A Canadian subsidiary is one of the most popular options for global entrepreneurs wishing to start and operate a new business in Canada.
To create a subsidiary, you would incorporate in a province of your choice. You can also incorporate federally. If the subsidiary isn’t incorporated federally, you can choose to apply for extra-provincial registrations so you can operate in multiple provinces.
Subject to certain exceptions, a business may incorporate under the federal or any of the provincial corporate statutes. In any case, incorporation is accomplished simply by filing Articles of Incorporation and paying a modest fee to the appropriate government authority.
A number of factors guide the investor in choosing between federal and provincial incorporation. Quite often, due consideration must be given to whether the company needs to protect its business name across the country. While a federal corporation may carry on business in every province under its corporate name, similar rights may not apply to a provincially incorporated company. Thus, an issue could arise if the provincially incorporated company’s name conﬂicts with that of an existing corporation or business entity in another province. On the other hand, provincial incorporation may offer advantages, particularly in situations where corporate operations are restricted to a single province as the business may be conducted in the province of incorporation as of right without the need for further registration.
Canadian corporations generally act through a board of directors elected by the shareholders. If the subsidiary is incorporated under the federal statute, at least 25% of the subsidiary’s board must be resident Canadians, defined as Canadian citizens or permanent residents ordinarily residing in Canada. For corporations involved in uranium mining, book publishing, distribution or retailing, or film or video distribution, a majority of the board members of the corporation must be resident Canadians. Provincial corporations statutes also impose a range of differing requirements for the residency of directors. Ontario, for example, requires that 25% of the directors be resident Canadians except where an Ontario corporation has less than four directors, in which case at least one director must be a resident Canadian. Certain other provinces such as British Columbia and Quebec have no residency requirement.
The federal and many provincial corporate statutes permit shareholders to use a unanimous shareholder agreement to partially or entirely restrict the directors’ powers to manage the corporation’s business and affairs.
Things to know
A corporate entity can be formed in Canada either under the federal laws of Canada or the laws of one of Canada’s provinces or territories. The laws applicable to corporate entities in each of these jurisdictions are generally consistent, but there are some important distinctions (some of which are set out in greater detail below).
Generally, corporate entities are formed as limited liability corporations, but certain provinces (including British Columbia, Alberta, and Nova Scotia) provide an alternative form of corporate entity: the unlimited liability company.
Unlimited liability companies are mainly chosen to facilitate favorable tax outcomes. You can also carry on business through a subsidiary formed as a partnership, trust or other types of entity, but special considerations may apply.
Corporate law in certain Canadian jurisdictions requires that the records of a corporation be kept in the jurisdiction of formation.
Things to do
Determine the jurisdiction of formation
- The subsidiary will be governed by the laws of the jurisdiction in which it is formed and the following factors should be considered when making this threshold decision:
- Director residency requirements
- For corporations formed in Ontario, Alberta, Manitoba, Saskatchewan, Newfoundland, and Labrador or under the federal laws of Canada, at least 25% of the directors must be resident Canadians
Where the subsidiary will carry on business in Canada
- If the subsidiary has been formed under the federal laws of Canada, the subsidiary will need to register in each Canadian jurisdiction where business will be conducted
- If the subsidiary has been formed under the laws of a specific Canadian province or territory, the subsidiary will need to register in each Canadian jurisdiction where business will be conducted, other than its jurisdiction of formation
Articles of incorporation
You will need to file articles of incorporation to legally form a corporation, as well as have corporate by-laws
Steps to Form a Canadian subsidiary
Step 1: Choosing a name
When you apply to incorporate a company under the Federal or Provincial Business Corporations Act, you may choose to use a corporate name or have a numbered name assigned to you. Although incorporating under a name involves additional effort and expense, there are advantages to doing so.
A corporate name is an important part of corporate communication and advertising today and can be a very valuable asset. It tells people who you are and will often represent the goodwill that you have built up with your customers and suppliers.
