{"id":32046,"date":"2008-03-26T16:35:41","date_gmt":"2008-03-26T21:35:41","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/nova-scotia-unlimited-companies.html"},"modified":"2008-03-26T16:35:41","modified_gmt":"2008-03-26T21:35:41","slug":"nova-scotia-unlimited-companies","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/corporate-governance\/nova-scotia-unlimited-companies.html","title":{"rendered":"Nova Scotia Unlimited Companies"},"content":{"rendered":"<section class=\"fl-gutenberg-byline\">\n    <div class=\"fl-gutenberg-byline-content\">\n                    <p><em>This article was edited and reviewed by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\" rel=\"noopener\">FindLaw Attorney Writers<\/a><\/em><\/p>\n\n                | Last reviewed\n        <time>\n                            May 07, 2026\n                    <\/time>\n    <\/div>\n\n    \n    <div class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-legally-reviewed\">\n        <h2>\n            <button tabindex=\"0\" aria-expanded=\"false\">\n                <i class=\"fl-gutenberg-byline-icon\"><\/i>\n                Legally Reviewed\n            <\/button>\n        <\/h2>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>This article has been written and reviewed for legal accuracy, clarity, and style by <a href=\"https:\/\/www.findlaw.com\/company\/our-team.html\" rel=\"noopener\">FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with <a href=\"https:\/\/www.findlaw.com\/company\/company-history\/editorial-policy.html\" rel=\"noopener\">our editorial standards<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/div>\n\n    <div class=\"fl-gutenberg-byline-toggle fl-gutenberg-byline-fast-checked\">\n        <h2>\n            <button tabindex=\"0\" aria-expanded=\"false\">\n                <i class=\"fl-gutenberg-byline-icon\"><\/i>\n                Fact-Checked\n            <\/button>\n        <\/h2>\n\n        <div class=\"fl-gutenberg-byline-toggle-content\">\n            <p><em>The last updated date refers to the last time this article was reviewed by FindLaw or one of our <a href=\"https:\/\/www.findlaw.com\/company\/our-team\/contributing-authors.html\" rel=\"noopener\">contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please <a href=\"https:\/\/lawyers.findlaw.com\/?fli=bylinelink\" rel=\"noopener\">contact an attorney in your area<\/a>.<\/em><\/p>\n\n        <\/div>\n    <\/div>\n<\/section>\n\n\n\n<div class=\"rxbodyfield\" xmlns:o=\"urn:www.microsoft.com\/office\" xmlns:st1=\"urn:www.microsoft.com\/smarttags\" xmlns:w=\"urn:www.microsoft.com\/word\" xmlns:x=\"urn:www.microsoft.com\/excel\"><p align=\"center\" class=\"MsoNormal\"><i><span lang=\"EN-CA\">The <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> unlimited company is the only Canadian entity treated as a corporation<\/span><\/i><i><span lang=\"EN-CA\">for Canadian tax purposes but also eligible to be &#8220;disregarded&#8221; for tax purposes in the <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">United States<\/st1:country-region><\/st1:place>.<\/span><\/i><i><span lang=\"EN-CA\">Accordingly, any adviser to US companies with interests in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region>, or to Canadian<\/span><\/i><i><span lang=\"EN-CA\">companies with interests in the <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">U.S.<\/st1:country-region><\/st1:place>, will want to consider whether (or, more often, how) his or her<\/span><\/i><i><span lang=\"EN-CA\">client can make use of a <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> unlimited company.<\/span><\/i><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">NAFTA and its predecessor, the Canada-US Free Trade Agreement, have generally made it easier for Americans and Canadians to do business throughout North America without regard to borders, and the Nova Scotia unlimited company, or &#8220;NSULC&#8221; (sometimes pronounced &#8220;ensulk&#8220;), has been routinely used to provide tax-efficient structures for cross-border investment. As a Canadian incorporated entity, the NSULC is a resident of <st1:country-region w:st=\"on\">Canada<\/st1:country-region> for the purposes of the <i>Canada Income Tax Act<\/i> (the &#8220;CITA&#8221;) and, as such, is taxable in <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">Canada<\/st1:country-region><\/st1:place> on its worldwide income. An NSULC is also a resident of <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">Canada<\/st1:country-region><\/st1:place> for the purposes of the <i>Canada-US Tax Convention<\/i> (the &#8220;Convention&#8221;).