Benefit of Incorporation: PERPETUAL EXISTENCE

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 or Chris@NeufeldLegal.com

Perpetual existence, with respect to a corporation, means that the corporation's legal existence is not tied to the lives of its shareholders, directors, officers, or employees, and instead the corporation exists as a separate legal entity and can continue to operate indefinitely.

The Core Principle of a Corporation's Perpetual Existence

• Independent of Individuals: Unlike a sole proprietorship or a partnership, a corporation does not cease to exist if an owner dies, becomes incapacitated, or decides to leave the company. This provides a level of stability and continuity that is crucial for long-term business planning, investment, and operations.

• Transfer of Ownership: Shares of a corporation can be easily bought, sold, or transferred without affecting the corporation's ongoing existence. When a shareholder dies, their shares become part of their estate and are transferred to their heirs or beneficiaries as outlined in their will or estate plan. The corporation itself continues to operate as usual.

• Stability for Stakeholders: Perpetual existence builds confidence among investors, creditors, employees, and customers. They can be assured that the business will continue to exist, honour its contracts, and fulfill its obligations regardless of changes in its ownership or management. This makes it easier for corporations to secure financing, attract talent, and build long-term relationships.

The Perpetual Existence of Corporation from a Practical Perspective means:

• When a Shareholder Dies: If a shareholder, even a sole shareholder, of a corporation passes away, the corporation does not automatically dissolve. The shares become part of the deceased's estate. The executor of the estate will then manage these shares, which can be transferred to the beneficiaries, sold to other shareholders, or even redeemed by the corporation itself, all according to the corporation's articles of incorporation and any existing shareholder agreements.

• When a Director Dies: Similarly, if a director passes away, the corporation's existence is not affected. The remaining directors, or the shareholders, will follow the process outlined in the corporate bylaws to appoint a new director. If the deceased was the sole director, the shareholders (or the executor of the deceased's estate if they were also the sole shareholder) must appoint a new one to ensure the corporation can continue to be managed.

A Corporation's Existence can come to an End

While a corporation has perpetual existence, it is not immortal. Its existence can be terminated through a legal process. The most common ways for a corporation to cease to exist are:

• Voluntary Dissolution: This is a deliberate decision by the shareholders and directors to close the business. The process involves a special resolution by the shareholders, followed by a formal liquidation process to settle all debts and obligations and distribute any remaining assets. The final step is filing articles of dissolution with the relevant government body (federal or provincial).

• Involuntary Dissolution: A corporation can be dissolved by a government authority (like Corporations Canada) if it fails to comply with certain requirements, such as failing to file annual reports or not having a director for a specified period. This is often referred to as being "struck from the register."

• Bankruptcy: While a corporation that declares bankruptcy ceases its operations, its legal existence does not immediately end. It continues to exist until the bankruptcy process is complete and the company is formally dissolved.

In summary, perpetual existence is a defining feature of a corporate entity, providing stability, continuity, and ease of ownership transfer. This principle allows the corporation to outlive its founders and owners, making it a robust and attractive structure for a wide range of commercial activities and pursuits.

For businesses seeking the potential benefits associated with incorporation, which can be financially significant if properly integrated into one's commercial enterprise, contact our law firm to engage the professional services of an experienced incorporation lawyer. Contact our law firm to schedule a confidential consultation at 403-400-4092 or via email at Chris@NeufeldLegal.com.

* Please note that the flat rates associated with a standard incorporation are strictly limited to a basic incorporation (provincial or federal) and does not involve other matters that might be corrollary to the incorporation process or might be atypical for a standard incorporation, including but not limited to related legal or tax advice, engagement with other governmental bodies or professional bodies, licensing, drafting of pertinent business contracts (i.e., shareholders' agreements), negotiations, disputes, financing, coordination with other companies or other legal structuring.

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