Corporate law, or corporation law, is the branch of law which deals with the relationship between natural persons, the corporation (the legal entity), and the government. It does this by laying out the regulations starting from its incorporation until its bankruptcy, insolvency, or liquidation.
This law also defines the rights and obligations of the corporation’s directors, officers, shareholders, and representatives or agents. Most activities by the corporation are also regulated by the government, such as the sale and acquisition of investments or capital such as bonds and shares, especially from foreign sources.
What do corporate lawyers do on a daily basis?
Generally, the practice of a corporate lawyer is transactional in nature and seldomly goes to litigation. Most of the time, they work for the compliance of the corporation with the relevant Canadian corporate laws, and alternatively, guide corporations with regards to its intra-corporate legal matters.
Where do corporate lawyers work in Canada?
Canadian corporate lawyers either work in law firms and are assigned to multiple corporations, or are separately hired by corporations or businesses themselves.
Corporate Lawyers and Commercial Laws
Commercial law and corporate law may be separately or jointly practised by one lawyer. This is because corporate matters largely deal with commercial transactions, which includes banking and financing matters, investments and securities, among others. Here, lawyers in this practice area also refer to other laws, such as the Canadian Bank Act and its regulations, in addition to the CBCA.
It should be noted that corporate law can vary from province to province. For those looking for legal advice in Ontario, be sure to find the best corporate lawyer in Ontario for your needs.
Corporate Lawyers and Taxation
Corporate lawyers in Canada are also experienced with taxation laws that are applicable to the corporation they specifically assist. While there are various tax laws and regulations in Canada, an important one applying to corporations is the Income Tax Regulations of the Income Tax Act which applies to all types of corporations (Public, Private, and Other Corporations), such as the filing of income tax returns.
Corporate Lawyers and Contracts
While Canada does not have a federal law governing contracts per se, the law on contracts is governed by common law and its basic principles. In connection with the commercial transactions that corporations engage in are the execution and enforcement of contracts.
As such, the practice of corporate lawyers in Canada involves negotiation, interpretation, perfection, and consummation of contracts that the corporation enters. When there’s a breach in these contracts, that is the time when a corporate lawyer may use litigation or other methods of alternative dispute resolutions to enforce the contract or resolve disputes arising out of the contract.
Corporation Laws in Canada
The Canada Business Corporations Act (CBCA), in addition to principles of common law, and to provincial and territorial laws on corporations, governs corporations in Canada.
Canada Business Corporations Act (CBCA)
Corporate lawyers in Canada guide corporations – whether Private, Public, or Other Corporations – in complying with the provisions of the Canada Business Corporations Act (CBCA).
- Scope: Section 3 provides that the CBCA generally governs federal, for-profit corporations, which are either incorporated before or after CBCA’s enactment. This means that corporations may also be incorporated under provincial or territorial corporate laws which shall be governed by them; and that not-for-profit corporations are governed by other laws, such as the Canada Not-for-profit Corporations Act.
- Incorporation: In Part II, the CBCA lays down the process for those who would want to incorporate under the said Act, and provides for its requirements, such as the Articles of Incorporation.
- Capacity and Powers: The CBCA in Section 15 provides that a corporation has the capacities, rights, powers, and privileges similar to that of a natural person in Canada. For example, this grants corporations to acquire properties or transact commercial business under its corporate name.
- In addition, Part X and Part XII of the CBCA has also listed the capacities, powers, and obligations of the corporate directors, officers, and shareholders, subject to the common law principle of “corporate veil”. This principle separates the identity of the corporate directors, officers, and shareholders against the corporation. However, the principle of “corporate veil” has exemptions (when it can be “pierced”), such as when the corporate directors, officers, and shareholders acted negligently or fraudulently which incurred damage to the corporation. This would make them solely liable to the corporation and/or the injured third party.
- Liquidation and Dissolution: Subject to the provisions of Bankruptcy and Insolvency Act, the CBCA also provides for the process of liquidating and dissolving a corporation as found in Part XVIII, such as the grounds for liquidation and dissolution (Sections 213(1) and 214 (1)); duties and powers of judicial courts in the process; and appointment, duties, and powers of a liquidator (Sections 220, 221 and 222).
Provincial and Territorial Corporate Laws
Provinces and territories also have their own corporate laws, which complements the provisions of the CBCA. In British Columbia, for example, they have the Business Corporations Act; in Ontario, it also has a separate provincial corporate law and is also named Business Corporations Act.
Types of Corporations in Canada
There are different kinds of corporations in Canada, which are governed by different laws and regulations:
- Canadian-Controlled Private Corporation (CCPC)
- Other Private Corporation (OPC)
- Public Corporation
- Corporation Controlled by a Public Corporation
- Other Corporation
They may be further grouped into (1) Private Corporations, (2) Public Corporations, and (3) Other Corporations.
1: Private Corporations
CCPCs are corporations majorly controlled by residents of Canada; otherwise, it would become an OPCs. Foreign or non-residents may still own shares in a CCPC, but when foreign or non-resident shares are larger than that of the shares owned by residents, the corporation loses its being as a CCPC.
Both a CCPC and an OPC are governed by the Canada Business Corporations Act, and both cannot be indirectly or directly controlled by a Public Corporation. Credit unions and cooperative corporations may also fall under the category of CCPCs, subject to certain tax requirements.
2: Public Corporations
Public Corporations, on the other hand, are corporations whose shares are listed on a designated Canadian stock exchange, in comparison to CCPCs whose shares are not listed publicly. These corporations become Public Corporations when they elected to become one themselves, or when the Minister of National Revenue has designated them to be one due to certain considerations on its shareholders and their shares.
Corporations controlled by a Public Corporation are subsidiaries of these Public Corporations; although, Public Corporations may also own subsidiaries which are Private Corporations in nature.
3: Other Corporations
Other Corporations are neither Private nor Public, and these may include Crown corporations (either owned by the federal, provincial, or territorial governments), general insurers, and to some extent, cooperatives, or credit unions.
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