Part 2 Incorporation (clauses 3-7)

A number of amendments designed to update and improve the efficient administration of the CBCA are included in this Part, including an amendment prescribing the criteria relating to acceptable forms of names of corporations. In addition, the Director would no longer be required to give notice in the Canada Gazette. Information which is required to be made public would be posted on the Corporations Directorate's website.

Finally, a number of technical amendments are proposed to update terminology, to clarify wording and to reconcile the English and French versions of the Act.

Briefing Book
An Act to amend the Canada Business Corporations Act and the Canada Cooperatives Act

Bill Clause No. 3
CBCA Section No. 6(1)
Topic: Incorporation(Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The words "in prescribed form" are replaced with "in the form that the Director fixes" whenever "in prescribed form" is used. The words "place within" are replaced with "province in" at s. 6(1)(b).

Purpose of Change 
Replacing the words "in prescribed form" with "in the form that the Director fixes" will allow the Director to fix the form of documents to be sent to or by the Director. This amendment will remove the current requirement to have the form of documents prescribed in the regulations and will add flexibility to the Act. The following sections would be amended accordingly: 19, 106(1), 177(1), 180(2), 185(1), 186.1(4), 187(3), 188(8), 191(4), 192(6), 209(2), 210(4), 211(10) and (14), 212(3), 213(4), 262(2) and 263. [see clause 124]

In cases where a corporation wishes to change the location of its registered office, it must file with the Director a Notice of Change of Registered Office (Form 3), Articles of Amendment (Form 4) and cover the costs of filing Form 4. The amendment will give a corporation the flexibility of relocating its registered office anywhere within the province its registered office is situated without having to file Articles of Amendment.

Similar Provincial Laws 

Current Wording 
6.(1) Articles of incorporation shall follow the prescribed form and shall set out, in respect of the proposed corporation,

(b) the place within Canada where the registered office is to be situated;

Proposed Wording 
6. (1) Articles of incorporation shall follow the form that the Director fixes and shall set out, in respect of the proposed corporation,

(b) the province in Canada where the registered office is to be situated;

Bill Clause No. 4
CBCA Section No. 8
Topic: Incorporation Government Administration)

Sources of Proposed Law 

Changes From Present Law 
The Director would have discretion to refuse to issue a certificate of incorporation in certain circumstances.

Purpose of Change 
The Act does not clearly give the Director the discretion to refuse to issue a certificate of incorporation when the articles of incorporation indicate that the corporation to be incorporated would not be in compliance with the Act. This amendment would give the Director the discretion to refuse to incorporate a corporation where the documents indicate that the corporation to be formed is not in compliance with the Act.

The section requires a corporation to indicate compliance with the requirement to have at least one director, for at least twenty-five percent of the directors to be resident Canadians (or a majority if there are ownership restrictions), and for a registered office of the corporation to be located in Canada.

Similar Provincial Laws 

Current Wording 
8. On receipt of articles of incorporation, the Director shall issue a certificate of incorporation in accordance with section 262.

Proposed Wording 
8. (1) Subject to subsection (2), on receipt of articles of incorporation, the Director shall issue a certificate of incorporation in accordance with section 262.

(2) The Director may refuse to issue the certificate if a notice that is required to be sent under subsection 19(2) or 106(1) indicates that the corporation, if it came into existence, would not be in compliance with this Act.

Bill Clause No. 5
CBCA Section No. 10(3)
Topic: Incorporation (Government Administration)

Sources of Proposed Law 

Changes From Present Law 
Regulations would define what are separate and combined language forms of name.

Purpose of Change 
Subsection 10(3) of the CBCA is unclear as to what constitutes the form of the corporate name when corporations have more than one linguistic form of name. It is not clear whether the English and the French form constitute the full name of the corporation or whether either the English form alone or the French form alone may be used. If the English form and the French form of the name have to be used then this can also be interpreted as meaning both forms must appear wherever the corporate name appears. The use of the English form of the name and the French form of the name in every document issued by a corporation is unwieldy and adds to the cost of business administration.

This amendment will clarify the issue of how to properly refer in the articles to separate and combined language names.

Similar Provincial Laws 

Current Wording 
10. (3) Subject to subsection 12(1), a corporation may set out its name in its articles in an English form, a French form, an English form and a French form or in a combined English and French form and it may use and may be legally designated by any such form.

Proposed Wording 
10. (3) Subject to subsection 12(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 the prescribed criteria. The corporation may use and may be legally designated by any such form.

Bill Clause No. 6
CBCA Section No. 13(1)
Topic: Incorporation (Government Administration)

Sources of Proposed Law 

Changes From Present Law  
The reference to publish the required notice in the Canada Gazette would be eliminated.

Purpose of Change  
The purpose of requiring public notice of exemption decisions is to ensure that decision making takes place in an open manner. Currently, notification takes place in the Canada Gazette. This publication, however, is not the method which best reaches the public.

This amendment will allow publication in whichever publication that is best suited to the task. The intention is to use the Industry Canada Corporations Directorate website for the publication of required notices. The following sections would be amended accordingly: 151(2), 212(2(b), 213(4)(b), 235(3), 262(2)(b)(v), 265(8) and 267.1.

Similar Provincial Laws 

Current Wording  
13. (1) When a corporation has had its name revoked and a name assigned to it under subsection 12(5), the Director shall issue a certificate of amendment showing the new name of the corporation and shall forthwith give notice of the change of name in the Canada Gazette or in the periodical referred to in section 129.

Proposed Wording  
13. (1) When a corporation has had its name revoked and a name assigned to it under subsection 12(5), the Director shall issue a certificate of amendment showing the new name of the corporation and shall give notice of the change of name as soon as practicable in a publication generally available to the public.

Bill Clause No. 7
CBCA Section No. 14(1) and (3)
Topic: Incorporation (Technical Amendments)

Sources of Proposed Law  

Changes From Present Law  
Clarify that subs. 14(1) applies to contracts purported to be entered into with a corporation prior to its incorporation.

Purpose of Change  
The proposed amendment clarifies the intention of the section, which is to protect third parties who enter into pre-incorporation contracts with as yet unformed corporations. The person who purports to act on behalf of the corporation is personally liable under the contract. The amendment removes a gap with the wording of the provision by adding the wording "purports to enter into a written contract". The 1989 Ontario Divisional Court decision in Westcom Radio Group Ltd. v. MacIsaac confused the law in this area. In that case, the Court held that the pre-incorporation contract was a nullity because the plaintiff intended to contract with a non-existent company. The pre-incorporation contract provision in the Ontario Business Corporation Act, which is similar to CBCA s. 14, did not apply since no contract came into existence. The Westcom decision has been criticized by commentators as narrowly interpreting the legislation, defeating its clear purpose and leading to uncertainty in the law. The 1998 decision of the Ontario Court of Appeal in Szecket v. Huang effectively, although not expressly, overruled this decision and it is now clear that Westcom no longer represents the law in this area. The proposed amendment is consistent with the interpretation given to the provision in Szecket v. Huang.

Similar Provincial Laws  
The Business Corporations Act (Saskatchewan)

Current Wording  
14. (1) Subject to this section, a person who enters 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 the benefits thereof.

(3) Subject to subsection (4), 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 fixing obligations under the contract as joint or joint and several or apportioning liability between or among the corporation and a person who purported to act in the name of or on behalf of the corporation and on such application the court may make any order it thinks fit.

Proposed Wording  
14. (1) Subject to this section, 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.

(3) Subject to subsection (4), 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 entered into, or purported to enter into, the contract in the name of or on behalf of the corporation. On the application, the court may make any order it thinks fit.