Navigating Nova Scotia’s Incorporation Process

July 6, 2012

Written by Andrea Shakespeare

Incorporation in Canadian common law provinces is a relatively inexpensive and straightforward process; however the process varies from province to province. Nova Scotia follows a unique process of incorporation, different from the process utilized by its Atlantic Canadian siblings. To illustrate, New Brunswick and Newfoundland follow the business corporations act model established by the Canada Business Corporations Act (link to New Brunswick blog here and link to Newfoundland and Labrador blog here). In contrast, Nova Scotia is governed by the Companies Act, RSNS 1989, c 81 (NSCA), which is based upon the (now defunct) UK Companies Act, 1862. The NSCA requires constating documents called a Memorandum of Association and Articles of Association to be filed with the Registry of Joint Stock Companies as opposed to the Articles of Incorporation used by business corporations’ jurisdictions. The Memorandum of Association and Articles of Association have no real standard form, so the following will provide a brief overview of the preliminary decisions that must be made before entering the exact information to incorporate.

Three types of companies exist under the NSCA: (1) companies limited by shares (most common form), (2) companies limited by guarantee (rare, generally only used where a not-for-profit cannot incorporate under the Societies Act, RSNS 1989, c 435), and (3) unlimited liability companies (ULCs). ULCs provide certain U.S. tax advantages, which is the primary reason for their popularity with US based entities operating in Canada. Under the NSCA, shareholders are exposed to no direct liability to the creditors of the ULC, with liability only arising on the winding up of the ULC. ULC shareholders will only be liable if creditors can establish a claim against the ULC and the ULC is unable to satisfy that claim, at which point creditors may pursue ULC shareholders by winding up the ULC and claiming a deficiency. (Note: Keep an eye open for our ULC blog entry coming soon!!!)

One unique feature of a Nova Scotia company is the ability to issue par value shares, which are essentially shares with a designated or fixed minimum issuance price. Par value shares can be used as a favourable tax planning tool for the incorporating entity as they provide some flexibility with respect to the determination of a company’s paid up capital account.  Also unique to Nova Scotia is the ability to establish a maximum amount of authorized shares a company may issue.  Major revisions to the NSCA in 2008 to make the statute more modern (and in tune with the business corporation’s act models) have turned this former requirement into an option with respect to non par value shares; however, a company issuing par value shares must still establish a maximum number of authorized shares.

Under the NSCA, the type of company being incorporated determines the specific information required in the Memorandum of Association. Most common, the Memorandum of Association of a company limited by shares requires the incorporating entity to establish the company’s name, powers and restrictions (if any) and authorized capital.  The Articles of Association that are required to be filed as part of the incorporation process can be created from scratch, or can be assembled from any, or all, of the model provisions in the Articles of Association (of a company limited by shares) found in the First Schedule, Table A of the NSCA. While adopting the model provisions provided may be most convenient, tailoring the provisions of the Articles of Association carefully to the requirements (both present and future) of your company can help prevent a number of unexpected complications that can be both time-consuming and costly.   Based on years of practice, Stewart McKelvey has tailored Articles of Association to instil its corporate clients with optimal abilities and powers, all in-line with the NSCA.

While the incorporation process may be fairly straightforward, mistakes now can create problems that can be difficult (or at least annoying!) to fix in the future. If you are uncertain about any portion of the incorporation process in Nova Scotia or tax planning for your organization, drop us a line and we would be more than happy to assist.

Written by Andrea Shakespeare

Incorporation in Canadian common law provinces is a relatively inexpensive and straightforward process; however the process varies from province to province. Nova Scotia follows a unique process of incorporation, different from the process utilized by its Atlantic Canadian siblings. To illustrate, New Brunswick and Newfoundland follow the business corporations act model established by the Canada Business Corporations Act (link to New Brunswick blog here and link to Newfoundland and Labrador blog here). In contrast, Nova Scotia is governed by the Companies Act, RSNS 1989, c 81 (NSCA), which is based upon the (now defunct) UK Companies Act, 1862. The NSCA requires constating documents called a Memorandum of Association and Articles of Association to be filed with the Registry of Joint Stock Companies as opposed to the Articles of Incorporation used by business corporations’ jurisdictions. The Memorandum of Association and Articles of Association have no real standard form, so the following will provide a brief overview of the preliminary decisions that must be made before entering the exact information to incorporate.

