Before incorporating a company, it is important to determine whether you wish to incorporate under the provincial or federal system. The differences between these two incorporation regimes are discussed in other articles on our blog.
A question we are often asked before the incorporation process is: will it be too late to change the constitutive regime, once the incorporation is done? The answer is no, it will not be too late.
The incorporating statutes, both the Quebec and federal statutes, but also the incorporating statutes of each of the Canadian provinces, provide for mechanisms allowing a corporation to continue its existence under another corporate statute. The opposite mechanism also exists: the laws provide for the possibility of importing a corporation incorporated under another law.
The Quebec Business Corporations Act provides that a corporation may, if authorized by its shareholders and by the Enterprise Registrar, apply to the competent authority of the law of another jurisdiction to continue its existence under this Act (section 297 QBCA). A fee must be paid to the Enterprise Registrar, and a copy of the special resolution authorizing the continuance of the corporation to another jurisdiction must be provided.
Once the application is accepted by the Registrar, a certificate is issued. Upon receipt of the document from the competent authority of the other jurisdiction (e.g. Corporations Canada) attesting to the continuation of the company to that other regime, the Enterprise Registrar prepares and issues a certificate of change of regime.
When a corporation is continued under the Quebec system, articles of continuance must be filed. These articles of continuance contain what is usually contained in articles of incorporation: corporate name, description of authorized share capital, restrictions on activities, restrictions on transfer of shares and securities, and other provisions. The law provides that upon filing articles of continuance, a corporation may make amendments to its articles. For example, if a federal corporation has an authorized share capital with 2 classes, the corporation may amend its articles by filing articles of continuance to add a third class of shares.
Furthermore, where a corporation is continued under the federal system, the law provides that the shares will be deemed to have been validly issued in accordance with Canadian law, whether or not the shares are fully paid up.
Several factors may justify continuing the existence of a company under another regime. For example, a company incorporated under the Quebec system that moves its establishment to another province and does not keep any address in Quebec will necessarily have to continue its existence under another system. It may opt for the federal system, which allows it to have a head office in any Canadian province, or for the system of the province to which it moves.
A federal corporation may also need to continue its existence under the Quebec regime in order to implement a corporate reorganization that is not permitted under the federal regime. For example, for the issuance of par value shares, or the creation of classes of shares with identical rights and restrictions.