Quebec Business Corporations Act

I just got back from a seminar on the new Quebec Business Corporations Act (“QBCA”). These proposals will replace the current Quebec Companies Act in its entirety. When the new law is enacted (probably within 1 year) all companies currently incorporated under Part 1A of the current law will automatically become QBCA corporations.

UPDATE: The new Act received royal assent on February 19, 2010, and will be in full effect by the fall. See the press release from Revenue Quebec.

The new act incorporates all the best features of the CBCA and other provincial statutes, billing itself as the most modern of Canada’s corporations acts.

The term “company” will no longer apply to Quebec charters; they will now be known as “corporations”.

Some of the features of this new act that are most interesting to me as a tax practitioner are:

Incorporation: The incorporation process will be much easier. Online incorporation will be available, and no name search report will be required.

Ability to issue par value shares: OK, this one already exists in the current law, but it will continue in the QBCA, which remains an advantage over the CBCA. This facilitates the use of “high/low” stock dividends in corporate reorganizations.

Ability to issue different classes of identical shares: The CBCA currently allows this, although few people are aware of it. This feature will facilitate the payment of discretionary dividends.

Corporate incest allowed: The QBCA will allow shares of a parent company to be held by its subsidiary for a period of 30 days. This will be a big help to those of us doing corporate spinoffs and other internal reorganizations.

Fractional shares permitted: Very often, when performing a reorganization, shares are split up into fractions. The old law did not allow such shares to exist. Now it will, but not upon an issue from treasury.

Amalgamations: Short-form amalgamations will be much easier, and will include sister companies where the shares are owned by an individual.

Dissolutions: There will be a much more streamlined method for dissolution, including the elimination of the need to put an ad in the newspaper.

Directors: There will be no requirement for directors to resident in Canada.

That’s just a small sampling of the more interesting features of the coming law. Of course, the list is by no means exhaustive. If you are truly interested in this topic, you can  read the entire text of Bill 63, either in English or in French.

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