In 1763 the French ceded control of their North American colonies to England in the Treaty of Paris. Up to that time the French voyageurs had dominated the fur trade in most of the area, but they found themselves increasingly displaced by Scots businessmen moving into the Montreal area. A huge number of partnerships formed with Scottish money and French manpower, and several attempts were made to formalize the arrangements, all of which failed for one reason or another.
Simon McTavish gathered together a number of Montreal merchants in the winter of 1783 - 1784 and set up the North West Company. There was some dissension, and the firm of Gregory and McLeod remained separate until 1787. The shareholders were the trading companies of Montreal and the wintering partners, the men who did the actual trading for fur with the native population.
Hostility between McTavish and several of the shareholders eventually led to several of them splitting off to form their own partnership, known unofficially as the XY Company. In 1802 Alexander Mackenzie gained control of this company, but when McTavish died in 1804 Mackenzie and his partners re-joined the North West Company.
The Nor'westers were aggressive traders, and started encroaching on the areas in the north controlled by the Hudson's Bay Company even before their own company had officially formed. There was some rivalry, but things didn't get serious until Thomas Douglas, 5th Earl of Selkirk, gained a controlling interest in "the Bay" in 1810 and decided to put a stop to the Nor'westers. He did so by starting the Red River Colony in Nor'wester territory in what is today southern Manitoba, and soon fighting had broken out.
This caused serious political problems in England, eventually causing the government to force the two companies to merge in 1821. The new company retained the name of the "Hudson's Bay Company", but comprised mostly North West personnel.