<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">By way of some examples, NSULCs are used:<\/span><\/p><blockquote dir=\"ltr\"><p class=\"MsoNormal\"><span lang=\"EN-CA\">&#8226; by US companies making Canadian acquisitions (including asset and share acquisitions);<br\/>&#8226; by <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">US<\/st1:country-region><\/st1:place> persons acquiring interests in Canadian partnerships (to qualify as a &#8220;Canadian partnership&#8221; as defined in the CITA and receive preferential tax treatment as compared to foreign partnerships, all partners must be Canadian residents. Using an NSULC to hold the partnership interest of a <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">US<\/st1:country-region><\/st1:place> resident maintains the Canadian partnership status for Canadian tax purposes);<br\/><\/span><span lang=\"EN-CA\">&#8226; by US persons with existing Canadian holdings seeking a more tax-efficient, or at least tax-transparent, corporate structure;<br\/>&#8226; by Canadian and <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">US<\/st1:country-region><\/st1:place> persons making investments in the other country to maximize the tax benefits of cross-border financing arrangements;<br\/><\/span><span lang=\"EN-CA\">&#8226; by Canadians emigrating to the US seeking to avoid double taxation on their Canadian holdings and to trigger an increased cost base for US purposes (an amendment proposed to the Convention in 2000 may eliminate the necessity of using a NSULC to create cost base for US purposes, but the amendment is pending, and the required US election regulations have not been created. As a result, most practitioners continue to use costbump procedures for emigrating Canadians);<br\/>&#8226; by US companies wishing to hire Canadians but without permanent Canadian establishments; and<br\/>&#8226; by US entities involved in significant lease-financing transactions with Canadians.<\/span><\/p><\/blockquote><p class=\"MsoNormal\"><span lang=\"EN-CA\">Other innovative uses of NSULCs have also been developed by tax advisers to address particular issues and particular circumstances. The vast majority of these reflect the major advantage of the NSULC: Both under the so-called check-the-box regulations for international entity classification issued by the US Treasury Department and Internal Revenue Service effective January 1, 1997, and under the rules in place before that time, the NSULC acts as a flow-through, either as a partnership or as a branch, depending upon whether it has more than one shareholder.<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">Why Nova <st1:place w:st=\"on\">Scotia<\/st1:place>?<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">There is nothing new about unlimited companies, nor have they been designed to meet a particular need of tax planners or to create a &#8220;Delaware North&#8221; in <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place>. The <i>Nova Scotia Companies Act<\/i> has allowed unlimited companies since 1900. There is no evidence that the NSULC was seen, even in the year it was introduced, as having any useful purpose, following the adoption by the <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> legislature of what was then the state-of-the-art corporate statute, the <i>English Companies Act<\/i>.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">English legislation had adopted the unlimited company in the early phase of the development of corporations to provide promoters with the ability to give more comfort to creditors and the public regarding the creditworthiness of their businesses while enjoying the other benefits of the corporate format. Because the unlimited personality, is capable of suing and being sued, can have perpetual existence and issues securities capable of easy transfer, its existence did provide a major advantage over a true partnership. That particular use of unlimited companies fell away as creditors and the public became more comfortable with the limited liability concept when dealing with limited corporations.<\/span><\/p><p class=\"MsoNormal\"><st1:state w:st=\"on\"><span lang=\"EN-CA\">Nova Scotia<\/span><\/st1:state> <span lang=\"EN-CA\">was by no means the only province to adopt the English legislation; an English model statute was already law in <st1:state w:st=\"on\">British Columbia<\/st1:state> and was later adopted by <st1:state w:st=\"on\">Alberta<\/st1:state>, <st1:state w:st=\"on\">Saskatchewan<\/st1:state> and <st1:state w:st=\"on\"><st1:place w:st=\"on\">Newfoundland<\/st1:place><\/st1:state> as they entered confederation. <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place>, however, is the only Canadian province to not only adopt English model legislation but also to maintain it with most of its original features to the present day. The reasons for this are attributable to the overall conservatism of the province&#8216;s institutions and to the piecemeal approach generally taken to legislative reform. As a result, the Nova Scotia Companies Act retains features long viewed as anachronistic but that have, especially over the past 10 years, proven most useful.