Municipal corporation. Provincial and national corporations?

Factual Questions
1

One of the woolier ideas we were kicking around this past New Years…

Okay, the city of Toronto, where I live, is governed by the Corporation of the City of Toronto, which was created by the province of Ontario. Does the province have a corporation? What about Canada as a whole?

Do these governmental corporations have shares? A board of directors? I presume that that would be the provincial or national Parliament, or City Council, right? I have the feeling this question is either so basic or so silly that no-one usually pays attention to it.

2

The provinces and Canada itself are sovereign entities and have a legal “existence,” for lack of a better term, with which they can conduct business. (You wacky Canadians do it in the name of the Crown, down here we just refer to “The United States” or “The State of New York” as an example of our sovereign entities.)

A question then arises when a sovereign wants to establish a more local government to manage a municipality. It’s a good idea to give that government a legal existence, so it can enter into contracts, have bank accounts, be sued by disgruntled citizens, and so on. So jurisdictions generally have some law about organizing these things with charters and calling them municipal corporations, incorporated territories, or something like that.

Just like a business corporation, a municipal corporation exists to be a legal entity distinct from the people that make it up.

But the word “corporation” doesn’t necessarily imply shareholders or directors. It just refers to any organization chartered by the government to be a distinct legal entity. In lots of states, non-profit organizations are set up as corporations, even though they aren’t owned by anyone. New York calls its cities, towns and villages “municipal corporations,” and so on.

3

It’s not normal to call a national government (such as the Crown in right of Canada, or the United States of America) or a state or provincial government (such as the State of New York) a “corporation”, because hasn’t been incorporated by either a charter or by an act of the legislature, but those governments do have many of the properties of corporations.

And, as friedo said, corporations are not limited to business corporations. They can be non-profit corporations (such as universities), or governmental or semi-govermental organisations.

4

Canada is a sovereign entity; Ontario is a constitutionally established entity. They don’t need to be incorporated.

Toronto is an entity that exists because the law of the Province of Ontario says it does, so it’s “incorporated” in that sense, and could be just as easily un-incorporated by the Province of Ontario.

5

Nope, but structurally, there are similar things. Instead of voting shares, think residents’ votes. Instead of a board of directors, think municipal council.

Think of a corporation as being an entity that in the eyes of the law is somewhat like a person, in that it has enforceable rights and responsibilities. Just like a person, a corporation can make legally binding contracts, can go to court to have its rights enforced, and can have its ass hauled into court if it does not meet its responsibilities.

There are many different types of corporations, such as private and public business corporations with share capital (what you usually think of when you think of a for-profit company), corporations without share capital (typically not-for-profit), personal professional corporatons, co-operative corporations, credit unions and trust companies, and municipal government corporations, to name just a few types.

There is a raft of legislation that sets out what types of corporations can be made, what different rights and responsibilities each type of corporation has, and how each type of corporation is structured. For example, most (but very far from all) businesses formed in Ontario are governed by the Ontario Business Corporations Act, while municipalities in Ontario (which are created by the provincial government) are corporations primarily governed by the Ontario Municipal Act, 2001. (Since Toronto is the cente of the universe, it has its own act: City of Toronto Act, 2006).

If you compare the Ontario Business Corporations Act and the Municipal Act, 2001, you will find that they are very different beasts, for the corporations that they govern have very different reasons for existing – one for commerce and the other for local government.

How do you control a business corporation that is already in existence? You buy voting shares of it, and uses those votes to get your preferred person elected to the board of directors. The rules of the game are set out in the Ontario Business Corporations Act (and a gazillion other laws).

How do you control a municipal corporation? You move there to get a vote, and you use your vote to get your preferred person elected to council. The rules of the game are set out in the Municipal Act (and a gazillion other laws).

Another way to look at it to think about how to grow, either as a business or as a community. First you start small, selling root beer to passing canoeists outside of your shack in the middle of the bush in northern Ontario (well, ok, the root beer lady was in northern Minnesota, but bear with me). Things are simple. In law, you are a sole proprietorship (or a partnership if you and your sweetie are peddling the pop together), and since there are very few people in the area, you are probably in an unorganized township.

Over the years, you attract a following. In fact, a few thousand people have flocked to you root beer stand, each setting up camp and settling down permanenlty.

You start making serious coin, but you are worried that if you are sued by someone who ruptures their gut due to a witheld belch, you will lose your life savings. To avoid this, you use the business corporations act to create a corporation, you buy its voting shares and elect yourself and your honey to the borad of directors, it hires you for a salary, and you take its profits in the form of dividends. If customers belch their guts out, they sue the corporation, but they don’t get to touch the money that you earned or received as dividends.

Meanwhile, the area is going to the dogs. All these people who moved to be close to you want things. They want roads, busses, water and waste water treatement facilities, and a bylaw prohibiting dogs from running at large. To deal with this, you get the provincial government to use the municipal act to incorporate your township to make it easier for the community to make bylaws about these sorts of things. Everyone who lives in the area gets a vote in who sits on the council that runs the corporation, and by virtue of your exceptional root beer, you get yourself and your honey get yourselves elected, and start making bylaws that determine who the community functions. When the roads wash away, the busses crash, and the water and waste water lines get reversed, the municipal corporation gets sued, not you and your honey.

6

Thanks, everyone. That’s pretty much what I thought, Muffin, but I didn’t know the details or even how and where to find them.