The Canada Business Corporations Act and other federal laws set forth a fairly narrow definition of a corporate reorganization, primarily applying to corporations that are insolvent, or in other words, bankrupt. In general, insolvent corporations reorganize or dissolve, and those are both obviously forms of reorganization. However, in common usage, reorganization has taken on a broader meaning that can include any number of measures by a corporation that have nothing to do with insolvency or bankruptcy. Anytime a business changes its structure in some way, that is considered a reorganization in the business world. The changes can be minor or significant – reorganization is a flexible tool for business to accomplish any number of goals.
CORPORATIONS REORGANIZE FOR MANY DIFFERENT REASONS
Despite the legal roots of reorganization in insolvency, corporate reorganization in the common understanding covers far more that anything as serious as insolvency actions, including such fairly mundane activities as:
- Changing the articles of incorporation or by-laws
- Changing share provisions, including the issue of shares and the transfer or conversion of shares
- Amending the shareholder agreement, or creating one
- Changing the number of a corporation’s directors or officers, or changing the holders of those offices
- Combining a corporation with an affiliate, known as amalgamation
Other similarly simple changes can be part of a reorganization, as can a combination of any or all of these such acts. Many of these changes are enacted as a business reacts to changes in economic conditions and the way it needs to operate to adapt to those changed conditions. Changes of ownership or management also usually result in a corporate reorganization. In fact, any changes to the structure or purpose of a corporation come with requirements under Canadian law, including such things as:
- Amending articles of incorporation, which is required to change to corporation’s name, the province or territory of the corporation’s registered office, share agreements, the number of directors required or permitted, classes of shares, or any other provisions set forth in the original articles of incorporation
- Amalgamating two or more corporations, essentially merging them into a single corporation
- Reviving a corporation that has been dissolved, restoring the corporation to its original legal status as if it had never been dissolved
- Continuance of an incorporated business, in which a business incorporated under one set of legislation becomes incorporated under different legislation.
- Dissolving a corporation, which entails ending a corporation’s legal existence. This can be voluntary, done at the decision of the directors or shareholders; by order of a court, usually when the corporation has not been following legal requirements for the operation of a corporation, such as holding shareholders meetings or operating as set forth in the articles of incorporation; or administratively, by order of the government, generally when the corporation is simply not operating.
There are other forms of reorganizations, as well, with each carrying its own legal requirements.
IF YOUR CORPORATION NEEDS TO REORGANIZE, TALK TO BEGANYI PROFESSIONAL CORPORATION
Corporations often need to undertake reorganizations, major or minor. You should do so with competent legal guidance. Beganyi Professional Corporation is ready and able to assist with any reorganization your corporation may be in need of in the greater Toronto area, including Mississauga, Brampton, Oakville, Hamilton, and Milton.