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Summary
This Part establishes the manner in which a corporation may be incorporated
for the purposes of the Act. Any person meeting the criteria established
in the Act may incorporate a corporation by meeting the requirements
of the Act. (Section 6)
Part 2 introduces incorporation as of right to non-share capital corporations
who wish to incorporate federally. With the new Act if the appropriate
materials, in the proper form, are provided to the Director a certificate
of incorporation will be issued. This is much more efficient than the
current system and will permit incorporation in days or hours instead
of months. It will reduce uncertainty and should promote the incorporation
of non-share capital and not-for-profit corporations with national objectives.
The effective date of incorporation is the date on the certificate of
incorporation. On provision of the proper documents in the correct form,
incorporation will occur almost immediately. (Sections 7-10)
The name of the corporation must meet the criteria established in the
Act and regulations. (Sections 11-14)
If a person, before the corporation is incorporated, enters into a contract
on behalf of the corporation, that person is individually bound by the
contract. The corporation may later decide to adopt the contract. (Section
15)
Briefing Book
An Act Respecting Not-for-Profit Corporations and
Other Corporations Without Share Capital
Top
Bill Clause No. 6
Section No. 6
Topic: Incorporation
Proposed Wording
6. (1) One or more individuals or bodies corporate may incorporate a corporation
by signing articles of incorporation and complying with section 8.
(2) No individual may incorporate a corporation under subsection (1)
if that individual
(a) is less than eighteen years
of age;
(b) has been found incapable by a court in Canada
or elsewhere; or
(c) has the status of a bankrupt. |
Rationale
Section 6 sets out the incorporation process that incorporators have to follow.
It also restricts who can be an incorporator of a federal not-for-profit corporation.
These restrictions are standard provisions in modern corporate law.
Incorporation of organizations would be "as of right" as opposed
to the present "letters patent" system. Incorporation "as of
right" is a registration-type system under which corporations are granted
corporate status upon the filing of certain documents. The "letters patent" system
requires applicants for incorporation to have their application reviewed and
receive ministerial approval.
The "as of right" method of incorporation would streamline administrative
practices and eliminate the delays associated with the present incorporation
procedure by letters patent. It would also harmonize this legislation with
the Canada Business Corporations Act and it is in keeping with legislation
from other jurisdictions.
Subsection 6(1) allows one or more individuals or another corporation to act
as an incorporator of a federal not-for-profit corporation. It explicitly recognizes
that, in addition to individuals, a body corporate can act as an applicants
for incorporation.
Under subsection 6(2), someone of less than 18 years of age, an undischarged
bankrupt or a person found to be incapable can not act as incorporators. Persons
found to be incapable can not act as incorporators as they lack legal capacity
in the eyes of the law. Likewise, an undischarged bankrupt can not as an incorporator
since their capacity over financial matters is assumed by a bankruptcy trustee.
Present Law
Canada Corporations Act:
154. (1) The Minister may by letters patent under his seal of office grant
a charter to any number of persons, not being fewer than three, who apply therefor,
constituting the applicants and any other persons who thereafter become members
of the corporation thereby created, a body corporate and politic, without share
capital, for the purpose of carrying on, without pecuniary gain to its members,
objects, to which the legislative authority of the Parliament of Canada extends,
of a national, patriotic, religious, philanthropic, charitable, scientific,
artistic, social, professional or sporting character, or the like objects.
[...]
155. (1) The applicants for such letters patent, who shall be of the full
age of eighteen years and have power under law to contract, shall file in the
Department an application signed by each of the applicants and setting forth
the following particulars:
[...]
Top
Bill Clause No. 7
Section No. 7
Topic: Incorporation
Proposed Wording
7. (1) Articles of incorporation shall follow the form that
the Director fixes and shall set out, in respect of the proposed corporation,
(a) the name of the corporation;
(b) the province where
the registered office is to be situated;
(c) the classes, or regional
or other groups, of members that the corporation is authorized to establish
and, if there are two or more classes or groups, any voting rights attaching
to each of those classes or groups;
(d) the number of directors
or the minimum and maximum number of directors;
(e) any restrictions
on the activities that the corporation may carry on;
(f) a statement
of the mission of the corporation; and
(g) a statement concerning
the distribution of assets on the dissolution of the corporation. |
(2) Articles of incorporation shall set out, in respect of the proposed corporation,
any provision required by any other Act of Parliament to be set out in the
articles.
(3) The articles may set out any provisions that may be set out in the by-laws.
