting information; and

• the fee of $250.4

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

Canada Busine ss Corporations Act, RSC 1985, c C-44 [CBCA]. E.g., Ontario

Business Corporations A ct, RSO 1990, c B.16 [OBCA], s 4(2); Alberta Business

Corporations Act, RS A 2000, c B-9 [ABCA], ss 5 and 7. The British Columbia

Business Corporations A ct, SBC 2002, c 57 [BCBCA] has no such requirement.

An individu al is incapable under the CBCA if t hey are “found, under the laws

of a province, to be un able, other than by reason of mi nority, to manage their

property or . . . decl ared to be incapable by any court in a ju risdiction outside

Canada” (s 2(1)).

2 See section C (“Juris diction of Incorporation”) in this ch apter for a discussion of

considerat ions relevant to choosing a jurisdiction for incor poration.

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 i ncorporation is done online. The CBCA for ms

and other infor mation regarding incorpor ation are available online: w ww.

ic.gc.ca/eic/site /cd-dgc.nsf/eng /home. Forms may be f‌iled th rough the Online

Filing Centr e on the Corporations Canad a website, online: http://strategi s.

ic.gc.ca/cgi-bin /sc_mrksv/corpdir/cor pFiling/register.cgi?lang=e. O n incorpo-

ration, the corp oration’s name appears on the website. In O ntario, incorpora-

tion forms may b e obtained from the government of Ont ario website and then

f‌iled through se veral primary ser vice providers who operate under cont ract

from the Mini stry of Government and Cons umer Services. See onl ine: www.

ontario.ca/page/incorporating-business-corporation#section-1. The service

providers cha rge additional fees. In Briti sh Columbia, the necessar y forms are

contained in t he schedules to the BCBCA and can be dow nloaded from the

website of the Min istry of Finance’s Corporate O nline: www.corporateonli ne.

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

&f‌ilingTypeCode=ICORP&from =main and f‌iled electronic ally.

Incorporat ion: Considerations and Process 161

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 or terri-

tory 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.

i) Names

The problems associated with corporate names are both legally and

practically complex. On a practical level, it is diff‌icult to f‌ind a name

that is not already in use. Also, 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 one may h ave to a corporate name, it may

acquire substantial f‌inancial value acquired through its use. A name

may be recognized by consumers or business customers as indicative

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

referred to as goodwill. The use of the same or a similar name by some-

one else may be severely damaging to the goodwill associated with the

name. One policy behind name regulation is the protection of the legit-

imately 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 t hat “the danger to be guarded against is

that the person seeing or hea ring one name will think it to be the sa me

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. TheCBCA and the provincial corporate statutes have provisions

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 also

regulates the use of names by corporations (other than the names they

are incorporated with) within its territorial jurisdiction, wherever they

are incorporated, and provincia l common law protects certain interests

in names through the tort of passing-off. The following subsections

outline brief‌ly the legal framework for the use of corporate names.

5 John Palmer Co v Palmer-McLellan Shoepack Co (1917), 45 NBR 8 at 56 (CA).

6 RSC 1985, c T-13 [TA].