CORPORATE TRANSACTIONS & COMPLIANCE BLOG

Extra-Provincial Annual Reports in Canada

By: Karen Redman, COGENCY GLOBAL INC. on Thu, Dec 08, 2016

Extra-Provincial Annual Reports in Canada.jpg

Scenic landscapes, multiculturalism (it’s even a law –the Multiculturalism Act, enacted in 1988), maple syrup, ice hockey and Justin Trudeau; there’s so much to love about Canada! A 2015 report from the Reputation Institute ranked Canada as the most reputable country in the world, based on a variety of environmental, political and economic factors. The World Bank ranked Canada second, behind only New Zealand, for the ease for starting a business. And yet, for all U.S. companies (or any federal or non-Canadian foreign corporation) registered extra-provincially to do business in Canada, there is still the mundane, form filling requirements of the annual report!

General Rule: Register Extra-Provincially and File Annual Report

If you are a federal Canadian entity or a non-Canadian foreign entity (i.e. foreign LLC or corporation) and want to do business in Canada, then you have to register extra-provincially in the province or territory where you wish to conduct business. Furthermore, if you are registered domestically in one province or territory in Canada, then, with a few exceptions, you have to complete the relevant extra-provincial registration to do business in other provinces or territories. The general rule is that when you have an extra-provincial license, you have to file an extra-provincial annual report (with the exception of Ontario where the annual report is part of the corporate tax return).

Legislative Exceptions to the Rule: Nova Scotia and New Brunswick

The neighboring provinces of Nova Scotia and New Brunswick have worked together for several years on various partnership agreements with the understanding that it enhances competitiveness, improves productivity, contributes to workforce development/availability and positively influences issues of mutual interest by streamlining practices, removing duplication and harmonizing regulations and practices between the provinces.[1]

This concept of reducing and better aligning regulations in both provinces  was further cemented in 2015 when the two governments announced  that they would work together to create a new Joint Office of Regulatory and Service Effectiveness that will be responsible for promoting a modern, consistent and fair regulatory environment for both provinces.[2]  In line with this thought model, both Nova Scotia and New Brunswick have had regulations in place since 1994 exempting their domestic entities from having to extra-provincially register in the other jurisdiction. For example: In the Nova Scotia Corporations Registration Act, Section 3(1) states that the Act applies to corporations generally. However, Section 3(3) allows the designation of a province that is exempt from registration (where that province provides the same exemption). In March 1994, the Governor in Council of Nova Scotia set out the Province of New Brunswick Exemption Designation

With this exemption designation, any New Brunswick domestic corporation can do business in Nova Scotia without registering. Therefore, there is no requirement for the New Brunswick entity to file an annual report in Nova Scotia. Nova Scotia has a similar act for partnerships and New Brunswick has reciprocating provisions in their statutes.

NWPTA and Automatic EP Registration Between British Columbia, Alberta and Saskatchewan

The New West Partnership Trade Agreement (“NWPTA”) created a single economic region encompassing British Columbia (BC), Alberta and Saskatchewan. Alberta and British Columbia already enjoyed the benefits of a streamlined registration process under the Trade Investment and Labour Mobility Agreement effective April 27, 2009. This Agreement also eliminated the requirement to file an extra-provincial (EP) annual report in the non-domestic jurisdiction. With NWPTA, this seamless corporate registration process was extended to Saskatchewan and also, a Saskatchewan company no longer needed to file an extra-provincial annual report in BC or Alberta or vice versa effective July 1 2012.[3]  

The NWPTA is different from the arrangement between Nova Scotia and New Brunswick. There, if you are registered domestically in one of the provinces, you can do business in the other without an EP license. With the NWPTA, businesses registered in one province are now able to seamlessly register in the other provinces at the same time as their original incorporation. The entity must still register as an EP and Appoint an Attorney for Service, but all registration takes place where the entity is domestic. For example, if the entity is domestic in British Columbia, the extra-provincial license for the other two jurisdictions must be completed and filed only in BC; this rule includes changes and amendments. The extra-provincial registration filing fees are waived. When the domestic registrant files their domestic annual report, that annual report is sufficient for their NWPTA partners. For our example above, when the British Columbia domestic entity files its annual report, the two other provinces will remain in “good standing”.

Canada Does Not Recognize LLCs

Canada does not recognize the LLC as an authorized form of a domestic business entity. However, each province and territory allows foreign LLCs to apply for an extra-provincial limited liability company license to do business in that jurisdiction. In Alberta, there is an extra requirement of a legal opinion from a lawyer in the LLC’s home state certifying certain conditions. Once the LLC becomes an extra-provincial registrant, it is obligated to file the requisite extra-provincial annual report.

 

As you can see, the requirements for business registration and filing annual reports in Canada vary greatly depending on whether the business is domestic or foreign and also based on which provinces are involved. To ensure your business remains in compliance, you may want to work with an experienced service company that can assist you with both extra-provincial transactions and annual reports.


[1]
Preamble of the New Brunswick – Nova Scotia Partnership Agreement on Regulation and the Economy (PARE)

[2] http://www2.gnb.ca/content/gnb/en/news/news_release.2015.03.0216.html

[3] http://www.newwestpartnershiptrade.ca/faq_business_investor.asp

 

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: International Corporate Services