(4) Subject to subsection (5), if the articles or a unanimous member agreement
require a greater number of votes of directors or members than that required
by this Act to effect any action, the provisions of the articles or of the
unanimous member agreement prevail.
(5) The articles may not require a greater number of votes of members to remove
a director than the number required by section 131.
Rationale
This section deals with the content of the articles of incorporation that
incorporators must submit to the Director Appointed Under the Act when incorporating
a corporation.
Subsection 7(1) outlines the mandatory requirements for the articles of incorporation.
These requirements include the corporation's name, the province of the corporation's
registered office, any classes or groups of members and the voting rights of
each class or group, the number of directors or the minimum and maximum number
of directors, any restrictions on the activities that the corporation may carry
on, the corporation's mission statement and how the assets of the corporation
will be distributed when it is dissolved. The corporation must identify if
there are any classes or groups of members and the voting rights of each class
or group to provide prospective members with full information. It also provides
a greater degree of protection for members' right as any change to a corporation's
articles requires a 2/3 majority vote. The articles of incorporation haves
to contain the corporation's mission statement so that everyone involved in
the corporation knows the purposes of the organization. The corporation must
also state in its articles how the assets of the corporation will be distributed
when it is dissolved since these corporations are corporations without share
capital.
Subsections 7(2) and (3) are self-explanatory. Amending a corporation's articles
is more difficult to achieve than changing its by-laws. As mentioned above,
a corporation's articles can only be changed by the passage of a special resolution
(2/3 majority) of members. Changing a corporation's by-laws requires only a
majority vote. Therefore, allowing additional provisions to be included in
the articles of a corporation adds a degree of protection and stability.
Subsection 7(4) provides that where the articles of incorporation, or a unanimous
member agreement, require a higher voting threshold than is set out in the
Act, the higher threshold must be met when a vote is taken. However, this subsection
is subject to subsection 7(5), which does not allow the articles to establish
a higher voting threshold concerning the removal of directors. The removal
of directors is governed by section 131.
Present Law
Canada Corporations Act:
155. (1) The applicants for such letters patent, who shall be of the full
age of eighteen years and have power under law to contract, shall file in the
Department an application signed by each of the applicants and setting forth
the following particulars:
(a) the proposed name of the corporation;
(b) the purposes for which its incorporation is sought;
(c) the place within Canada where the head office of the corporation
is to be situated;
(d) the names in full and the address and calling of each of the applicants;
and
(e) the names of the applicants, not less than three, who are to be
the first directors of the corporation. |
(2) The application shall be accompanied by the by-laws, in duplicate,
of the proposed corporation, which by-laws shall include provisions upon the
following matters:
(a) conditions of membership, including societies or companies
becoming members of the corporation;
(b) mode of holding meetings,
provision for quorum, rights of voting and of enacting by-laws;
(c)
mode of repealing or amending by-laws with special provision that the
repeal or amendment of by-laws not embodied in the letters patent shall
not be enforced or acted upon until the approval of the Minister has
been obtained;
(d) appointment and removal of directors, trustees, committees
and officers, and their
respective powers and remuneration;
(e) audit of accounts and appointment of auditors;
(f) whether or how members may withdraw from the corporation; and
(g) custody of the corporate seal and certifying of documents issued
by the corporation.
|
(3) The applicants may ask to have embodied in the letters patent any provision
which could under this Part be contained in any by-law of the corporation.
Top
Bill Clause No. 8
Section No. 8
Topic: Incorporation
Proposed Wording
8. One of the incorporators shall send to the Director articles of incorporation
and the documents required by sections 20 and 129. Rationale
Incorporation is permitted as a matter of right as long as there is compliance
with the provisions of the Act.
In addition to the articles of incorporation, every incorporator wishing to
incorporate a federal corporation has to provide the Director Appointed Under
the Act with information concerning where its registered office is situated
in Canada (section 20) and the names of the directors of the corporation (section
129). For existing corporations, any change to the location of the registered
office and any change in the composition of the board of directors must also
be sent to the Director.
Present Law
Canada Corporations Act :
155. (1) The applicants for such letters patent, who shall be of the full
age of eighteen years and have power under law to contract, shall file in the
Department an application signed by each of the applicants and setting forth
the following particulars:
[...]
Top
Bill Clause No. 9
Section No. 9
Topic: Incorporation
Proposed Wording
9. On receipt of articles of incorporation, the Director shall issue a certificate
of incorporation in accordance with section 274.
