Corporate Law

Independent Legal Advice (“ILA”) refers to legal advice given by a lawyer who is not involved in the transaction with the client. ILA is usually required by lenders and other sophisticated parties who want to ensure that their clients are fully informed of the content and consequences of a transaction. ILA should be obtained by any person who is self represented and who is involved in a transaction where all, or some, of the parties are represented by the same lawyer.

A company is an entity incorporated in terms of the applicable Corporations Act. It is regulated by statute and statutory documents, e.g. the articles. A partnership is an contractual agreement between two or more persons. The terms of the agreement between the parties are regulated by the partnership agreement. A sole proprietorship is a registration of a single business person.

BC Company

• Incorporated in British Columbia.
• Must register extra provincially in other provinces the corporation does business in.
• Must register to do business in each province it wants to do business in.
• Name protected against further registration in British Columbia, not the rest of Canada.

Federal Company

• Incorporated federally.
• Does not have to register extra provincially in each province it does business in.
• Must register to do business in each province it wants to do business in.
• Name protected against similar registrations in all of Canada.

Separate Legal Entity Incorporating creates a new legal entity called a corporation, commonly referred to as a “company.” It operates separately and makes decisions by resolution. A corporation’s assets belong to the corporation and not to its officials, directors, or shareholders. Continues past the event of the “owners” death When a business is incorporated, its separate legal status, property, rights, and liabilities continue to exist until the corporation is dissolved, even if one or more shareholders or directors sell their shares, die, or leave the corporation. Limits Liability Incorporation limits the liability of a corporation’s shareholders. As a general rule, the shareholders of a corporation are not responsible for its debts. If the corporation goes bankrupt, a shareholder will not lose more than his or her investment. Creditors also cannot sue shareholders for debts incurred by the corporation. Directors are also protected, except in certain exceptional circumstances, e.g. gross negligence or fraud. Lower Corporate Tax Rates Corporations are taxed separately from their owners. Because corporate tax rate is generally lower than the individual tax rate, incorporation may offer you some tax advantages. Respectability Generally, the public and business partners look more favourably on incorporated businesses than personally operated businesses. In fact, larger contractors will insist that a contractor be incorporated to do business with them. Greater Access to Capital It is often easier for corporations to raise money than it is for other forms of business.Corporations have the option of issuing bonds or share certificates to investors. Other types of businesses must rely on their own money and loans for capital. Corporations are often able to borrow money at lower rates than those paid by other types of businesses, simply because financial institutions and others tend to see loans to corporations as less risky.

A company must have a registered address where service can be affected by third parties. A company must also have an office where the public can view the company’s corporate records. As these addresses are usually the same, it is referred to the Registered & Records office (R&R) of the company.

Incorporation documents consist of:

• Notice of Articles
• Articles
• Certificate of Incorporation

Articles of a Company refer to the statutory document that each company must have. This document regulates the relationship between the company and the shareholders and, among other things, explains the share rights, and corporate governance in relation to directors, shareholders, and officers.

Yes, you can incorporate your own company. It can be done online. However, unless you have the experience and knowledge to incorporate in a manner that fulfills your requirements, you will incorporate a basic entity with little or no flexibility or opportunity to do tax planning. Discuss your incorporation requirements with our corporate lawyer before you proceed.

A business has special structuring requirements which should be addressed before incorporation. Lawyers have experience with incorporations and know how to go about achieving the required result.

A shareholders’ agreement regulates the relationship between shareholders. It is important as without a Shareholders’ Agreement, affairs between shareholders, i.e. the right of first refusal, insurance, share price, etc. is not fixed and may cause disputes.

The following documents are essential:

• Notice of Articles
• Articles
• Certificate of Incorporation
• Central Securities Register (contains a list of all the shareholders and what shares they hold)
• Register of Directors
• Share certificates

A company should have:

• A shareholders’ agreement
• Shareholders’ loan agreements
• Copies of all shareholders’ and directors’ resolutions
• Annual reports

The capital structure of a company refers to the various share classes and the rights attached to each class of shares. Without a share structure must be flexible and allow the directors and shareholders to obtain the maximal use thereof in relation to control, dividends and investor security.

Yes, incorporation does protect your business name, but only against further registration by others of a similar name in the jurisdiction where your corporation is registered. So, if your business is incorporated in British Columbia, no other business may register a similar name.

Your mark, or setup of your business including your name, logos, and colours, are the heart of your business and may become very valuable and desirable over time. Protecting your rights against competing businesses is important. Although your business has rights to its mark through the workings of common-law trademarks in the geographical area where it is made known, it is not protected elsewhere. Only registration of your mark as a Canadian trademark protects it against use by others absolutely.

Preparation of the Annual Report, Resolutions of Directors, and Resolutions of Shareholders, affecting execution, filing Annual Report with the Registrar of Companies, filing Resolutions in the Corporate Records Book, maintaining duplicate records of the company, providing photocopying services, maintaining office hours for the inspection of records by third parties for two business hours daily, and all other related services and correspondence for and on behalf of the company.