two annual returns and pay two annual filing fees, whereas only one return and one annual filing fee are required for a Québec corporation. Additi onally, 25% of a CBCA’s corporation’s directors must be Canadian residents; there is no residency requirement for QBCA directors. Another potential disadvantage of incorporation under the CBCA is that all corporations which are not publicly traded are req uired to maintain “a register of individuals with significant control over the corporation” (an “ISC”). This is defined as any individual who, as registered holder or beneficial owner, controls any number of shares carrying 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares or equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value. Two or more individuals can each be considered an ISC if they have joint ownership or control of 25% or more of the shares in votes or value. The CBCA corporation must maintain a register containing each ISC’s name, date of birth and address, jurisdiction of residence for tax purposes, the day they became or ceased to be an ISC, and a description of why they qualify as an ISC. This information must be confirmed, and updated if necessary, at least annually and may be maintained at the corporation’s registered office or at any other place in Canada designated by the corporation’s directors (such as the law firm where the minute books are maintained). The information is accessible to shareholders and creditors of the corporation or their personal representatives upon request during the corporation’s usual business hours, and they may obtain an extract from the register on payment of a reasonable fee. The information may not be used by any person except in connection with (i) an effort to influence the voting of shareholders of the corporation ( e.g. , a proxy solicitation); (ii) an offer to acquire

securities of the corporation; or (iii) any other matter relating to the affairs of the corporation. Failure by the corporation as well as its directors and officers to establish or maintain the register without reasonable cause, the recording or provision by a director or officer of false information, and the failure by a shareholder to reply accurately and completely to a corporation’s request for information, are all punishable by fines and a maximum of 6 months’ imprisonment. Similar requirements are at various legislative stages in each province and territory, so this requirement will eventually become universal throughout Canada, regardless of the jurisdiction of incorporation. Unlimited Liability Company (“ULC”) ULCs, which are similar to American limited liability companies (LLCs), can currently be formed only under the laws of the Provinces of Nova Scotia, British Columbia, and Alberta; however, they can hold property in Québec if they register with the REQ. These entities permit flow-through treatment for profits and losses to their shareholders, although tax treaties may impact the ability to use this. However, Canadian ULCs do not provide limited liability protection, and it is therefore common practice to interpose a single purpose holding corporation between the ULC and its shareholder(s). Partnerships / Limited Partnerships These are formed under provincial/territorial law by the agreement of the partners in the case of a general partnership, or the general and limited partners in the case of a limited partnership. General partnerships do not usually require any other formality in order to be created, whereas a limited partnership generally exists only from its registration date. The partnership agreement or limited partnership agreement,

ILN Real Estate Group – Buying and Selling Real Estate Series

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