From blue to red: How to make your Quebec company into a federal one?

As you probably know, Canada is a federation in which the legislative competences are split between provincial legislatures and federal legislature. Amongst these legislative competences, there is the power to enact laws pertaining to corporations. The provinces and the federal share this power.

This implies that entrepreneurs of Quebec eager to create and run their own company can either turn themselves to federal law (Canada Business Corporations Act) or to Quebec legislation (Quebec’s Business Corporations Act).

Once you set your choice on either one of these jurisdictions, is your corporation condemned to spend the rest of its life under this law? Not at all. The law also recognizes that only fools never change their mind and allows to a company created under provincial law to pursue its existence under Canada Business Corporations Act.

So, if your company was created under Quebec’s Business Corporations Act and you now wish to transform it into a federal corporation, read the following lines.

As we mentioned in a previous article federal corporations are different from Quebec corporations on various aspects. The first ones are subjected to Canada Business Corporations Act whereas Quebec’s Business Corporations Act regulates the Quebec companies. There are many advantages that could lead entrepreneurs to create a federal corporation.

Firstly, federal corporations benefit from a certain prestige within the business community. According to Corporations Canada, being a federal corporation is “sign of distinction”.

Secondly, Canada Business Corporations Act offers more flexibility to entrepreneurs with regards to where their head office can be located. Contrary to Quebec’s Business Corporations Act, which prohibits corporations from having their head office outside of Quebec’s territory, the federal law allows corporations to establish their head office anywhere in Canada.

Finally, federal law gives a national protection to the name chosen by a corporation, if it respects the applicable regulations. Thus, whether your company does business in Alberta New Brunswick or Northwest territories, it will be able to keep its name and its name will be protected, provided that it respects the applicable legislation.

That is why, if you plan on doing a lot of import-export, continuing under Canada Business Corporations Act might be a good idea. In all cases, if you intend on doing business in Quebec, the name you choose will have to comply with the Charter of the French Language.

You’re now fully set on transforming your provincial corporation into a federal one. “But how?” I hear you ask me.You just need to initiate a continuance procedure.

What is a continuance?

It is a procedure after which a company created under X law continues its existence under Y law. This process can be initiated by any legal entity created under another federal law, a provincial or territorial law or even a foreign law.

However, the constitutive law of this legal entity has to allow the continuance. There are two types of continuances: export and import.

An export occurs when a federal corporation wishes to pursue its existence under a provincial or territorial law. We qualify a continuance as an import when a company created under a provincial, territorial or foreign law is now regulated by Canada Business Corporations Act.

As you will have understood, it is the procedure of the second type of continuance that you’ll have to follow in order to transform your provincial corporation into a federal one.

What to do exactly

Before initiating the continuance process, a corporation that wishes to change jurisdiction must verify that it is allowed by its constitutive law. In that regard, section 297 of Quebec’s Business Corporations Act stipulates that corporations can, upon authorization of their shareholders and of Quebec’s enterprise Register pursue their existence under another law.

That means that is you wish to transform your corporation into a federal one, your Board of directors will have to convoke a shareholders meeting during which the shareholders will express themselves on the continuance.

In order for the continuance to happen, shareholders must adopt a special resolution to that effect, which is a resolution adopted by a two-third majority or by any other majority defined in a shareholder agreement.

Subsequently, you’ll have to obtain an authorization from Quebec’s enterprise register. You’ll also have to fill, sign and send to Corporations Canada a form that contains the continuance clauses, a form pertaining to your head office and your first Board of directors.

You’ll also have to produce and send a NUANS report, if you chose a customized name (non-numerical, that is). The NUANS report ensures Corporations Canada that another company isn’t already using the name chosen.

Finally, you’ll have to pay the fees associated with your continuance request, which, in 2017, are of 200 $. If your request is compliant with the applicable regulations, it will be accepted and Corporations Canada will issue you a Certificate of Continuance: a document that indicates the date on which the continuance is effective.

You now know how to transform your Quebec company into a federally regulated corporation. If you wish to profit from the expertise of a lawyer to help you with this process, contact us by e-mail at the following e-mail address: bonjour@lexstart.ca or by phone at (514) 621-2750 and we’ll put you in touch with one of our lawyer partners. If you are a self-employed person and you want to create a corporation, get our Incorporation Kit.

Me Gilles de Saint-Exupéry, LL.M

Vanessa Ntaganda 

 

 

 

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