Continuance: changing governing statute without dissolving

The short answer: continuance lets a corporation change its constituting statute, for example move from the Québec regime to the federal one or the reverse, without dissolving. The corporation remains the same legal person: contracts, accounts, history and business number follow. It is the cleanest legal move there is.

When is a continuance worth considering?

The classic scenario: a corporation constituted provincially whose ambitions have become national, and which wants Canada-wide name protection and the federal framework. The reverse scenario exists too: a federal corporation whose activities are all in Québec and which wants to simplify its obligations by answering to the registrar alone. Add to those the reorganizations, where the constituting statute of the corporations in a group is harmonized before an amalgamation, a financing or a sale, because certain corporate transactions require the corporations to live under the same statute.

Why not simply dissolve and re-incorporate?

Because it would mean losing everything. Dissolving a corporation and then creating a new one under the other regime means assigning every contract, reopening every account, renegotiating every agreement, transferring every asset with the tax consequences that follow, and starting from zero on credit history. Continuance avoids all of that: the statutes of both regimes expressly provide that the continued corporation keeps its rights, its obligations and its personality. For the business’s partners, almost nothing happens; for its legal frame, everything changes.

How does the procedure work?

Three blocks. The authorizations first: continuance is a major decision requiring the shareholders’ authorization by resolutions in the prescribed form. The export next: the departing jurisdiction must consent to the corporation’s departure, with its formalities and, in Québec, the registrar’s fees. The import, finally: the receiving jurisdiction takes the corporation in by articles of continuance, with its own government fees and requirements, including the name search. That is why our package covers the analysis, the authorizations and the whole Québec side, and why the costs of the receiving regime, which vary with your choice, are quoted to you and submitted for approval before we proceed.

How much time to allow?

A continuance has two administrations talking to each other: expect generally a few weeks between the first resolutions and the final confirmation, depending on the processing times of the jurisdictions involved. A perfectly manageable timetable when the step is anticipated, ahead of a financing for instance, rather than discovered in the middle of a rushed transaction.

The case we see most often

Beyond the large reorganizations, the situation that comes up most in our practice is a good deal more down to earth: the sole shareholder and director who moves to another province.

The scenario is always the same. Someone constituted their corporation in Québec, practised there a few years, then settles in Ontario, Alberta or British Columbia. Their activity follows them, their clientele changes, and their Québec corporation stays behind with its obligations: the annual declaration to the registrar, a head office that must remain reachable in Québec, and sometimes an address left with a relative or a former accountant. That is exactly the configuration that leads to notices never received, and then to being struck off.

No one wants to maintain, from a distance, a structure in a province where they no longer practise. Two avenues then open. A continuance to the federal regime suits the person who keeps business ties in several provinces: the corporation becomes federal and registers where it actually operates. A continuance to the receiving province suits the person whose activity is now entirely elsewhere: the corporation then answers to that province’s law, and the Québec file closes cleanly rather than dragging on.

In both cases the benefit is the same: the corporation keeps its legal personality, its contracts, its accounts and its history, all of which a dissolution followed by a new constitution would lose. The ideal moment is the move itself, before the declarations start piling up.

What continuance changes inside the corporation

What people remember is mainly what does not change: contracts, accounts, history. You also have to understand what does change, because that is where the real legal work lies.

From the continuance on, it is the receiving statute that governs the corporation’s internal life. The rules on the composition of the board, on shareholders’ rights, on the majorities required, on the holding of meetings and, on the federal side, on directors’ residency, become those of the new regime. A share structure perfectly valid under one statute may need adjusting under the other, and the corporation’s by-laws must be reviewed to fit the new text.

That is why a continuance done well is not limited to filing the articles: it comes with a review of the constituting documents, by-laws adapted to the new regime and resolutions adopting them. A corporation that changes statute while keeping by-laws written for the old one ends up with governance that no longer matches its legal framework, which a buyer will spot.

What to verify before starting the procedure

Three points regularly hold files up, and they can be checked in minutes.

The compliance of the departing file. A corporation in default of its declarations, or worse, radiée, cannot be continued as it stands: it must first be brought back into compliance. That step can add several weeks and an unforeseen cost to the project, hence the value of checking it before announcing a timetable to an investor.

The clauses in your contracts. Some financing agreements, some leases and some important contracts contain stipulations about a change in the corporation’s organization. A continuance may, depending on how they are drafted, require prior notice to or consent from the creditor or the counterparty. Discovering them after the fact puts the business in an uncomfortable position.

The registrations and the security. The security published in favour of your lenders, the intellectual property registrations and the sectoral permits are attached to the corporation’s identification. They survive the continuance, but their respective registers must be informed so the information stays consistent.

What continuance does not do

Three expectations come up, and deserve correcting at the outset.

It does not change the corporation’s name. People often take the opportunity to do so, since the name has to be searched with the receiving jurisdiction in any event, but that is a separate decision, with its own consequences, described in our article on change of name.

It does not repair a neglected corporate file. A corporation whose minute book is incomplete arrives in its new regime with exactly the same gaps. A continuance is moreover an excellent moment to do that cleaning up, since the constituting documents are being reopened anyway.

It does not move the business’s taxation. A corporation’s tax regime depends on factors belonging to tax law, not on the statute under which it is constituted. A Québec corporation continued federally does not thereby become taxed differently by that change alone. If your aim is a tax one, it is your accountant you should consult before contemplating a continuance.

To join two corporations rather than change regime, see simplified amalgamation.

Choosing the right moment

A continuance sits badly with urgency, because it brings in two administrations whose timelines you do not control. The ideal moment is a quiet period: no financing under way, no sale negotiation, no tender to submit. Conversely, starting the process because an investor requires it for a closing three weeks out creates needless pressure.

If your thinking is at the stage of choosing a regime rather than changing one, our comparison of Québec or federal sets out the criteria that count, and the receiving regime will determine your future obligations, notably the federal annual return where applicable.

Frequently asked questions

What is the difference between “prorogation” and continuance?

They are two names for the same transaction: a corporation moving from one constituting statute to another while keeping its legal personality. The vocabulary varies from statute to statute; the mechanics are the same.

Does the continued corporation keep its business number and its contracts?

Yes. Continuance preserves the legal personality: contracts, accounts, permits, history and the business number follow the corporation into its new regime. That is precisely its advantage over a dissolution followed by a re-incorporation.

What does a continuance cost?

Our package is $1,999 plus taxes, registrar fees of $263 included, for the analysis, the authorizations and the filings on the Québec side. The fees and set-up of the receiving jurisdiction are added according to your choice of regime; we quote them to you before proceeding.

The current government amounts are set out in the fees of both regimes.