Jurisdiction to Incorporation

Jurisdiction to Incorporation

Corporation is a common business form in start-ups. It is adaptable the changing circumstances and it is the only structure that can take advantage of government programs. When incorporating your start-up, the jurisdiction to incorporation must be considered.
 
Where do the powers come from?
The provincial power is explicit, written under s. 92, para. 11 of the Constitution Act, 1867. The paragraph states that each provincial legislative assembly may individually make laws in relation to the incorporation of companies with provincial Objects. The federal power is implicit, mostly stemming from the general power of the federal government under s. 91 of the Constitution Act, 1867 over peace, order and good government.[1] The power of incorporation is implicit in other enumerated federal powers as well, such as navigation and shipping and the trade and commerce clause.[2]
 
The distinction 
Although it has been determined both federal and provincial governments may enact laws regarding incorporation of businesses, the precise distinction between the federal and provincial power has not been fully determined. The provincial legislation has often been seen as more limited, since the constitution grants only the power for the incorporation of corporations having “provincial objects.” However, the limitation that flows from it has been narrowly interpreted.[3] A corporation may incorporate under provincial law even if it carries business that is closely related to an area with federal jurisdiction, such as banking.[4] A corporation under federal jurisdiction may also choose to limit its business to an object or purpose that is of provincial nature.[5]
 
For a start-up business, finances and efficiency should be an important consideration when incorporating. Compared to the federal process, the provincial incorporation process is lower in fees and lawyers would not have to deal with bureaucrats all the way in Ottawa. Many corporate lawyers like to recommend incorporation in the home province of the company and its counsel for these reasons.

Kara Cao is a member of the BLG Business Venture Clinic and is a second-year law student at the Faculty of Law, University of Calgary.

References
[1] John Deere Plow Co. v. Wharton, [1915] A.C. 330
[2] Referece re Dominion Constitutional Act, s. 110
[3] Bonanza Creek Gold Mining Co. v. R., [1916] 1 A.C. 566 
[4] Re Bergethaler Waisenamt, [1949] M.J. No. 42, 29 C.B.R. 189 
[5] Colonial Building and Investment Association v. Quebec (Attorney General) (1883)