Incorporating in Prince Edward Island

May 14, 2012

By Emily MacDonald

So – You’ve got a business in PEI and you’ve decided to incorporate (good call).  The question is – How!?

You first have to decide if you want to incorporate federally under the Canada Business Corporations Act or provincially, under PEI’s Companies Act.  If you are going to operate in several provinces, on a larger scale, you may want to consider incorporating federally.  Registration as a federal company protects your business name across all of Canada.  However, most small and medium sized owner-managed businesses in PEI tend to incorporate provincially (what we call a “PEI company”) because it is often more convenient and requires less paperwork.  You can still register your PEI Company in other provinces when you start to expand “off-Island” (a federal company also has to register in any province in which it does business).   

There are three main forms you need to complete to incorporate a PEI company:

  • Form 1 – the Application for Incorporation;
  • Form 2 – an Affidavit (before a commissioner of oaths or notary public); and
  • Form 3 – an Attorney’s Statement.

You will need to name at least one director for your company.  You can have more than one director but should try to keep an odd number of directors for voting purposes.  The full names, mailing addresses and occupations of each director must be provided on Form 1.  Directors of PEI companies don’t have to be Canadian residents.

You will also need to outline the objectives and purposes of your proposed company and will have to provide the full names, mailing address and number and type of shares that will be issued to all shareholders.  The types of shares of the proposed company must also be stated; this is referred to as the company “authorized capital”.

We recommend setting up companies with five classes of common shares and five classes of preferred shares.  This allows for flexibility to bring on new shareholders on different terms when your company starts growing.  Special rights, preferences, restrictions and conditions attach to different classes of shares.

Last, but not least, you’ll have to select a name for your company.  You must first check to make sure that the name you want is available for registration.  This is done by completing a name search with the Department of Environment, Labour and Justice.  Although a formal name search is required, the on-line Corporate/Business names Registry at http://www.gov.pe.ca/corporations/index.php is a good starting point to check the availability of a proposed name.   To comply with PEI’s Companies Act your company’s name must have a legal ending such as “Inc.” or “Ltd.”.

All completed forms must be sent to the Department of Environment, Labour and Justice with a cover letter and a filing fee of $265 (payable to the Provincial Treasure PEI).  There is no online filing.

After review and approval of the three forms set out above, the government will grant you “Letters Patent” which will legally create your new company.  Banks will need copies of these Letters Patent to open accounts for your company – so keep them in a safe place or keep an electronic copy for easy forwarding.   A notice of your new company will also appear in the following issue of the Royal Gazette (like a birth announcement of your new “baby”!).

Then it’s off to the races.  Stay tuned for tips and tricks on creating Bylaws & Minutes (Your Company’s Who, What, When, Where & Why) and Shareholders Agreements (Till Death or Shotgun Clause Do Us Part).

 

 

 

By Emily MacDonald

So – You’ve got a business in PEI and you’ve decided to incorporate (good call).  The question is – How!?

You first have to decide if you want to incorporate federally under the Canada Business Corporations Act or provincially, under PEI’s Companies Act.  If you are going to operate in several provinces, on a larger scale, you may want to consider incorporating federally.  Registration as a federal company protects your business name across all of Canada.  However, most small and medium sized owner-managed businesses in PEI tend to incorporate provincially (what we call a “PEI company”) because it is often more convenient and requires less paperwork.  You can still register your PEI Company in other provinces when you start to expand “off-Island” (a federal company also has to register in any province in which it does business).