Corporate Relocation: Continuing Company vs Extra-Provincially Registering
To schedule an appointment, contact our law firm at 403-400-4092 or Chris@NeufeldLegal.com
The implications of a poorly devised advised approach to corporate relocation are rarely discernable at the outset, yet can have serious adverse effects going forward, such that the initial cost of continuing the corporation into the new province is more than compensated for by the reduced costs and administrative demands going forward, together with the avoidance of serious legal issues. As such, the decision for a corporation to continue into a new Canadian province, as opposed to merely extra-provincially registering its existing entity (or worse yet, take no corporate action), is of particular importance to corporate ownership, especially when one weighs in the legal ramifications associated with not continuing the corporation into the new province.
Extra-provincial registration is generally perceived as a simpler process that allows a corporation, incorporated in one Canadian jurisdiction (its original home province or federally), to legally carry on business in another province or territory. This process essentially licenses the existing company to operate elsewhere, meaning it remains governed by the corporate law of its original jurisdiction for internal affairs (e.g., director residency, shareholder rights). In contrast, continuance is a fundamental legal change where the corporation ceases to be governed by its original incorporating act and becomes a new domestic corporation in the new province, fully subject to that province's corporate legislation.
While extra-provincial registration is generally faster and less complex than continuance, it presents its own set of administrative burdens and associated costs (that accumulate with time). The corporation must maintain a registered office in its former home jurisdiction (province), together with appointing an attorney for service / recognized agent, who resides in the former home jurisdiction, to receive legal documents on its behalf, and maintain the corporate documents; which is in addition to the registered office and attorney for service / registered agent that the company has in the province that it relocated to. Maintaining a registered office from afar is not as straightforward a process as it might seem, especially when creditors and potential litigants initiate court action against your extra-provincially registered corporation in its province of incorporation.
Meanwhile, the administrative challenges are compounded by the lack of uniformity across Canada, which do change from time-to-time. Each province and territory maintains its own registry, forms, fees, and rules regarding the registration process and ongoing compliance. This means a single corporation operating in multiple jurisdictions must track and comply with varying annual filing deadlines and distinct reporting requirements for each province where it is registered, in addition to its home jurisdiction filings. The associated costs include the initial filing fee for registration, the ongoing annual renewal/report fees in each jurisdiction, and the costs associated with maintaining a local attorney for service / recognized agent and registered office address.
Bifurcating the business into two provinces (through extra-provincial registration), can also significantly increase professional fees and the complexity of tax reporting and tax filings, which would be much cleaner and concise through a corporate continuance, as the corporation's home jurisdiction and operating jurisdiction are the same. This can also pose challenges with the Canada Revenue Agency and the provincial tax authorities, creating an unnecessary administrative headache and costly professional services to address and rectify (given how complexity tends to breed scrutiny from tax authorities).
By comparison, continuance results in a single, primary jurisdiction of incorporation, streamlining future corporate compliance into one set of provincial rules, eliminating the burden of managing multiple extra-provincial registrations, which poses ongoing added costs and administrative challenges, together with avoiding the potential for significant legal issues emanating from the business' bifurcated business locations (incorporation jurisdiction and operational headquarters jurisdiction).
Providing corporate-commercial legal advice and strategic direction to business enterprises engaged as Alberta provincial corporations or federal corporations, from business formation to corporate governance to contracts and business transactions. Contact our law firm at Chris@NeufeldLegal.com or 403-400-4092 to schedule an initial consultation with a corporate relocation lawyer.
