When starting a business in Canada, one of the most important decisions is whether to incorporate federally or provincially. In Ontario, this means choosing between being governed by the Canada Business Corporations Act (RSC 1985, c. C-44 (“CBCA”) or the Ontario Business Corporations Act (RSO 1990, c B.16) (the “OBCA”). At first glance, the two systems appear similar. However, there are key distinctions that can significantly affect your business as it grows.
- Jurisdiction and Scope
A corporation formed under the OBCA is primarily governed by Ontario’s corporate laws. It has legal standing across Canada, but to conduct business in another province, it must obtain extra-provincial registration or licensing in those jurisdictions, which can involve additional administrative steps and costs.
On the other hand, federal incorporation under section 15 of the CBCA allows a corporation to carry on business throughout Canada under its corporate name. However, this does not eliminate provincial requirements: a federally incorporated corporation must generally register extra-provincially in each province or territory where it carries on business. While the process is often streamlined and may involve only a notice filing in some jurisdictions, compliance with local registration regimes remains necessary to operate nationwide.
2. Name Protection and Branding
An Ontario corporation’s name is protected only within the province. Under section 9 of the OBCA, the name must not be identical or deceptively similar to an existing Ontario corporation, but that protection stops at the border.
By contrast, a federal incorporation offers name protection across Canada. Section 12 of the CBCA prohibits the registration of any name that is confusing with an existing corporate name. This is particularly advantageous for businesses that operate nationally or internationally, as it provides a stronger claim to the corporate name.
3. Registered Office
An Ontario corporation must maintain its registered office within Ontario at all times under section 14 of the OBCA. The corporation can change its registered office address by directors’ resolution or change to another municipality or geographic township within Ontario by special resolution. However, a corporation cannot relocate its registered office outside of Ontario while remaining an OBCA corporation.
Section 19 of the CBCA says that a Canadian corporation must have its registered office within Canada, in the province specified in the articles. The directors may change the registered office address within the same province specified in the articles. If a CBCA corporation wishes to change the province where its registered office is located, it must amend its articles.
4. Directors and Corporate Structure
Under section 105 of the CBCA, at least 25% of directors must be resident Canadians, or if there are fewer than four directors, at least one director must be a resident Canadian. There are no residency requirements under the OBCA.
Both jurisdictions impose a fiduciary duty on directors to act honestly and in good faith with a view to the best interests of the corporation. The business judgement rule applies in both jurisdictions, and protects directors who make informed, good-faith business decisions.
5. Maintenance and Filings
Ontario corporations must file annual returns with the Ontario Business Registry, while federal corporations file their annual returns with Corporations Canada. Both federal and Ontario corporations can submit their filings electronically through their respective online systems.
Filing fees vary between jurisdictions. Federal corporations pay $200 for incorporation when using online services and $20 for annual returns filed electronically. Ontario incorporation costs approximately $300, with no annual return fees if filed directly through the Ontario Business Registry, although additional fees may apply if a third-party service provider is used.
Federal corporations must submit their annual returns within 60 days of their incorporation anniversary date, while Ontario corporations follow different deadlines based on their specific circumstances under section 3 of the Corporations Information Act. With respect to transparency requirements, corporations governed by the CBCA must maintain and file information relating to individuals with significant control (ISC). This information is submitted to Corporations Canada and is included in a publicly accessible register, subject to certain privacy limitations.
In contrast, Ontario corporations are also required to maintain an internal ISC register under the OBCA, but this information is not currently filed on a public register. However, legislative trends suggest that Ontario may move toward a more public-facing disclosure regime in the future.
6. Continuance and Flexibility
Both the OBCA and CBCA allow continuance, which is a process that lets a corporation migrate from one jurisdiction to another without dissolving and reincorporating.
An Ontario corporation can apply to continue federally under section 181 of the OBCA. Likewise, a federal corporation may continue under the OBCA through section 182 of the CBCA. This flexibility allows businesses to adjust their corporate structure as their operations expand or as regulatory needs evolve. If you are unsure which route best suits your business, our corporate team can guide you through the decision, prepare incorporation documents, and assist with ongoing compliance under either regime.
If you would like more information or assistance regarding any of the matters discussed in this Corporate Alert, please contact our firm.
