Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether an Alberta Unlimited Liability Corporation is a "corporation" for purposes of the Income Tax Act.
Position: Yes.
Reasons: An Alberta Unlimited Liability Corporation is incorporated under the Business Corporations Act (Alberta) and therefore meets the definition of "corporation" in subsection 248(1) of the Income Tax Act (Canada).
XXXXXXXXXX
XXXXXXXXXX 2005-014145
T. Lanzer
(613) 957-2129
March 15, 2006
Dear XXXXXXXXXX:
Re: Alberta Unlimited Liability Corporations
We are writing in response to your letters of July 11, 2005 and February 10, 2006 asking us to confirm that an Alberta unlimited liability corporation (an "AULC") is a "corporation", as defined in subsection 248(1) of the Income Tax Act (Canada) (the "Act").
Background
The background for your request is as follows:
1. The general statutory corporate law in the Province of Alberta is set out in the Business Corporations Act, RSA 2000, c. B-9, as amended (the "ABCA").
2. Paragraph 1(i) of the ABCA defines the term "body corporate" as including a company or other body corporate wherever or however incorporated.
3. Paragraph 1(l) of the ABCA defines the word "corporation" as meaning a body corporate incorporated or continued under the ABCA and not discontinued under the ABCA.
4. On March 9, 2005, the Government of the Province of Alberta introduced Bill 16, entitled the Business Corporations Amendment Act, 2005, in the Legislative Assembly of Alberta.
5. Bill 16 was enacted on May 2, 2005, given royal assent on May 10, 2005, and proclaimed on May 17, 2005 by Order in Council 248/2005 (Alberta).
6. Bill 16 provided for the incorporation in Alberta of unlimited liability corporations.
7. More specifically, sections 2 and 9 of Bill 16 added, inter alia, the following provisions to the ABCA:
(a) paragraph 1(kk), which defines the term "unlimited liability corporation" as meaning a corporation whose shareholders have unlimited liability for any liability, act or default of the corporation, as set out in section 15.2 of the ABCA;
(b) section 15.2, which provides that the liability of each of the shareholders of a corporation incorporated under the ABCA as an unlimited liability corporation for any liability, act or default of the corporation is unlimited in extent and joint and several in nature;
(c) section 15.3, which provides that the articles of incorporation, amalgamation, amendment, continuance or conversion of an unlimited liability corporation shall contain an express statement that the liability of each of the shareholders of the corporation for any liability, act or default of the corporation is unlimited in extent and joint and several in nature;
(d) subsection 15.4(1), which provides that the name of every unlimited liability corporation shall end with the words "Unlimited Liability Corporation" or the abbreviation "ULC"; and
(e) subsection 15.4(2), which provides that no person other than a body corporate that is an unlimited liability corporation shall carry on business in Alberta under any name or title that contains the words "Unlimited Liability Corporation" or "ULC".
8. Section 61 of Bill 16 amended section 16(d) of the Interpretation Act (Alberta) (the "IA"). Before this amendment, section 16(d) of the IA read as follows:
Words in an enactment establishing or continuing a corporation . . .
(d) exempt from personal liability for its debts, obligations or acts those individual members of the corporation who do not contravene the provisions of the enactment establishing the corporation; . . .
Bill 16 replaced the phrase "individual members of the corporation" with the phrase "individual members of a corporation that is not an unlimited liability corporation . . . ." Thus, section 16(d) of the IA now reads as follows:
Words in an enactment establishing or continuing a corporation . . .
(d) exempt from personal liability for its debts, obligations or acts those individual members of a corporation that is not an unlimited liability corporation as defined in the Business Corporations Act who do not contravene the provisions of the enactment establishing the corporation; . . .
It is your view that the provisions of the ABCA which are quoted or paraphrased above indicate that an AULC is a "body corporate" and a "corporation", as those terms are defined in the ABCA. As well, section 16(d) of the IA implies that an AULC is a corporation. Accordingly, in your view, an AULC is a "corporation", as that term is defined in subsection 248(1) of the ITA.
In your view, this conclusion is consistent with the following previous technical interpretations:
(a) technical interpretation 9408195, dated June 27, 1994, which took the position that an incorporated company created under the Companies Act (Nova Scotia) is a corporation within the meaning of section 248 of the ITA, notwithstanding that the shareholders of the company have unlimited liability for the debts of the company; and
(b) technical interpretation 9129645, dated March 23, 1992, which took the position that an incorporated company created under the corporate statutes of a foreign jurisdiction is a corporation within the meaning of section 248 of the ITA, notwithstanding that the shareholders of the company have unlimited liability for the debts of the company.
We agree with your analysis and conclusion. An unlimited liability corporation incorporated under the Business Corporations Act (Alberta) would ordinarily be a corporation within the meaning of subsection 248(1) of the Income Tax Act (Canada), notwithstanding that the shareholders of the corporation have unlimited liability for any liability, act or default of the corporation.
The foregoing comments represent our general views with respect to the subject matter of your letter. As indicated in paragraph 22 of Information Circular 70-6R5, our comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency.
Yours truly,
for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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