Business Corporations
The incorporation of a business corporation under the Business Corporations Act in the province of New Brunswick may be done by filing:
Form 1 - Articles of Incorporation
Form 2 - Notice of Registered Office
Form 4 - Notice of Directors
You are able to file your incorporation documents electronically with Corporate Registry.
The provisions of the Business Corporations Act govern what needs to be set out in the Articles of Incorporation in relation to the share structure of a corporation.
The share structure of a corporation must be set out clearly in its Articles. Specifically, the information must be set out on the classes and maximum number of shares that the corporation is authorized to issue and any maximum aggregate amount for which shares may be issued, and:
- If there will be two or more classes of shares, the rights, privileges, restrictions and conditions attaching to each class of shares,
- If a class of shares may be issued in series, the authority given to the directors to fix the number of shares in, and to determine the designation of, and the rights, privileges, restrictions and conditions attaching to, the shares of each series,
- If the shares will be of one kind only, the par value of each share or a statement that the shares are without par value, and
- If the shares are of both kinds, any maximum number of shares of each kind, the par value of each share having par value and a statement that the other kind of shares are without par value;
The above concepts apply equally if you are filing Articles of Amendment, Articles of Amalgamation or Articles of Continuance.
It is important for the corporation to have the right share structure, whether it is a single class of shares or a more complex share structure. If you are not sure of the desired share structure, you should contact your legal or business advisor.
Share Structure - Where the corporation has only one class of shares
If the corporation will only have one class of shares, then pursuant to s.22 (2) of the Business Corporations Act, each shareholder has an equal right
- to vote at any meeting of shareholders of the corporation,
- to receive any dividend declared by the corporation, and
- to receive the remaining property of the corporation on dissolution.
An example of share provisions for a corporation with only one class of shares is as follows: Eg: an unlimited number of no par value Class A shares.
The above is an example only. It may or may not be appropriate to your circumstance. Again, your legal or business advisor should be consulted.
Share Structure - Where the corporation has more than one class of shares
If the corporation will have more than one class of shares, then s.22(3) of the Business Corporations Act applies. This means
- the rights, privileges, restrictions and conditions attaching to the shares of each class shall be set out in the Articles, and
- the rights pertaining to
- voting at any meeting of shareholders of the corporation
- receiving any dividend declared by the corporation
- receiving the remaining property of the corporation on dissolution
must be attached to at least one class of shares but all of those rights are not required to be attached to one class.
Please note by Section 22(4) of the Business Corporations Act, no class of shares shall be designated as preference shares or by words of like import, unless that class has attached thereto a preference or right over some other class of shares.
Where a corporation has more than one class of shares, countless variations exist as to any proposed share structure and the wording of those provisions. One must decide on what rights pertain to voting, dividend and receiving the remaining property of the corporation on dissolution will apply to each class or series of shares.
There is no one standard set of wording that is applicable to any corporation. It is recommended that you consult with your legal or business advisor on the above prior to setting out any proposed provisions. Setting out an inappropriate share structure can affect your legal rights as a shareholder and have business, legal and tax consequences for you and the corporation.
Restrictions on Share Transfers - General
In certain cases a corporation's Articles set out restrictions on share transfers. Proper legal and business advice should be obtained when considering adding or changing existing restrictions on share transfers or deleting any existing restrictions.
Where restrictions are put in the Articles, such restrictions deal, sometimes, with restricting the transfer of shares of the corporation without either the consent of the directors or consent of the shareholders and setting out the required level of consent in either or both situations. (e.g. Consent of the majority
Restrictions on Share Transfers - Securities Act Considerations
The Securities Act, regulations, and rules together known as Securities Laws govern the issuance of securities (shares) by an issuer (corporation) and by security holders that may resell securities. The Securities Laws are administered by the Financial and Consumer Services Commission –New Brunswick (the FCNB) and are amended by the Commission from time to time. Any changes to the Securities Laws are posted on the FCNB website.
The general requirement of Securities Laws is that when securities are sold or traded, the seller must provide a prospectus (information about the securities) to a buyer and must be registered under the Securities Laws to sell or trade those securities. There are many exemptions from the general requirement that can be found in National Instrument 45-106 Prospectus and Registration Exemptions. For this, please visit the FCNB website.