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Going back to 1990, many <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> lawyers would have favoured an overhaul of the Act. The ability to incorporate three kinds of companies&#8212;companies limited by shares, companies limited by guarantee and unlimited companies&#8212;struck no one as being particularly useful. Unlimited companies, if anyone noticed them at all, seemed to be throwbacks to the days before limited liability became identified as a sine qua non of corporate status. While for their own peculiar reasons unlimited companies had seen a renaissance in the <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">United Kingdom<\/st1:place><\/st1:country-region> during the 1960s, this was well outside the experience of most Nova Scotians, and it seemed unlikely that any similar rebirth would occur here.<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">The Revival<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">In the early 1980s, at least one (and to our knowledge, only one) unlimited company was incorporated, presumably to take advantage of the so-called four factors test then used by the IRS to determine whether an entity was to be taxed as a corporation or as a partnership. The four factors test (really six factors, but only four were ever at issue) allowed an entity to be taxed as a partnership if it &#8220;failed&#8221; to have at least two of the four indicators of corporate status. One of these four indicators was limited liability.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">By 1980 no other province in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region> (except Newfound-land, until it overhauled its corporate statute in 1986) could provide a corporate entity that so clearly failed one of the tests. The other three tests&#8212;limited life, freely transferable shares and centralized management&#8212;were also easier to fail in <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> as a result of the flexibility of its legislation. However, for whatever reason, using NSULCs did not catch on during the &#8216;80s. Certainly <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> lawyers did not yet recognize what they had to offer and accordingly did not promote them to their American cousins.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Beginning in 1992 as a trickle and escalating substantially with the adoption of the check-the-box regulations in 1997, NSULCs have proven indispensable to cross-border transaction planning. Happily, this coincided with post-NAFTA North American corporate integration and the tech boom. But even the reduction in cross-border activity, and in M&#038;A transactions generally, since late 2000 has not caused a major slowdown in their use. Throughout this period new uses&#8212;for example, as part of income trust structures&#8212;arose, and previous structures were refined. We expect that as the <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">US<\/st1:place><\/st1:country-region> economy rebounds, demand for NSULCs will be substantial.<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">Creating an NSULC<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Unlimited companies, like all other companies formed under <i>the Nova Scotia Companies Act<\/i>, are incorporated by filing with the Registrar of Joint Stock Companies a signed memorandum and articles of association (effectively a contract among the shareholders and the company), accompanied by a lawyer&#8217;s declaration concerning the propriety of the incorporation and one or two other simple documents. Since the check-the-box regulations came into force, the cost of creating such a company has been reduced substantially; no longer is it necessary to have all aspects of the company carefully vetted by expert US tax counsel (although they should still be involved), nor is it usually necessary to compromise the flexibility available in a Nova Scotia company to reach the desired tax status. Since the check-the-box regulations were enacted, the documentation for forming NSULCs has become largely standardized. (We note that in April 2002, <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> implemented a &#8220;tax&#8221; on the formation of NSULCs, which effectively increases the government filing fee to C$3,000. This has not appeared, in most cases, to have affected the overall economics of their use).<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Unlike the <st1:country-region w:st=\"on\">UK<\/st1:country-region>, <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> does not have a simple procedure for moving from limited to unlimited. However, by combining several mechanisms available under the Act, an existing corporation existing virtually anywhere in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region> can be &#8220;converted&#8221; into an NSULC. The process involves &#8220;continuing&#8221; the corporation from its current jurisdiction of incorporation to the Nova Scotia jurisdiction, and then &#8220;amalgamating&#8221; that company with a shell company (traditionally an NSULC but now&#8212;to avoid paying the tax referred to above&#8212;most often another limited company) created for that purpose.