Rationale
This section, consistent with the "as of right" incorporation process,
provides the Director Appointed Under the Act no discretion but to file the
articles of incorporation if they comply with the Act. The Director, subsequently,
is obligated to issue a certificate of incorporation to the corporation to
bring it into existence. The Director can refuse to issue a certificate if,
after the issuance of the certificate, the corporation would not be in compliance
with the Act with respect to certain filing requirements (e.g., the corporation's
articles, notice of registered office under section 20, notice of the corporation's
directors under section 129, notice of a change in the corporation's directors
or a change in their addresses under section 135.)
Present Law
Canada Corporations Act:
9. (1) Before the letters patent are issued the applicants shall establish
to the satisfaction of the Minister
(a) the sufficiency of the application and the truth and sufficiency
of the facts therein set forth, and
(b) that the proposed name is not the same or similar to the name under
which any other company, society, association or firm, in existence, is carrying
on business in Canada or is incorporated under the laws of Canada or any province
thereof or so nearly resembles the same as to be calculated to deceive and is
not otherwise on public grounds objectionable, or that such existing company,
society, association or firm is in the course of being dissolved or changing
its name and has signified its consent to the use of the said name. |
[...]
Top
Bill Clause No. 10
Section No. 10
Topic: Incorporation
Proposed Wording
10. A corporation comes into existence
on the date shown in the certificate of incorporation.
Rationale
This section states that the date on the certificate of incorporation issued
by the Director Appointed Under the Act is the date on which the corporation
comes into existence.
With respect to the date on the certificate of incorporation, subsection 274(3)
states that it can be dated by the Director on the day the articles of incorporation
are received or on any later date as specified by the person who signed the
articles or by the court.
Present Law
Canada Corporations Act:
12. A company comes into existence on the date of the letters patent incorporating
it.
Top
Bill Clause No. 11
Section No. 11
Topic: Incorporation
Proposed Wording
11. (1) Subject to subsection 13(1),
the name of a corporation may be set out in its articles in an English
form, a French form, an English form and
a French form, or a combined English and French form, so long as the combined
form meets any prescribed criteria. The corporation may use and may be legally
designated by any such form.
(2) Subject to subsection 13(1), a corporation may, for use outside Canada,
set out its name in its articles in any language form and it may use and may
be legally designated by any such form outside Canada.
(3) A corporation shall set out its name in legible characters in all contracts,
invoices, negotiable instruments and orders for goods or services issued or
made by or on behalf of the corporation.
(4) Subject to subsection (3) and 13(1), a corporation may carry on activities
under or identify itself by a name other than its corporate name.
Rationale
This section deals with the corporation's name form and its usage
Section 11(1) specifies that the corporation's name form can be unilingual,
either English or French, or that it can be a combination of Canada's two official
languages.
Section 11(2) states that if a corporation is operating outside of Canada,
it may set out its name in any language for use outside Canada.
Section 11(3) requires the use of the corporation's legal name in corporate
transactions.
Section 11(4) allows a corporation to carry on its activities under a name
other than its official corporate name. For example, the official name for
the Red Cross is "The Canadian Red Cross Society" although it carries
on activities under the name Canadian Red Cross. However, this provision is
subject to subsection 11(3), which requires the corporation to use its legal
name in corporate transactions.
Present Law
Canada Corporations Act:
25. [...]
(2) If the company has a name consisting of a separated or combined French
and English form, it
may from time to time use, and it may be legally designated by, either the
French or English form
of its name or both forms.
(3) A company shall
[...]
(b) keep its name engraved in legible characters on its seal and, if the company
has a name
consisting of a French and English form, whether separated or combined, the
company shall show
on its seal both the French and English forms of its name or shall have two
seals, each of which
shall be equally valid, one showing the French and the other the English form
of its name; and
[...]
Top
Bill Clause No. 12
Section No. 12
Topic: Incorporation
Proposed Wording
12. (1) The Director may, on request, reserve for a prescribed period a name
for an intended corporation or for a corporation about to change its name.
(2) If requested to do so by the incorporators or a corporation, the Director
shall assign to the corporation as its name a designating number followed by
the word "Canada" and a prescribed term.
Rationale
This section deals with reserving corporate names and numerical names prior
to incorporation. Reserving a corporate name in advance of incorporating or
using a numerical name allows for a quicker incorporation process.
