Canada has federalism as a political system. From a legal perspective, this signifies that some areas of the law are shared between the federal and provincial governments, who can both enact laws to regulate the same field. It is the case in the business sector: in addition to the federal Canada Business Corporations Act (CBCA), some provinces have their own law, allowing entrepreneurs and companies to choose to incorporate at the federal or the provincial level. This is the situation in Quebec, which has its very own Quebec Business Corporation Act (QBCA).
If you wish to obtain more detailed information about the QBCA, and be advised on the legal decisions of your Canadian company, do not hesitate to contact the Law Office of S.Grynwajc.
What is the Quebec Business Corporation Act (QBCA) ?
The Quebec Business Corporation Act came into force on the 14th of February, 2011 and replaced part I and part IA of the former Companies Act in order to modernize Quebec’s legislative framework regarding business law while harmonizing it to its federal counterpart. It applies to all business corporations or company constituted, continued, or formed as a result of an amalgamation under the QBCA.
Who are the directors of the corporation under the Quebec Business Corporation Act (QBCA) ?
The directors play a crucial role in corporate governance and are the representatives of the legal person that is the corporation. They must exercise their functions with prudence, diligence, honesty and loyalty and must therefore act in good faith.
Being a shareholder is not required to become a director under the Quebec Business Corporation Act. The board of directors has many powers and obligations, some of which may not be delegated, such as authorizing the issue of shares, declaring dividends, etc.
What about the shareholders ?
The shareholders play an important role in a corporation’s life under the Quebec Business Corporation Act (QBCA). Annual meetings of the shareholders entitled to vote must be held, during which the board of directors reports back to the shareholders by presenting them the balance sheet and the financial statements. It is generally during this meeting that the shareholders elect the board of directors for the following year, as well as the corporate auditor. In addition, the corporate bylaws, which run the inner workings of the corporation, must always be approved by the shareholders.
All of the shareholders can unanimously agree to restrict the powers of the board of directors to manage or supervise the management of the business and affairs of the corporation through a unanimous shareholder agreement. The sole shareholder can likewise restrict or withdraw all powers from the board through a written declaration. Some formalities are required under the Quebec Business Corporation Act (QBCA) and the Act respecting the legal publicity following such an agreement.
Under the QBCA, minority shareholders also have particular rights to protect their interests and make their voice heard : if the corporation is a reporting issuer or has 50 or more shareholders, any shareholder holding at least 1% of the capital or a value of 2000 $ of the corporation’s shares during the six months preceding the annual shareholders’ meeting may submit any matter or proposal. Moreover, when some conditions are reunited, it gives rise to the right for any shareholder to demand the repurchase of their shares by the corporation.
Why choose the Quebec Business Corporation Act (QBCA) ?
When operating solely on the territory of Quebec, it is cheaper and simpler to operate under the Quebec Business Corporation Act, since the company is incorporated by the delivery of the articles of corporation to the Quebec Corporate Registry, who will register the corporation at the same moment. As for the corporations that are created under the CBCA but wish to do business in Quebec, they will have to file a separate registration declaration and pay an additional fee.
Furthermore, the Quebec Business Corporation Act (QBCA) offers a greater flexibility on some levels. For instance, and contrary to the Canada Business Corporation Act (CBCA), the QBCA has no requirements when it comes to the place of residence of a corporation’s directors. The Quebec Business Corporation Act also permits the issue of par value shares or shares that aren’t fully paid.
To learn more about the Quebec Business Corporation Act (QBCA), the Canada Business Corporation Act (CBCA) and about doing business in Quebec or in Canada, contact the Law Office of S. Grynwajc today. Stephan Grynwajc is admitted in Quebec and Canada, and he understands all of their local and federal requirements.
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This article was written in collaboration with Irina Gueorguiev