The topics in the Dial-A-Law series provide general information on legal issues within the Province of Alberta. The purpose of this topic is to inform you of your legal rights and responsibilities. This is not legal advice. If you require legal advice, you should contact a lawyer.
This topic will discuss the process of incorporating a business entity in Alberta. This procedure is complex and you are encouraged to consult a lawyer.
To begin, you must select a preferred name for your business, which can be a numbered corporation or a proper name. If you choose to register as a numbered corporation, the number for your business is assigned by the Corporate Registry. For example, the corporate registry name for your business may be “99999 Alberta Ltd”. Numbered companies allow for quick incorporation when there is no practical need to have a named corporation or for reasons of anonymity. For example, a holding company that is incorporated simply to hold land or buildings does not require a name and can just be a numbered company.
On the other hand, if you have a business where a name is better for people to easily identify its services, you should incorporate under an appropriate name. For example, “ABC Plumbing Ltd.” is a name that people can easily identify. The selected or preferred name cannot however be the same name with an existing corporate name, neither can it be confusing nor objectionable. The name must have a distinctive element, a descriptive element, and a legal element. For example, in “ABC Plumbing Ltd.” ABC is the distinctive element, plumbing describes what the corporation does, and Ltd. is the legal part. You may also use a variation of “Limited”, “Corporation” or “Incorporated”, or the abbreviation of these words.
You must obtain a NUANS Report for a named company. To do this, you will contact a private name search company to get advice on the preferred name and to obtain a “search report” on it. A list of private name search companies may be obtained from any Corporate Registry in Calgary or Edmonton, or by consulting the Yellow Pages telephone directory under Searchers of Records. This search will tell you whether there is an existing company with the name you wish to use, or one similar to it. Alternatively, you may want to check the Business Corporations Act and Regulations for rules on corporate names.
The NUANS Report must be registered as part of the documents for incorporation. The NUANS Report must be filed within 90 days of the date the search was made. If you are outside the 90 days when you actually incorporate, you will have to obtain another report.
Other documents required for incorporation, include the business’ “Articles of Incorporation” which you must submit. This document provides the details of the business you are incorporating. It outlines the corporate name, the share structure, restrictions on the transfer of shares, the number of directors, the names and addresses of the incorporators, and restrictions on the corporation’s business. In addition, professional corporations created by a dentist, doctor, lawyer, accountant or optometrist must also provide the approval of the association governing the profession. Also, a “Notice of Address” must be filed showing the address of the registered office of the corporation and the records address if the records are kept in a place different from the registered office address. The “Notice of Directors” must also be filed to show the names and addresses of the directors of the corporation and whether or not they are resident Canadians.
Before a certificate of incorporation is issued, the following incorporation documents must be in order:
- NUANS Report (original report no more than 90 days old)
- Articles of Incorporation
- Notice of Address
- Notice of Directors
A fee is then paid to the Corporate Registry after which a Certificate of Incorporation is issued to confirm the existence of the corporation as a legal entity as per the date of the Certificate.
The corporation should then be organized to begin the business. The directors and the shareholders each have responsibilities for the organization of the business. For example, the directors adopt the by-laws and the shareholders must confirm them at their next meeting. By-laws are the corporation’s internal management rules and regulations. They set out such things as voting rights, procedures for director and shareholders’ meetings, and document signing authority. Also, the shares of the corporation must be issued, the officers appointed, and the necessary documents approved for banking. You should consult a lawyer when drafting the by-laws and other organizational documents. A corporate seal should also be adopted. A seal is not required for most documents signed by an officer or agent of the corporation, but your bank may insist upon one. Accountants and possibly auditors must also be appointed.
Know your responsibilities to keep your company registered on the Corporate Registry’s active records. For example, you must file an Annual Return every year. The Return must have the current information about your corporation and its shareholders. If the Returns are not filed on an annual basis, your corporation will be dissolved and it is expensive to revive the corporation. You are also required to advise the Registry of any changes in your address, or changes in the directors.
Directors are elected by shareholders, and they bear responsibility for overseeing and managing the affairs of the corporation. Directors are also responsible for hiring, firing, and appointing officers of the corporation. Directors owe a duty of loyalty to the corporation and the shareholders, and must act in the best interest of the corporation. If directors perpetrate fraud, self-dealing, or have conflicts of interest, then shareholders may sue directors for breach of trust and recover damages from the directors personally.
Directors may also accrue personal liabilities in many cases. For example, directors may be held personally liable for unpaid employee wages in certain circumstances. Directors may also be held personally liable for unremitted source deductions and payments to the Crown.
Being a director of a corporation comes with significant responsibility and presents many liabilities. Shareholders can transfer some or all of the powers (and liabilities) of directors to themselves by signing an Unanimous Shareholder Agreement. In this scenario shareholders are directly involved in and responsible for the management of corporate affairs.
If the corporation has multiple investors and shareholders, then the shareholders might consider signing a Shareholder Agreement between themselves. The shareholder agreement outlines the respective rights and obligations between the shareholders, and also sets out dispute resolution mechanisms in case disputes arise.
Dial-A-Law is a Calgary Legal Guidance public service project funded in part by the Alberta Law Foundation.