Subsection 12(1) authorizes the Director Appointed Under the Act to reserve
a corporate name upon request from an organization intending to incorporate
or from an existing corporation that intends to change its name. The Director
can only reserve a name for a prescribed period (proposed as 90 days).
Subsection 12(2) provides that a corporation may become incorporated with
a numerical name instead of an alphabetic name, provided the word "Canada" and
a prescribed term is used. The prescribed terms include "association", "center", "centre", "foundation" and "society".
Present Law
None Top
Bill Clause No. 13
Section No. 13
Topic: Incorporation
Proposed Wording
13. (1) A corporation shall not be incorporated
or continued under this Act with, change its name to, or have, carry on
activities under or identify itself by, a name
(a) that is, as prescribed, prohibited or deceptively misdescriptive;
or
(b) that is reserved for another corporation or intended corporation
under subsection 12(1). |
(2) The Director may direct a corporation to change its name in accordance
with section 195 if, through inadvertence or otherwise, the corporation is
granted a name that contravenes subsection (1).
(3) If a corporation has a designating number as its name, the Director may
direct the corporation to change its name to a name other than a designating
number in accordance with section 195.
(4) If a corporation acquires a name as a result of a person undertaking to
dissolve or to change names, and the undertaking is not honoured, the Director
may direct the corporation to change its name in accordance with section 195,
unless the undertaking is honoured within the period specified in subsection
(5).
(5) If a corporation has not followed a directive under subsection (2), (3)
or (4) within the prescribed period, the Director may revoke the name of the
corporation and assign a name to it and, until changed in accordance with section
195, the name of the corporation is the name assigned by the Director.
Rationale
This section deals with prohibited corporate names. It ensures that corporations
do not use a name that is misleading or offensive. It also protects the existing
names of corporations and ensures that each corporate name is unique. While
incorporation is a matter of right, this section ensures that inappropriate
corporate names are not used. It also empowers the Director Appointed Under
the Act to direct a corporation to change its name and to revoke a corporation's
name if the corporation does not follow the Director's directive. The rules
for the granting of names under this Act will be the same as the current rules
under the present Act.
Subsection 13(1) prohibits corporations from having a name that is "as
prescribed, prohibited or deceptively misdescriptive" or a name that is
already reserved by a corporation.
Subsections 13(2) and (3) empowers the Director to order a corporation to
change its name, enabling the Director to correct a name granted in error.
Subsection 13(4) empowers the Director to order a corporation to change its
name within the prescribed period (60 days) in instances where the corporation's
name was acquired based on another corporation's pledge to either dissolve
or change its name and the pledge was not honoured. However, if the corporation
who pledged to dissolve or change its name does so within the prescribed period
(60 days), the corporation does not have to follow the Director's directive.
Subsection 13(5) authorizes the Director to revoke a corporation's name and
to assign it a new name if the corporation did not change its name within the
prescribed period (60 days) as directed by the Director under subsections 13(2),
(3) or (4). The assigned name is to remain the corporation's official name
until such time as the corporation changes its name through the normal approval
process set out by the Director.
Present Law
Canada Corporations Act:
9. (1) Before the letters patent are issued the applicants shall establish
to the satisfaction of the
Minister
[...]
(b) that the proposed name is not the same or similar to the
name under which any other company, society, association or firm, in existence,
is carrying on business in Canada or is incorporated under the laws of
Canada or any province thereof or so nearly resembles the same as to be
calculated to deceive and is not otherwise on public grounds objectionable,
or that such existing company, society, association or firm is in the course
of being dissolved or changing its name and has signified its consent to
the use of the said name. |
[...]
(4) The Minister, after giving reasonable notice to the applicants, or to
their authorized representative or agent, may give to the company a corporate
name different from that proposed by the applicants in any case in which the
proposed name is deemed by the Minister to be objectionable.
28. (1) A company shall not be incorporated
| (a) with a name that is the same or similar to the name under
which any other company, society, association or firm, in existence, is
carrying on business in Canada or is incorporated under the laws of Canada
or any province thereof, or that so nearly resembles that name as to be
calculated to deceive, except where the existing company, society, association
or firm is in the course of being dissolved or of changing its name and
signifies its consent in such manner
as the Minister requires, or
(b) with a name that is otherwise on public grounds objectionable. |
(2) Where a company, through inadvertence or otherwise, is without the consent
mentioned in subsection (1) incorporated with a name that is the same or similar
to the name under which any other company, society, association or firm in
existence has been previously carrying on business in Canada or has been previously
incorporated under the laws of Canada or any province thereof, or with a name
that so nearly resembles that name as to be calculated to deceive, or that
is otherwise on public grounds objectionable, the Minister, after he has given
notice to the company of intention so to do, may direct the issue of supplementary
letters patent changing the name of the company to some other name, which shall
be set forth in the supplementary letters patent.