If you wish to incorporate, the following exemptions from the general requirement may be of interest to you:
National Instrument 45-106:
- s. 2.3 Accredited investor
- s. 2.4 Private issuer
- s. 2.5 Family friends and business associates
- s. 2.10 Minimum amount investment
Note that Securities Laws impose restrictions on the resale of securities issued under some exemptions from the general requirement. These restrictions can be found in Multilateral Instrument 45-102 Resale of Securities. Also note that the use of the private issuer exemption is subject to restrictions on transfer being set out in the constating documents of the corporation e.g. the Articles of Incorporation, the Articles of Amalgamation or the Articles of Continuance. Where the constating documents do not contain such provisions, you may wish to file Articles of Amendment to add such provisions to the Articles of the corporation. An example of wording for these provisions in the Articles is:
No securities, other than non-convertible debt securities, shall be transferred without the consent of the directors or shareholders of the corporation expressed by resolution passed at a meeting of the board of directors or the shareholders or by an instrument or instruments in writing signed by all such directors or shareholders.
Caveat: You should obtain legal advice prior to using this suggested wording or any variation of it in the Articles. Also, the above wording may or may not be appropriate for your corporation. Likewise, it may not meet the regulatory requirements of other jurisdictions if the corporation is issuing its securities in another jurisdiction or the security holder or purchaser resides in a jurisdiction other than New Brunswick. The above is for information only. It is not intended as legal advice.
The information on this page is provided in conjunction with the Financial and Consumer Services Commission.
Minimum and/or Maximum number of Directors
The corporation must have at least one director. You may specify the minimum number and maximum number or a fixed number of directors. For further information dealing with the directors of a corporation, please refer to s. 60 of the Business Corporations Act.
Restrictions on Business the Corporation May Carry On
In most cases a corporation does not restrict the business that it may carry on.
A corporation has the capacity and, subject to the Business Corporations Act, the rights, powers and privileges of a natural person. Normally, one would not wish to restrict the business the corporation may carry on. Usually, this section in the Articles of Incorporation is left blank or the word "N/A" or "None" is set out. If, however, you wish to restrict the business, you may do so by setting out "that the business of the corporation is restricted to the following .....", or similar type of wording. It is highly recommended that you consult with your business or legal advisor on any proposed wording and the legal consequences of putting restrictions on the business.
Please note by s.13 (3) of the Business Corporations Act a corporation cannot have the capacity to:
(a.1) to accept from the public deposits within the meaning of the Canada Deposit Insurance Corporation Act, chapter C-3 of the Revised Statutes of Canada, 1970;
(a.2) to execute the office of executor, administrator, guardian of a minor's estate or committee of a mentally incompetent person;
(a.3) to provide services of a fiduciary nature commonly provided by a trust company;
(b) to carry on the business of a loan company or trust company as defined in the Loan and Trust Companies Act or of an insurance company;
(c) to carry on any business or activity if incorporation for the purposes thereof is provided for in any other Act; or
(d) to practice a profession except as expressly permitted by an Act governing that profession.
The above concepts apply equally if you are filing Articles of Amendment, Articles of Amalgamation or Articles of Continuance.
Other Provisions in the Articles
The Business Corporations Act allows the corporation to set out additional provisions in the Articles of Incorporation.
The corporation, with its legal and business advisor, should determine whether any other provisions should be set out in its Articles. Many corporations are incorporated without any additional provisions being set out in the Articles of Incorporation.
The following list some areas where some corporations choose to set out other provisions. This is not a definitive list, nor is it intended to provide advice on whether it should be included in the Articles.
Financial Assistance
Section 43 of the Business Corporations Act deals with the corporation giving financial assistance to any shareholder, director or officer or employee of the corporation. See Act.
In particular, s. 43(1) states as follows:
Please note by s.13 (3) of the Business Corporations Act a corporation cannot have the capacity to:
- to any shareholder, director, officer or employee of the corporation or of an affiliated corporation, or
- to any associate of a shareholder, director, officer or employee of the corporation or of an affiliated corporation, if there are reasonable grounds for believing that
- the corporation is, or after giving the financial assistance would be, unable to pay its liabilities as they become due,
- or the realizable value of the corporation's assets, excluding the amount of any financial assistance in the form of a loan or in the form of assets pledged or encumbered to secure a guarantee, after giving the financial assistance, would be less than the aggregate of the corporation's liabilities and stated capital of all classes.