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">While an amalgamation is normally a nontaxable event, for Canadian tax purposes, it has the drawback of giving rise to a year-end, which is sometimes problematic. There are also cases in which the amalgamation can raise other Canadian or US tax concerns. Accordingly, <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> lawyers have recently began using the &#8220;plan of arrangement&#8221; procedures in the <i>Companies Act<\/i> to effect such conversions without amalgamation. Again, this process has arisen as an innovative use of existing materials to fashion a procedure not expressly provided for by statute. Because the plan of arrangement is more legally complex and involves two court hearings, its use remains primarily for those cases where an amalgamation is not a practical option. The Supreme Court of Nova Scotia recently issued a decision that confirms the availability of this procedure, which will likely increase the use of said procedure.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">At this point, we have been involved in conversions of companies from virtually every Canadian jurisdiction. Only companies incorporated under the <i>Quebec Companies Act<\/i> (which does not permit continuance out) cannot be converted in this way. Even where this method is not available, one can ordinarily find a tax-effective method to transfer assets from the existing company to an NSULC, accomplishing the same goal.&#160;&#160;&#160;&#160;&#160;&#160;&#160;<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">The True Nature of the Unlimited Company<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">The essential nature of unlimited companies remains somewhat of a mystery to many considering using an NSULC. One reason for confusion is that their similar names and functions, NSULCs are often confused with limited liability companies (&#8220;LLCs&#8221;) of the type incorporated under US state laws.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Many also make the understandable, but incorrect, assumption that an unlimited entity that is taxed as a partnership must truly be a partnership. Many wrongly assume that to be a corporation, one must have limited liability, an assumption that has no historical basis in Anglo-Canadian law. The fundamental nature of an NSULC is that of a body corporate with separate personality, not significantly different from any other corporation. The Nova Scotia Companies Act makes this perfectly clear, and it is this hybrid nature that makes the NSULC in many cases so much more attractive than &#8220;true&#8221; partnership under Canadian law.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">The only ordinary purpose for which an NSULC is a &#8220;partnership&#8221; or &#8220;branch&#8221; is for <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">US<\/st1:place><\/st1:country-region> tax purposes. This is not so unusual, since the check-the-box regulations recognize similar-type hybrids in virtually every major country in the world.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Among the advantages in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region> of not being a true partnership are the following:<\/span><\/p><blockquote dir=\"ltr\"><p class=\"MsoNormal\"><span lang=\"EN-CA\">&#8226; SULC &#8216;s members avoid the requirement to file their own tax returns in <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">Canada<\/st1:country-region><\/st1:place>.<br\/><\/span><span lang=\"EN-CA\">&#8226; Creditors have no direct rights against the NSULC&#8217;s share-holders. These shareholders only suffer from unlimited liability if the company is liquidated or (perhaps) becomes bankrupt, in which case the liquidator can call upon these shareholders to contribute to any corporate deficit.<br\/>&#8226; Certain Canadian tax rules, including rules under the Canada-US Income Tax Convention, are more favorable to corporations than partnerships in particular circumstances.<br\/>&#8226; As a Canadian corporation, the NSULC is considered resident in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region> for Canadian tax purposes, regardless of where its members are located. This is the opposite of the rule for partnerships.<br\/><\/span><span lang=\"EN-CA\">&#8226; Certain Canadian rules make it very difficult for true partnerships with any American members to carry on business in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region>. However, corporations with substantial <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">US<\/st1:place><\/st1:country-region> participation may be found to have sufficient Canadian content. These sorts of rules are found in areas as diverse as the communications and financial services industries.