Contracts and company law essentials in Canada

Two layers of law

Contract law in British Columbia and Ontario is common law, supplemented by provincial sale of goods and consumer protection statutes. Quebec is a civil law jurisdiction with French-language requirements and is outside the LegalMatrix catalogue. Corporate law is a choice: incorporate federally under the Canada Business Corporations Act (CBCA) or provincially under the British Columbia Business Corporations Act or the Ontario Business Corporations Act. Employment standards, however, are provincial for almost all private employers, so a federal corporation with staff in Toronto follows Ontario's Employment Standards Act, 2000.

Parties may choose the governing law and forum of a commercial contract. Ontario and British Columbia courts enforce foreign choices subject to local mandatory rules, and interest clauses must express an annual rate to be enforceable under the federal Interest Act.

Electronic signatures

The Ontario Electronic Commerce Act, 2000 and the British Columbia Electronic Transactions Act give electronic signatures legal effect where the parties consent, which may be implied from conduct. Part 2 of the federal PIPEDA applies to documents under federal statutes and introduces the secure electronic signature for specified federal purposes. Exclusions are familiar: wills and codicils, trusts created by wills, powers of attorney for personal care or property, negotiable instruments and documents of title, and certain land registry documents that follow their own electronic filing regimes. Ordinary commercial, corporate and employment documents are signed electronically. Corporate seals are optional.

Personal data in commercial contracts is governed by PIPEDA federally and by substantially similar provincial statutes in British Columbia and Alberta (Ontario has none for the private sector, so PIPEDA applies). Service providers must be bound by contract to protect transferred data to a comparable standard, and cross-border transfers require transparency to individuals rather than a prior approval. A data processing schedule is therefore standard in Canadian services and intercompany agreements; check the Office of the Privacy Commissioner for current guidance.

CBCA, BCBCA and OBCA compared

Directors under all three statutes must act honestly and in good faith with a view to the best interests of the corporation and exercise the care of a reasonably prudent person. The differences that matter to foreign-owned groups are residency and transparency. The CBCA requires at least 25 per cent of directors to be resident Canadians; Ontario removed its residency requirement in 2021 and British Columbia never had one. CBCA corporations file their individuals with significant control with Corporations Canada, where most of the information is public; British Columbia maintains a transparency register with public search; Ontario corporations keep a register at the registered office. Check the authority for current public-access rules.

Ordinary resolutions pass by majority and special resolutions by two-thirds. A unanimous shareholder agreement can restrict directors' powers and transfer them to shareholders, which is useful in joint ventures. The oppression remedy (CBCA section 241 and provincial equivalents) is broad and frequently used in private company disputes, so deadlock and exit mechanics belong in the shareholders' agreement. A private company's articles restrict share transfers so that it qualifies as a private issuer under National Instrument 45-106; every issuance and transfer must fit a prospectus exemption. No transfer tax applies.

Employment standards and the Ontario non-compete ban

Ontario and British Columbia require no statutory notice in the first three months of employment, which is why probation clauses are drafted around that window. After three months, Ontario requires one week's notice rising by one week per year of service to eight weeks, plus severance pay for larger employers; British Columbia requires one week after three months, two weeks after twelve months and three weeks after three years plus one week per further year to eight weeks. Courts add common law reasonable notice, often measured in months, unless a termination clause validly limits it. Ontario courts void clauses that could breach the Act in any scenario, so precise drafting is the difference between statutory and common law exposure.

Ontario prohibits non-compete agreements with employees entered into on or after 25 October 2021, with exceptions for the sale of a business and for executives holding chief-officer titles. British Columbia and federally regulated employers rely on the common law, which enforces only unambiguous and reasonable restraints. Non-solicitation and confidentiality clauses remain available everywhere.

Employee equity

Option plans are adopted by the board with shareholder approval where the articles or shareholders' agreement require it, and grants rely on the employee exemption in NI 45-106. Tax treatment follows the Income Tax Act stock option rules, with deferral available for Canadian-controlled private corporations and a stock option deduction whose scope has been the subject of proposals that were announced and then withdrawn in recent years; check the Canada Revenue Agency before setting expectations with employees.

Trade marks at CIPO

Canada moved to a first-to-file system in June 2019 and no longer requires use to register, although a registration may be expunged for non-use after three years. Nice classification is mandatory, fees are charged per class, and the scope of goods and services cannot be broadened after filing. Advertised applications may be opposed within two months. The practical issue is time: CIPO has carried a backlog for years and approximately eighteen to thirty-six months from filing to registration is realistic; check the authority for current wait times. Applicants without a Canadian address must appoint a trademark agent registered with the College of Patent Agents and Trademark Agents. Canada is a Madrid Protocol member.

Checklist

• Choose CBCA, BC or Ontario with director residency and transparency in mind.
• Draft termination clauses to the provincial statute exactly, or expect common law notice.
• Omit non-competes for Ontario employees unless an exception applies.
• Fit every share issuance into a prospectus exemption.
• File trade marks early; registration will take years.