In some cases, a corporations Articles of Incorporation specifically provide for this:
Notwithstanding section 43(1) of the Business Corporations Act, the Corporation or any corporation with which it is affiliated may directly or indirectly, give financial assistance by means of a loan, guarantee or otherwise:
- to any shareholder, director, officer or employee of the Corporation or of an affiliated corporation,
- or to any associate of a shareholder, director, officer or employee of the Corporation or of an affiliated corporation, even if there are reasonable grounds for believing that
- the Corporation is, or after giving the financial assistance would be, unable to pay its liabilities as they become due, or
- the realizable value of the Corporation's assets, excluding the amount of any financial assistance in the form of a loan or in the form of assets pledged or encumbered to secure a guarantee, after giving the financial assistance, would be less than the aggregate of the Corporation's liabilities and stated capital of all classes.
Pre-emptive Rights
Section 27 of the Business Corporations Act deals with pre-emptive rights of existing shareholders to purchase their proportional number of any new shares to be issued by the corporation.
The corporation and its shareholders must decide whether they are satisfied with the provisions set out in Section 27. Section 27 permits provisions to be set out in the Articles which either eliminate or alter the preemptive rights set out in Section 27.
It is highly recommended you seek legal or business advice on the above prior to deleting, changing or adding provisions in this area.
Summary
The above sets out some of the additional provisions added to Articles of Incorporation of some corporations. The same concepts apply equally if you are filing Articles of Amendment, Articles of Amalgamation and Articles of Continuance.
Security Transfer Act Considerations
The Securities Transfer Act (STA) came into effect on February 1, 2010. The STA deals with transfers of several types of securities such as shares, bonds and other property interests that arise when investments of various kinds are dealt with). The STA is part of a cross Canada initiative to modernize the rules for the transfer of securities on a harmonized basis.
The direct holding rules in the STA have replaced provisions of the Business Corporations Act on share transfers, and will apply to all New Brunswick business corporations, both large and small, whether or not they are publicly traded. However, the Act reinforces any restrictions on transfer that the shares contain. Relevant provisions of the Business Corporations Act were repealed or amended in order to fit with the STA.
The new share transfer rules in the STA do not apply to companies subject to the Companies Act.
If you wish to make changes to the name of your corporation, share structure change and other fundamental changes you may file Articles of Amendment. Section 26 and 113 of the Business Corporations Act set out the legal authority for these fundamental changes.
Articles of Amendment may be filed online by accessing Articles of Amendment - Provincial Business Corporation. Please refer to our FAQ that relates to Prerequisite to filing Articles of Amendment before submitting the Articles to Corporate Registry.
Alternately, you may complete and file the Articles of Amendment by mail. You can download the form at " Forms" on the Corporate Registry site. Please send the original with the fee payment of $212 to Service New Brunswick, Corporate Registry, PO Box 1998, Fredericton, NB, E3B 5G4 or drop off the form at any Service New Brunswick.
Preparing the Articles of Amendment - General
You should be certain what provisions in the charter of the corporation you wish to change. Please refer to your incorporation documents plus any amendments that have been filed to date.
Secondly, when completing the Articles of Amendment, use language that is clear to indicate what you are doing. Are you adding a new provision, changing an existing provision or deleting a provision.
Preparing the Articles of Amendment - Change of Name of the Corporation
In order to change the name of your corporation you must obtain a NUANS (Name Search) report. The NUANS report must have been done within the last 90 days and set out the proposed new name of your corporation. If you are changing the name of your corporation to a numbered corporation a NUANS report is not required. You may want to consult your business or legal advisor to see whether this is a suitable alternative for you. For more information regarding the selection of a proposed name click here.
The name of the corporation must contain the word "Limited", "Limitée", "Incorporated", "Incorporée", or "Corporation" or the abbreviation "Ltd.", "Ltée", "Inc." or "Corp.". These words are called legal identifiers, and identify it as being a corporation. Usually, these identifiers are found at the end of the name of the corporation.
