The Act reformed the government of the province of Quebec to accommodate the 10,000 English-speaking settlers, known as the United Empire Loyalists, who had arrived from the United States following the American Revolution. Quebec, with a population of 145,000 French-speaking Canadians, was divided in two when the Act took effect on 26 December 1791. The western half became Upper Canada (now southern Ontario) and the eastern half Lower Canada (now southern Quebec). The names Upper and Lower Canada were given according to their location on the St. Lawrence River. Upper Canada received English law and institutions, while Lower Canada retained French civil law and institutions, including seigneurial land tenure, and the privileges accorded to the Roman Catholic Church. Representative governments were established in both colonies with the creation of respective legislative assemblies; Quebec had not previously had representative government. Along with each assembly was an appointed upper house, the Legislative Council, created for wealthy landowners; within the Legislative Council was the Executive Council, acting as a cabinet for the governor.
In practice, income from the rent or sale of these reserves, which constituted one-seventh of the territory of Upper and Lower Canada, went exclusively to the Church of England and, from 1824 on, the Church of Scotland. These reserves created many difficulties in later years, making economic development difficult and creating resentment against the Anglican church, the Family Compact, and the Château Clique. The act was problematic for both English and French speakers; the Canadiens felt they might be overshadowed by Loyalist settlements and increased rights for Protestants, while the new English-speaking settlers felt the Canadiens still had too much power. However, both groups preferred the act and the institutions it created to the Quebec Act which it replaced.
The Act of 1791 is often seen as a watershed in the development of Canadien nationalism as it provided for a province (Lower Canada) which les Canadiens considered to be their own, separate from the Anglo Upper Canada. The disjuncture between this Canadien ideal of Lower Canada as a distinct, national homeland and the reality of continued Anglo political and economic dominance of the province after 1791 led to discontent and a desire for reform among various segments of the Canadien populace. The Canadien frustration at the nature of Lower Canadian political and economic life in "their" province eventually helped fuel the Lower Canada Rebellion of 1837–38.