<\/span><\/p><\/blockquote><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">Dealing with Unlimited Liability<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">The unlimited liability feature does, however, require that most investors using NSULCs take steps to reduce the negative impact of potential liability. As noted, shareholders of an NSULC, unlike partners in a partnership, have no direct relationship with creditors and cannot be sued during corporate existence. However, upon winding up, shareholders are jointly and severally responsible for satisfying any outstanding obligations. Former shareholders within the past year may also be held responsible, even though they are not shareholders at the time of winding up.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">To reduce the impact of liability, it is most common for some sort of limited liability entity to be interposed between the unlimited company and the shareholders&#8217; other assets. So long as this limited entity is properly created under the laws of its incorporating jurisdiction (usually one of the <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">United States<\/st1:place><\/st1:country-region> ) and steps are taken to ensure that its separate limited liability nature will be respected under local law, there should be an effective shield against liability. One thing to keep in mind here: if the shareholder of the NSULC is an LLC (as opposed to a C corporation, S corporation or <st1:country-region w:st=\"on\">U.S.<\/st1:country-region> resident individual), favorable tax treatment given to dividends paid to <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">U.S.<\/st1:country-region><\/st1:place> corporations under the convention may be unavailable, and much of the benefit of the arrangement will be lost.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Unlimited liability also affects companies that wish to issue or pledge their shares to third parties. Most lenders are now fairly sophisticated about dealing with this liability. NSULCs do not, however, for the most part, issue incentive shares or stock options to employees.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">Going Limited<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">We noted earlier in this article that there is no single-step procedure for turning a limited company into an unlimited company. However, perhaps counterintuitively, in the opposite case&#8212;giving shareholders of an unlimited company limited liability&#8212;the Act has a simple procedure that requires only the passing of a resolution and its filing with the Registrar of Joint Stock Companies. This means that an unlimited company that no longer needs the benefits that unlimited liability provides can pass a resolution and reregister itself as a limited company.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Probably upon such conversion, shareholders no longer have any responsibility, even for debts that existed at the time of the reregistration. (In the <st1:country-region w:st=\"on\">UK<\/st1:country-region> there is a three-year period during which these liabilities continue, but no similar provision has ever been enacted in <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> ).<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Once a company has been changed from an unlimited company to a limited company, it can be exported from <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> to another jurisdiction, if that is desirable. One of the reasons why imports and exports are common in <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">Canada<\/st1:place><\/st1:country-region> is because in order to amalgamate two entities, they must both be incorporated under the same laws. While a <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> unlimited company cannot, during the time that it is still an unlimited company, be amalgamated with an entity in any other jurisdiction (since no other province would allow it to remain unlimited), it can always move elsewhere and amalgamate after conversion to a limited company. Alternatively, of course, the limited company with which it wishes to amalgamate can move to <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place>.