Prerequisite to filing Articles of Amendment
The corporation must approve of the proposed changes to the charter. This is done by having the shareholders approve of the changes by means of a special resolution of the shareholders. A special resolution is a resolution of shareholders passed by not less than 2/3 of the votes cast by the shareholders who voted in respect of the resolution or a resolution signed by all shareholders entitled to vote on that resolution.
You should not proceed to file Articles of Amendment without having obtained the necessary shareholder approval.
In some instances, the draft Articles of Amendment is submitted to the shareholders for approval, whereas in other cases, the shareholders strictly approve of the changes to the Articles (e.g. change to the name of the corporation).
Note: Where a corporation which has a designated number name wishes only to file Articles of Amendment to change its name to a name that is not a number name, shareholder approval is not a prerequisite. The Act permits the directors to approve of the proposed change and to file the Articles of Amendment in that case.
Shareholders Voting on the Proposed Changes
As indicated in the above section, the shareholders must approve of the proposed changes. (see s.113 of the Business Corporations Act)
Where there is more than one class of shares or where a class of shares has a series of shares, shareholders may be entitled to vote separately as a class or series of shares. This is governed by s. 115 of the Business Corporations Act. If you are uncertain whether a particular class or series of shares is entitled to vote separately as a class or series, you should consult with your legal advisor.
Please note that a particular class or series of shares may be entitled to vote separately as a class or series of shares even though the shares of that class or series otherwise does not carry the right to vote [see s.115(2), 115(3)].
When is the Amendment effective?
Upon submitting the Articles of Amendment to Corporate Registry, the office will review the Articles. If satisfactory, a Certificate of Amendment will be issued by the Director under the Business Corporations Act. It will be dated the date of receipt of the Articles of Amendment provided the Articles are in compliance with Act. If not, the dating will be as of the date matters have been rectified and approved by Corporate Registry.
When submitting Articles, you may request that the Articles be given a future date. If you wish to do this, complete the Special Instructions section of the application module. In this case, the Certificate of Amendment will be issued on the date requested. (If will not be issued prior to the date requested).
Exemption
Nova Scotia based corporations, partnerships and sole proprietorships are exempted, effective April 1, 1994, from the general registration requirements under the Business Corporations Act.
Please note the exemption deals only with registration requirements at SNB Corporate Registry. Your business or organization may well need to register with other Government of New Brunswick departments and agencies in relation to activities you do in New Brunswick (e.g. other types of licences and permits).
The relevant legislative and regulation provisions in New Brunswick that govern the exemption in New Brunswick for Nova Scotia corporations is as follows:
Act – section 195.1
Regulation – section 11.1
Do corporations/companies incorporated outside of New Brunswick need to register at Corporate Registry?
The provisions of the Business Corporations Act, require any extra-provincial corporation that carries on business in New Brunswick to either
- register as an extra-provincial corporation per s.196 of the Act, or
- apply to be exempted from the operation of Part XVII (i.e. the requirement to be registered) if the corporation "does not carry on business for the purpose of gain" (see s.194(3) of the Act)
Carry on business is defined in s.194(1) of the Act and is as follows:
194(1) For the purposes of this Part, an extra-provincial corporation carries on business in New Brunswick if
- its name, or any name under which it carries on business, appears or is announced in any advertisement in which an address in New Brunswick is given for the extra-provincial corporation;
- it has a resident agent or representative or a warehouse, office or place of business in New Brunswick;
- it solicits business in New Brunswick;
- it is the owner of any estate or interest in land in New Brunswick;
- it is licensed or registered or required to be licensed or registered under any Act of New Brunswick entitling it to do business;
- it is the holder of a certificate of registration under the Motor Vehicle Act;
- it is the holder of a licence issued under the Motor Carrier Act; or
- it otherwise carries on business in New Brunswick.
We do have a number of circumstances where extra-provincial corporations do not have to register as an extra-provincial corporation or do not need to apply to become exempted from the registration requirement. These circumstances are as follows and are set out in s.195 of the Act or s.11.1 of the Regulations thereunder:
- an extra-provincial corporation required to be licensed as an insurer under the Insurance Act,
- an extra-provincial corporation to which the Foreign Resident Corporations Act applies,
- a licensed extra-provincial company as defined in the Loan and Trust Companies Act,
- a bank incorporated under the laws of Canada
- an extra-provincial corporation incorporated under the laws of the Province of Nova Scotia.