[...]
Top
Bill Clause No. 14
Section No. 14
Topic: Incorporation
Proposed Wording
14. (1) If the Director assigns a new name
to a corporation under subsection 13(5), the Director shall issue a certificate
of amendment showing the name
and shall publish notice of the change of name as soon as practicable in
a publication generally available to the public.
(2) The articles of the corporation are amended accordingly on the date shown
in the certificate of amendment.
Rationale
This section gives effect to the powers of the Director Appointed Under the
Act regarding a mandatory name change.
Subsection 14(1) requires the Director to issue a certificate of amendment
showing the new name of the corporation if the Director has revoked its old
name and assigned it a new one. The Director must also notify the general public
of the name change (such as, for example, on Corporations Canada's web site).
Subsection 14(2) states that the articles of the corporation regarding its
name are changed as of the date shown on the certificate of amendment issued
by the Director under subsection 14(1).
Present Law
Canada Corporations Act:
28. [...]
(2) Where a company, through inadvertence or otherwise, is without the consent
mentioned in subsection (1) incorporated with a name that is the same or similar
to the name under which any other company, society, association or firm in
existence has been previously carrying on business in Canada or has been previously
incorporated under the laws of Canada or any province thereof, or with a name
that so nearly resembles that name as to be calculated to deceive, or that
is otherwise on public grounds objectionable, the Minister, after he has given
notice to the company of intention so to do, may direct the issue of supplementary
letters patent changing the name of the company to some other name, which shall
be set forth in the supplementary letters patent.
(3) Notice of the issue of such supplementary letters patent shall be published
in the Canada Gazette.
Top
Bill Clause No. 15
Section No. 15
Topic: Incorporation
Proposed Wording
15. (1) Subject to this section and
unless the contract expressly provides otherwise, a person who enters into,
or purports to enter into, a written contract
in the name of or on behalf of a corporation before it comes into existence
is personally bound by the contract and is entitled to its benefits.
(2) The corporation may, within a reasonable time after it comes into existence,
adopt the contract by any action or conduct signifying its intention to be
bound by the contract, and on such adoption
(a) the corporation is bound by the contract and is entitled
to its benefits as if the corporation had been in existence at the date
of the contract and had been a party to it; and
(b) the person ceases to be bound by or entitled to the benefits of
the contract, except as provided for in subsection (3). |
(3) Whether or not a written contract made before the coming into existence
of a corporation is adopted by the corporation, a party to the contract may
apply to a court for an order respecting the nature and extent of the obligations
and liability under the contract of the corporation and the person who is bound
by the contract under subsection (1). On the application, the court may make
any order that it thinks fit.
Rationale
Under common law, a corporation can not ratify or adopt a contract purportedly
entered into on its behalf before its incorporation, since the corporation
did not yet exist. The corporation would be required to negotiate a new contract
once it is incorporated. This section changes that common law rule so that
a corporation can ratify or adopt a pre-incorporation contract.
This section goes on to make the person who entered into a pre-incorporation
contract liable unless the person takes adequate actions to ensure that the
contract is adopted by the corporation after the corporation comes into existence.
As well, the person who entered into the contract may apply to the court for
an order relieving him/her of this liability. The court can make any order
with respect to the obligation and liability under the contract. In addition,
the individual can make an express disclaimer in the contract which relieves
him/her of liability and of the contract's benefits. The Canada Business
Corporation Act has similar provisions regarding the personal liability
of a person entering into a contract prior to the corporation comes into existence.
Subsection 15(1) states that a person who enters, or purports to enter, into
a contract on behalf of a corporation not yet existing is bound by it and can
enjoy its benefits.
Subsection 15(2) allows the person who enters into the contact to escape the
contract's obligations and forfeit any of the contract's benefits by getting
the newly established corporation to adopt the contact as its own, so long
as the contract is in writing.
Subsection 15(3) permits a party to the contract to apply to the court for
an order that would, in effect, render the adoption of the contract by the
corporation, in whole or in part, as ineffectual. It also authorizes the court
to make any other order it sees fit as to the liability of the person who entered
into the contract and of the corporation who adopted the contract.
Present Law
None.
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Corporate and Insolvency Law Policy
