A company operating in B.C. may be incorporated under the Business Corporations Act of British Columbia or the Canada Business Corporations Act. The Acts are similar in a number of ways, however there are a few key differences that may affect which Act you wish to incorporate under.
Names: The requirements for the company’s name are relatively similar under the B.C. and Federal Acts. Both require a “distinctive” element to set the company apart from companies providing similar goods or services and a “corporate designation” (Ex. Ltd.). B.C. companies must have a “descriptive” element that indicates the type of good or service provided by the company. Federal companies do not need to have a descriptive element. Name protection is arguably the biggest difference between the names of B.C. and Federal companies. A B.C. company’s name cannot be too similar to the name of an existing B.C. company’s name. If the B.C. corporate registry decides that a proposed name is so similar to the name of an existing B.C. company’s name that a member of the general public could think that they are the same business, the name request will be rejected and cannot be used. Also, the name of an existing B.C. company is not guaranteed if the business expands into a different province and needs to extra-provincially register in another province. A proposed name for a Federal company is not compared with existing companies incorporated under the various provincial acts and can be used by a Federal company across Canada without additional name approval provided that the necessary extra-provincial registrations are complete. Regardless of the above, companies should always do their research for existing company names, trademarks and the availability of website domains and social media accounts before selecting a name.
Incorporation: The incorporation of a B.C. company will take effect as of the date and time that the incorporation application is filed electronically. An incorporation of a Federal company takes effect as of the date shown on the certificate of incorporation which can take a couple of days (although there is an expedited process available for an added fee). The person incorporating the company must take shares in the company if it is a B.C. company and does not need to take shares in the company if it is a Federal company. The document that outline’s the companies processes and internal workings is called “articles” under the B.C. Act and “bylaws” under the Federal Act.
Directors: Directors are the people who carry out the day-to-day operations of the business. Under the B.C. Act, a director must be an individual. Under the Federal Act, a director may be a corporation. The Federal Act requires that at least 25% of the directors be residents of Canada whereas the B.C. Act has no residency requirement. The voting shareholders (owners of the company) can remove a director by “special resolution” under the B.C. Act and “ordinary resolution” under the Federal Act making it easier to remove a director under the Federal Act.
Officers: Directors can delegate some of their powers to officers. “Officer” is defined in the Federal Act, but only “Senior Officer” is defined in the B.C. Act. “Senior Officers” under the B.C. Act must meet all of the same requirements as directors. “Officers” under the Federal Act must only have “full capacity” which allows for more flexibility (Ex. if a person is an undischarged bankrupt or was convicted of fraud recently, they could be an Officer of a Federal company but not a Senior Officer of a B.C. company).
Share Certificates: A share certificate is a physical document signed by the company that is legal proof of ownership of shares in the company. A share certificate is typically printed on special paper and signed in wet ink by a director of the company. The B.C. Act allows for “uncertificated shares” which are typically documented as a notice of shareholding which can be digitally or physically signed by a director of the company. Uncertificated shares are often quicker and easier to prepare, sign and store. The Federal Act does not contemplate uncertificated shares.
Shareholder Voting Thresholds: Many decisions that must be voted on by the shareholders of a company must be approved by “special resolution”. Under the Federal Act, this requires at least 2/3 approval by the shareholders entitled to vote on the matter. The B.C. Act allows for more flexibility in that the company’s articles can increase the approval threshold from 2/3 to 3/4 which can be extremely helpful in some circumstances.
Sale of the Assets of a Business: Shareholders must approve the sale of “all or substantially all” of the assets of the company. Under the B.C. Act only shareholders with “voting shares” have a vote whereas under the Federal Act all shareholders (regardless of the voting or non-voting rights attached to their shares) can vote.
As mentioned at the beginning of this article, we have summarized only a few of the differences between companies incorporated under the laws of B.C. and the laws of Canada. If you are considering incorporating a company you should seek legal advice on which act to incorporate under based on your unique circumstances. If you have any questions about incorporating your business, please let us know and we would be happy to help.
Author: Danielle (Dani) Brito
This information is general in nature only and should not be considered as legal advice. The above content does not create a lawyer-client relationship and is not an invitation to send us unsolicited confidential information. You should consult a lawyer before acting on any of this information. To learn more about your legal needs, please contact our office at (778) 940-3768 or any of our top-notch lawyers:
Danielle (Dani) Brito: [email protected]
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