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Running a business

What Is the Canada Business Corporations Act, and Why Does It Matter?

The Canada Business Corporations Act (CBCA) is the federal law that regulates business structures in Canada. The law acts as a kind of clearinghouse for Canadian corporate structures, in that it defines what a corporation is, how it should be organized and run, what counts as a “Canadian-owned” business (and thus deserves special tax breaks), and how financing may be handled. The CBCA covers the rules for founding a corporation or other business structure in Canada, the reporting requirements it operates under, and the approved procedure for dissolving the company when it closes up. The Act also goes over some of the forbidden activities for Canadian companies. Insider trading is covered in part XI of the law, and “going-private” or “squeeze-out” transactions are listed in part XVI. The CBCA grants authority to the government to regulate corporate practises and investigate alleged breaches of the law. Many of Canada’s smaller-scale corporate laws draw their authority from the CBCA, as well as their inspiration, so that the CBCA is essentially the guidepost for Canada’s secondary business laws. Provincial laws are generally compatible with the CBCA to prevent conflict. Since its adoption in 1985, the CBCA has come to cover an estimated 284,000 companies doing business in Canada, and its provisions guide the actions of virtually every major player in the Canadian economy, from sole proprietorships to major multinationals doing business in the country. Understanding the CBCA and applying its provisions to your own business practices is an important part of running a for-profit entity in Canada. Don’t hesitate to consult with a professional who knows the law to be sure you understand the rules you’re doing business under.

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