To register as an extra-provincial corporation, go to Registration of an Extra - Provincial Corporation - Information.
To apply to be exempted from registration as an extra-provincial corporation (provided the corporation is a non-profit corporation), go to Exemption of Extra - Provincial Non-Profit Corporations - Information.
You may review these Acts and Regulations by going to Acts and Regulations
Note:
The Province of Nova Scotia has brought into effect on April 1, 1994 reciprocal provisions to exempt New Brunswick based corporations, partnerships and sole proprietorships from the general registration requirements under their Acts: the Corporations Registration Act and the Partnerships and Business Names Registration Act. You may contact the Registry of Joint Stock Companies, Nova Scotia, about their exemption for New Brunswick corporations, partnerships and sole proprietorship by visiting their website.
Securities laws apply to any issuer of securities, incorporated or unincorporated, including those not listed on a stock exchange. The misconception of what is governed by the securities laws results in many start-up and early-stage corporations unintentionally breaking the law because they don’t realize that they are distributing securities in contravention of the law.
The reference point is that every person who "distributes" new securities must disclose certain information to potential investors in the form of a prospectus. This requirement ensures that investors receive sufficient information to allow them to make an informed investment decision. There are exemptions from the requirement to provide a prospectus to a potential investor. These are exceptions which relieve a business from prospectus obligations in certain circumstances. These exemptions can be used to: start a company; reward employees; raise money to finance the development of a business or community venture; reorganize a business; or to sell a business.
More information about available exemptions is available from the Financial and Consumer Services Commission (the FCNB) and their website.
When issuing shares to investor, we urge you to become familiar with the securities laws provisions surrounding issuing and selling shares. You may wish to discuss the above matters with your lawyer and/or the FCNB.
We also note that for most corporations that are not publically listed on a stock exchange, there can be restrictions on the issuance or sale of securities in the corporation's articles or bylaws or that a shareholders' agreement may exist that restricts the issuance and transfer of shares by the corporations and its shareholders. You should seek legal advice whether such restrictions exist when purchasing shares from the corporation or from an existing shareholder.
A person becomes a shareholder by buying shares, either from the corporation or from an existing shareholder. Please review the FAQ on “Raising capital and soliciting investors – Securities Act concerns”. As also stated in that FAQ:
We also note that for most corporations that are not publicly listed on a stock exchange, there can be restrictions on the issuance or sale of securities in the corporation's articles or bylaws or that a shareholder's agreement may exist that restricts the issuance and transfer of shares by the corporations and its shareholders. You should seek legal advice whether such restrictions exist when purchasing shares from the corporation or from an existing shareholder.
Being a shareholder in a corporation, in particular, being a minority shareholder in a corporation, does not normally give you a legal right to manage or supervise in the management of the corporation. The responsibility to manage or supervise the management of the business and affairs of the corporation is given to the directors of the corporation.
Depending on the type of shares you own, you may or may not have the following rights under the Act and as further set out in the articles of the corporation:
- receive notice of and to vote at a shareholders’ meeting
- receive the corporation’s financial statements for purposes of the annual meeting of shareholders
- share in the profits (dividends) of the corporation
- share in the property of the corporation upon dissolution
- elect and dismiss directors
- approve by-laws of the corporation
- appoint the auditor of the corporation (if an auditor is required)
- examine and copy records of the corporation as specified by the Act
- approve major or fundamental changes (such as those affecting a corporation’s legal structure or business activities) as required by the Act
In particular, if you are considering becoming a minority shareholder in a corporation that is not listed on a public stock exchange, you may wish to seek legal advice before deciding to become a minority shareholder. This will give you a better understanding of what you are getting for you investment and what legal rights you will be receiving as a shareholder.
In certain cases, shareholder agreements or unanimous shareholders agreements can alter significantly the business and affairs of the corporation and your rights as a shareholder. Likewise, you may consider, in your particular case, whether such an agreement needs to exist before investing in a corporation. Again, these are situations where it is prudent to seek legal advice before deciding to become a minority shareholder.