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Draft Annual Directors Resolutions and Shareholders Resolutions for Canada (CBCA) or Ontario (OBCA) Corporations

Draft Resolutions Canada Corporations
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Draft Annual Directors Resolutions and Shareholders Resolutions for Canada (CBCA) or Ontario (OBCA) Corporations

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Now that we know why we must maintain annual resolutions for a company, we must also know how to maintain annual resolutions for a company. All Business Corporations Act (Ontario) (“OBCA”) corporations and Canada Business Corporations Act (“CBCA”) corporations, no matter how small and inactive they are, must hold at least: one annual meeting of Shareholders, and one annual meeting of Directors. To fulfill these requirements, meetings must either take place or written resolutions in lieu of a meeting must be prepared and signed by all the Shareholders and all or the Directors of a corporation. These rules apply to all Canadian corporations, even corporations with no business activity in a year. Likewise, all Canadian corporations are required to file a federal tax return each year. There are three parts to annual resolutions: (1) Financial Statements, (2) Directors Resolutions, and (3) Shareholders Resolutions. Each will be further examined below.

(1) Financial Statements

When an accountant prepares your tax returns, they will also likely prepare your financial statements. The contents of these financial statements are substantially the same for CBCA and OBCA corporations.

For CBCA Corporations

Annual financial statements must consist of at least the following statements:

  • a statement of financial position or a balance sheet
  • a statement of comprehensive income or an income statement
  • a statement of changes in equity or a statement of retained earnings, and
  • a statement of cash flows or a statement of changes in financial position.

Financial statements of subsidiaries and of body corporates whose accounts are consolidated into a corporation’s financial statements must be kept at the corporation’s registered office, and these must be made available for examination upon request by shareholders. Annual financial statements must also be prepared using Canadian generally accepted accounting principles (Canadian GAAP) or International Financial Reporting Standards. (Section 71 and 72 of the CBCA Regulations)

For OBCA Corporations 

Annual financial statements must consist of at least the following statements:

  • a balance sheet;
  • a statement of retained earnings;
  • an income statement; and
  • a statement of changes in financial position.

Financial statements are to be prepared in accordance with the standards set forth in the Handbook of the Canadian Institute of Chartered Accountant which includes Canadian GAAP) or International Financial Reporting Standards. (Sections 38 to 42 of the OBCA Regulations)

(2) Directors Resolution

For the second part of the annual resolutions, the Directors of the Corporation must approve the financial statements and one Director of the Board must physically sign the Financial Statements.  Below is a template Directors Resolution for CBCA or OBCA corporations that can assist you with preparing this Directors Resolution. Please note amendments to the template are necessary and that certain situations may require additional steps. A word version of this template is also available: Template Directors Resolution for Canada Corporations

[“Resolution of The Sole Director” -or- “Resolution of the Board of Directors”]  of

[“Name of Corporation”] (the “Corporation”)

Financial Statements

Resolved that the financial statements of the Corporation for the financial year ended [“Financial Year End date, for example, December 31, 2018”] are approved and a Director of the Corporation is hereby authorized to sign the Financial Statements.

The undersigned, being [“the Sole Director” -or- “all of the Directors”] of the Corporation hereby approve the foregoing in accordance with the provisions of the Canada Business Corporations Act.

Effectively Dated [“Must be within six months of Financial Year End date, for example, if your Financial Year end date is December 31, 2018, this date must be June 30, 2019 or earlier”]

_____________________________

[“Directors Name” If the Directors Resolution is completed in writing in lieu of a meeting it must be signed by all of the Directors of the Corporation without exception]

(3) Shareholders Resolution

For the third part of the annual resolutions, the shareholders are required to:

  • consider the financial statements;
  • consider the auditor’s report, if any;
  • appoint the auditor or dispense with the requirement; and
  • elect directors, if necessary.

Below is a template Shareholders Resolution for CBCA or OBCA corporations that can assist you with preparing this Shareholders Resolution. Again, please note amendments to the template are necessary and that certain situations may require additional steps. A word version of this template is also available: Template Shareholders Resolution for Canada (CBCA) Corporations

[“Resolution of the Sole Shareholder” -or- “Unanimous Resolution of the Shareholders”] of

[“Name of Corporation”] (the “Corporation”)

Consideration Annual Financial Statements

Receipt and consideration of the financial statements of the Corporation for its financial year ended on [“Financial Year End date, for example, December 31, 2018”] is hereby acknowledged by the undersigned.

Consideration Auditors Report [Only include this provision if there is an Auditor’s Report]

Receipt and consideration of the Auditor’s report for financial statements of the Corporation for its financial year ended on [“Financial Year End date, for example, December 31, 2018”] is hereby acknowledged by the undersigned.

“Appointment or Auditor/Accountant” -or- “Waiver of Appointment of Auditor”

Resolved that [“Name of Accountant/Auditor”] is hereby appointed as the [“Accountant” -or- “Auditor”] of the Corporation to hold office until the close of the next annual meeting of the shareholders or until the firm soon ceases to hold office;

-or-

Resolved that the appointment of an auditor of the Corporation in respect of the financial year of the Corporation ending [Financial Year End date, for example, December 31, 2018”] be dispensed with.

Election of [“Director” -or- “Directors”] [Only include this provision if Directors are being elected]

Resolved that the following are hereby elected the [“Director” -or- “Directors”] of the Corporation to hold office until the next annual meeting of shareholders or until their successors have been elected or appointed:

[“Name or Names of Directors”]

The undersigned, being [“the Sole Shareholder” -or- “all of the Shareholders”] of the Corporation hereby approve the foregoing in accordance with the provisions of the Canada Business Corporations Act.

Effectively Dated [“Within six months of Financial Year End date, for example, if your Financial Year end date is December 31, 2018 this date must be June 30, 2019 or earlier”]

_____________________________

[“Shareholder Name” If the Shareholders Resolution is completed in writing in lieu of a meeting it must be signed by All of the Shareholders of the Corporation without exception]

Conclusion

Every situation is unique, and many corporations will require additional resolutions, approvals, and rectifications. Pawlina Law is prepared to help you ensure you are compliant with the requirements of the CBCA. Lastly, it should be noted that failing to maintain corporate records is an offence. Pursuant to Section 20(6) of the CBCA, anyone who fails to maintain corporate records is guilty of an offense and liable on summary conviction to a fine not exceeding five thousand dollars.  For this reason, immediate action should be taken.

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