Your name must meet certain requirements before it is approved by the Registries Office:
The name must be distinctive.
The name must not cause confusion with any existing name or trade-mark.
The name must include a legal element.
The name must not include unacceptable terms.
Step 2: Preparing your articles of incorporation
This step establishes the structure of your corporation. However, you can apply to change the structure of your corporation once you are operating.
Your articles of incorporation will need to be signed by the incorporator(s). If an incorporator is a company or other incorporated body, the articles must be signed by an individual authorized by that body. Note that changes to the approved articles can only be made by amendment.
Step 3: Establishing the initially registered office address and first board of directors
The registered office address is where you must keep your corporate records and where official documents will be served on the corporation. Choose an address where you will be sure to receive any documents that are sent there since, legally, they will be assumed to have been received by the corporation. Information about the registered office address is corporate information, and as such, is required to be made public.
Step 4: Filing the appropriate forms and paying the fee
In order to register a new company in Canada, you need to complete and register with the Corporate registries office of your desired province of incorporation the following forms:
Articles of Incorporation
Notice of Directors
Notice of Address
NUANS Report or provincial name search report
Step 5. Complete Bylaws, Organizational Minutes & Issue Shares
After the corporation has been created, its structure must be organized. The organization of the corporation is documented in written form and maintained in the corporate minute book. The initial organization of the corporation is achieved by a meeting of directors or shareholders of the corporation or by written resolutions signed by all directors or shareholders. Included in this initial organization are the following:
approval of corporate by-laws
issuance of shares to shareholders
election of directors
appointment of corporate officers
other organizational resolutions
shareholder agreements (optional)
Step 6. Keeping your Canadian corporation in good standing
To make sure that your corporation continues to benefit from incorporation under Federal and Provincial Business Corporation Act, you need to fulfill certain requirements with the Corporate Registries Office of your desired jurisdiction of incorporation. Depending on the type of requirement, you need to file annually or when circumstances change. Namely, you must:
Filing an annual return: Filing an annual return for a business corporation provides up-to-date information to Alberta Registries.
Filing a change of registered office address: Your registered office address is the official address for communications with your corporation.
Filing changes regarding directors: Interested stakeholders have a right to know who the current directors are and where they can be reached.
Amending your articles: Your articles set out basic information about your corporation.
Step 7. Maintaining corporate records
Your corporation must keep certain corporate records at its registered office (or at some other location in Canada, as set out by the directors).
Step 8. Preparing a Corporate Minute Book
All Canadian corporations are required by law to keep certain corporate records including, but not limited to:
- a copy of the Articles of Incorporation
- all corporate by-laws
- minutes of shareholder meetings
- shareholder resolutions
- minutes of directors’ meetings
- resolutions of directors
- directors register
- Securities register
- share transfer register
- a copy of any forms filed with the government
- a copy of any unanimous shareholder agreement
All of these documents are usually kept in a binder or case known as a corporate minute book. Although there is no specific type of minute book required (incorporators can use a simple binder if they choose), it is useful to have a professional minute book prepared and updated each year to reflect the ongoing business of the corporation. A professionally updated minute book allows for quick organized reference to corporate documents, and is extremely important in a variety of corporate transactions, such as the sale of the corporation to another shareholder (the purchaser’s lawyer will usually want to examine the corporate minute book in advance of the sale to ensure that all legal requirements have been met by the corporation).
Canada Subsidiary Registration service
Company Formations provides fast and easy Canada Subsidiary Registration service and provides all the documents your new Canada corporation will need to stay up-to-date and in compliance with your province of registration corporations law.
$2200 (All Inclusive)
Our Canada Subsidiary Registration Service includes:
- Name Search Report
- Preparation of Articles of Incorporation and Incorporation Documents
- Incorporation Agreement
- By-Laws, Company Minute Book, Share Certificates
- Canada Registered Agent Service for 1 year
- Government Fees
- Our Service Fees
- Original Certificates
- Copy of Documents in PDF