Common Reasons for Corporate Continuances
Contact our law firm for your corporate legal work at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com
Corporate continuance is a strategic legal maneuver that allows a company to change its corporate jurisdiction (and governing corporate statute) without interrupting its existence. Unlike dissolving a company and re-incorporating it elsewhere, continuance ensures that the corporation's legal identity remains intact, preserving its contracts, property, and liabilities seamlessly. Corporations typically pursue this process when the corporate laws and/or regulatory procedures of their current jurisdiction become restrictive or when a different province offers a regulatory environment that better aligns with their evolving business goals (i.e., differences in provincial tax rates).
One of the most common drivers for continuance is the desire to escape rigid residency requirements for directors. Both at the federal level and with the provinces of Manitoba and Saskatchewan, a specific percentage of the board of directors must be resident Canadians. In contrast, most other provinces, including Ontario and Alberta, have modernized their corporate statutes to remove these residency requirements entirely. International businesses or Canadian companies with foreign leadership often continue into these more flexible provincial jurisdictions to compose their boards with the most qualified individuals, regardless of their citizenship or residency. Furthermore, federally-incorporated companies are subject to ever more stringent disclosure requirements as to their ownership, which almost entirely publicly-accessible on the Internet, with this increasing invasive effort at transperancy not being a preference of ownership, especially foreign-based ownership.
Another significant motivation is the facilitation of complex corporate transactions, particularly amalgamations. Canadian corporate law generally dictates that corporations must be governed by the same statute before they can legally merge (amalgamate) into a single entity. Consequently, if a company incorporated in Manitoba intends to merge with a company incorporated in Ontario, one of the two must often "continue" into the other’s jurisdiction as a preliminary step. This technical necessity makes continuance a routine but critical component of many mergers and acquisitions across the country.
Operational efficiency and modernization of corporate governance also play a key role in the decision to move. Some provincial statutes are more progressive regarding the use of technology, allowing for fully virtual shareholder meetings and digital record-keeping with fewer bureaucratic hurdles. Conversely, older or less frequently updated statutes may impose onerous administrative burdens or outdated procedural rules. By continuing into a jurisdiction with a more "business-friendly" registry and modern corporate act, companies can reduce their annual administrative costs and streamline their internal governance procedures. Similarly, as corporate operations move to a lower taxed provinicial jurisdiction, it is typically preferable to severe corporate ties with the former provincial jurisdiction to reduce confusion as to the basis for provincial tax liability.
As a further tax structuring rationale, corporations may transfer jurisdictions to access specialized corporate structures for tax planning purposes. For instance, Alberta, British Columbia, and Nova Scotia allow for the creation of Unlimited Liability Companies (ULCs), a specific entity type often used by American investors to achieve tax-efficient "flow-through" treatment under U.S. tax laws. A standard corporation might continue into one of these provinces specifically to convert into a ULC, thereby optimizing the global tax position of its parent company or shareholders [more on ULCs]. This ability to tailor the corporation's legal status to specific fiscal strategies remains a powerful incentive for inter-jurisdictional movement.
At Neufeld Legal, our law firm works with corporations looking to continue into alternate jurisdictions for a variety of business reasons, given that most corporate continuances require the engagement of legal counsel to complete the required paperwork for submission to the appropriate governments' corporate registries (i.e., as legal opinions can only be conferred by lawyers); so if you are looking to continue your company into an alternate jurisdiction, contact us at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or via email at Chris@NeufeldLegal.com.