Changing the structure or nature of the corporation

Businesses often need to adapt to structural changes in the economy, or to shifts in their management or workforce.

When considering changes to the structure or nature of your corporation, you have specific requirements under the Canada Business Corporations Act (CBCA).

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Amending your articles

Your articles set out basic information about your corporation. You are required to amend your articles to make changes to this information. To amend your articles, a special resolution needs to be passed at a special meeting.

These changes include:

  • changing your corporate name
  • changing the province or territory in which your registered office is located
  • changing the minimum or maximum number of directors
  • adding or removing restrictions on the transfer of shares
  • modifying the restrictions on the business that the corporation can carry on
  • creating or eliminating classes of shares
  • modifying existing classes of shares
  • increasing or reducing the stated capital if the stated capital is set out in the articles
  • adding, changing or removing any other provisions that are set out in the articles.

For instructions on how to amend your articles, see Guide on amending articles.

Amalgamating business corporations

Amalgamation is a process by which two or more corporations governed by the CBCA, the “amalgamating corporations” merge and carry on as one corporation, the “amalgamated corporation”. For more information on amalgamation, see Guide on amalgamating business corporations.

Reviving a business corporation

A revival allows a corporation dissolved under the CBCA to be restored to its previous legal position in the same manner and to the same extent as if it had not been dissolved. For more information on revival, see Policy on reviving a business corporation.

Continuing (import) an incorporated business

A continuance (import) allows an incorporated business to effectively re-incorporate under another legislation. Because the business is already incorporated, the legal process is called a continuance. Instead of incorporating again, the incorporated business continues, that is, transitions, from one legislation into another. It will then be governed by the second legislation (in this case, the CBCA) as though it were originally incorporated under it. The process results in the corporation being exported out of one legislation and being imported into another. For more information on continuance (import), see Policy on continuance (import) of an incorporated business.

Continuing (export) a federal corporation

An export transaction allows a corporation incorporated under the CBCA to be governed by legislation other than the CBCA. The corporation continues into, and is governed by, another legislation (referred to as the importing legislation). The CBCA would then be the exporting legislation. As a result, the corporation ceases to be governed by the CBCA. For more information on continuance (export), see Policy on continuance (export) of a federal corporation.

Dissolving a business corporation

Dissolution is the legal termination of a corporation. In other words, dissolution is the act of ending a corporation's existence. A corporation is dissolved when Corporations Canada issues a certificate of dissolution. The effective date is shown on the certificate of dissolution.

There are three types of dissolution.

Voluntary dissolution

At some point in the life of the corporation, directors or shareholders can decide to voluntarily dissolve the corporation by special resolution. For more information on how to dissolve your corporation, see Guide on dissolving a business corporation.

Administrative dissolution

Corporations Canada can issue a certificate of dissolution and dissolve a corporation on its own initiative under the following circumstances:

  • the corporation has not commenced its business within three years after the date shown in its certificate of incorporation
  • the corporation has not carried on its business for three consecutive years
  • the corporation is in default for a one-year period in sending to Corporations Canada any fee, notice or other document required by the CBCA, or
  • the corporation does not have any directors.

Before dissolving the corporation, Corporations Canada must give notice of its intent to dissolve to the corporation and to each of its directors. This notice will also be published in Monthly transactions.

Unless Corporations Canada receives satisfactory information explaining why the corporation should not be dissolved, Corporations Canada can, after 120 days of giving notice, issue a certificate of dissolution.

There is an exception to the administrative dissolution procedure when the required fee for the issuance of a certificate of incorporation has not been paid. In such cases, Corporations Canada can administratively dissolve a corporation without notice.

Dissolution by court order

The CBCA also provides for the involuntary dissolution of a corporation by court order on several grounds. The director or any interested person may apply to a court for an order dissolving a corporation if the corporation has:

  • failed to hold annual meetings of shareholders as required by the CBCA
  • contravened certain requirements of the CBCA, such as undertaking activities not permitted by the articles; not providing shareholder access to the corporations' records; or not providing financial statements to the shareholders, or
  • obtained any certificate under the CBCA by misrepresentation.

In addition, a court may order the dissolution and liquidation of a corporation on the application of a shareholder in certain circumstances, such as when the actions of the corporation are oppressive or unfairly prejudicial to the interests of any shareholder, creditor, officer or director or these actions cause such a result.

In such cases of involuntary dissolution, the court may make any order it thinks fit in connection with the liquidation or the dissolution of the corporation, including appointing a liquidator and directing that notice be given or payments made to identified parties. If the court makes an order for the liquidation of a corporation, the corporation continues in existence but ceases its activities except those that are, in the opinion of the liquidator, required for an orderly liquidation. In addition, the powers of the directors and shareholders cease and are instead vested in the liquidator.

It should be noted that the court may appoint any person, including a director, officer or shareholder as liquidator for the corporation. Once the liquidation process is complete and the liquidator has submitted its final accounts, which have been approved by the court, the court will order Corporations Canada to issue a certificate of dissolution.

Arrangements

Where it is not practicable to make a fundamental change under any other provision of the CBCA it may be possible to undergo an “arrangement”, with the assistance of the court. For more information on arrangements, see Policy on arrangements – Canada Business Corporations Act, section 192.

Reorganizations

It is possible for a corporation to undergo a “reorganization” pursuant to a court order. The court order can result from:

  • another court order resulting from an oppression remedy brought by the shareholders
  • another court order made as a result of a proposal made under bankruptcy legislation or
  • a court order made under any other federal legislation that affects the rights among the corporation and its shareholders and creditors.

Such a court order can also:

  • require amendments to the articles that can lead to a fundamental change to the corporation, under section 173 of the CBCA
  • authorize the issuance of debt obligations, whether or not convertible into shares of any class or having attached any rights or options to acquire shares of any class and fix their terms, or
  • appoint directors in place of or in addition to all or any of the directors then in office.

After a court order has been made, the corporation will need to file Form 14 – Articles of Reorganization (see Federal incorporation forms) and other related documents with Corporations Canada, which will then issue a certificate of amendment. The reorganization becomes effective on the date shown on the certificate of amendment.

Correcting articles and related certificate

Policy on corrections of articles or certificates – Canada Business Corporations Act explains the circumstances under which a business corporation can apply to correct articles and the related certificate, and how you can apply.

Cancelling articles and related certificate

Policy on cancellation of articles or certificates – Canada Business Corporations Act explains the circumstances under which a business corporation can apply to cancel articles and the related certificate, and how you can apply.

Sale, lease or exchange of the corporation's property

The sale, lease or exchange of all or substantially all of a corporation's property outside the ordinary course of the corporation's activities (that is, not as part of the ordinary day-to-day activities of the corporation) requires the approval of the shareholders by special resolution. In approving such a transaction, the shareholders can also impose additional terms and conditions.

All shareholders will have the right to vote on the proposed transaction, including shareholders who do not usually have voting rights. If a corporation has more than one class of shareholders and the proposed transaction affects the rights of a class in a manner different from the shareholders of another class, then separate approval by special resolution must be obtained from the affected class of shareholders who are entitled to vote separately to approve the transaction.

If the directors intend to abandon a transaction that has been approved by the shareholders, further shareholder approval will be required, unless the shareholders have already provided pre-approval to authorize the directors to abandon the transaction at a future date.

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