<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">Ongoing Connections with Nova <st1:place w:st=\"on\">Scotia<\/st1:place><\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">There are few complications in looking after unlimited companies once they have been created, and few ongoing ties to the province are required. Every NSULC must have a registered office in <st1:state w:st=\"on\">Nova Scotia<\/st1:state> at which certain corporate (but not financial) records must be maintained, and must also have a &#8220;recognized agent&#8221; in <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> upon whom documents can be served. Law firms are happy to fill both of these roles for a small annual fee. Other than an annual tax\/fee of C$2,000, no tax filings (and this includes franchise taxes) are required in <st1:state w:st=\"on\">Nova Scotia<\/st1:state> simply because the company is incorporated there, and there is also no requirement that the company have any operations in <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place>. No meetings need ever take place in <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> (although some clients use this as an excuse to go there).<\/span><\/p><p class=\"MsoNormal\"><b><span lang=\"EN-CA\">The Future of Unlimited Companies<\/span><\/b><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Because the NSULC exists only because the Nova Scotia Legislature failed to remove long-unused provisions from local corporate legislation, its features are necessarily less than wholly up-to-date. <st1:place w:st=\"on\"><st1:state w:st=\"on\">Nova Scotia<\/st1:state><\/st1:place> lawyers and, through them, legislators, are beginning to focus on how the NSULC can be brought into the 21st Century without interfering with its usefulness. Continuing concerns exist that reform will ultimately be destructive, and looking at what was lost in other jurisdictions gives little comfort. Some incremental changes are being looked at that should provide further flexibility while not adversely affecting current uses.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">While the &#8220;taxes&#8221; on NSULCs introduced in 2002 are often annoying, their existence also finally gives the <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> government a substantial interest in promoting their use and ensuring long-term viability. Even before the &#8220;tax&#8221;, <st1:state w:st=\"on\"><st1:place w:st=\"on\">Nova Scotia<\/st1:place><\/st1:state> had significantly improved its technology, allowing ready access to information over the Internet and rapid turnaround on processing of most requirements. We expect to see stream-lining of unnecessarily complex procedures (perhaps including limiting those circumstances where court applications are required to effect corporate changes).<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">Much of the NSULC work in the mid-1990s involved reorganizing existing corporate structures for tax transparency. During the tech bubble, NSULCs were used as acquisition vehicles, especially in transactions in which <st1:country-region w:st=\"on\"><st1:place w:st=\"on\">US<\/st1:place><\/st1:country-region> purchasers bought Canadian companies, using their own stock and exchangeable shares. These applications continue to exist and will be used more as the <st1:place w:st=\"on\"><st1:country-region w:st=\"on\">US<\/st1:country-region><\/st1:place> economy heats up.<\/span><\/p><p class=\"MsoNormal\"><span lang=\"EN-CA\">We now see new financial products developed with NSULCs as necessary components. Cross-border income trusts are but one recent example. By combining new applications and more user-friendly corporate law developments, we expect to see the popularity of NSULCs continue to increase.<\/span><\/p><hr\/><p align=\"center\" class=\"MsoNormal\"><span lang=\"EN-CA\"><font size=\"2\">Charles S. Reagh &#8226; Tel: (902) 420-3335 &#8226; Fax: (902) 496-6173 &#8226; Email: <a href=\"mailto:csr@smss.com\">csr@smss.com<\/a><br\/>&#038;<br\/>Paul W. Festeryga &#8226;<\/font> <font size=\"2\">Tel: (902) 420-3302 &#8226; Fax: (902) 420-1417 &#8226;<\/font> <font size=\"2\">Email: <a href=\"mailto:pfesteryga@smss.com\">pfesteryga@smss.com<\/a><br\/><br\/>Stewart McKelvey Stirling Scales<br\/>900 Purdy&#39;s Wharf, 1959 Upper Water St, Box 997,<\/font><\/span> <st1:place w:st=\"on\"><font size=\"2\"><st1:city w:st=\"on\"><span lang=\"EN-CA\">Halifax<\/span><\/st1:city> <span lang=\"EN-CA\"><st1:state w:st=\"on\">NS<\/st1:state> &#160; <st1:postalcode w:st=\"on\">B3J 2X2<\/st1:postalcode><\/span><\/font><\/st1:place><\/p><\/div>","protected":false},"excerpt":{"rendered":"<p>The Nova Scotia unlimited company is the only Canadian entity treated as a corporationfor Canadian tax purposes but also eligible to be \u201cdisregarded\u201d for tax purposes in the United States.Accordingly, any adviser to US companies with interests in &#8230;<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_categories":[6475,6474],"class_list":["post-32046","corporate","type-corporate","status-publish","hentry","corporate_categories-corporate-governance__business-organization","corporate_categories-corporate-governance"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate\/32046","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=32046"}],"wp:term":[{"taxonomy":"corporate_categories","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_categories?post=32046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}