If you have not maintained annual resolutions for your corporation, you should address this issue immediately. Both the Business Corporations Act (Ontario) (“OBCA”) and the Canada Business Corporations Act (“CBCA”) require annual corporate resolutions to be maintained and it is an offence not to maintain corporate records. In addition to maintaining annual corporate resolutions, an CBCA Corporations must file a Form 22 – Annual Return along with the prescribed fee ($20.00) within 60 days following the corporation’s anniversary date.
All OBCA and CBCA corporations, no matter how small and inactive they are, must hold at least one annual meeting of shareholders every year. At this meeting, 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.
These four points are further examined below. In addition to holding an annual meeting of shareholders, there must also be a directors meeting. As an alternative to holding meetings, an OBCA or CBCA corporation may pass an (1) unanimous shareholder resolution signed by all the shareholders of a corporation and (2) an unanimous director resolution signed by all of the directors of a corporation. If a single shareholder or director is not willing or able to sign a resolution, then the company must hold a meeting. This director resolution and shareholder resolution needs to be signed within 6 months of the corporation’s year end (Section 133 of the CBCA and Section 94 of the CBCA). For example, if the company’s year-end is December 31st, the resolutions must be signed before June 30th.
|Approval of Financial Statements||As part of the annual resolutions, the directors of the Corporation must approve the financial statements and any auditor’s report. (Sections 155 and 159(1) of the OBCA and Section 158 of the CBCA)|
|Signing of Financial Statements||Both the CBCA and OBCA require that Financial Statements, and if applicable, any Auditor Report be manually signed by a Director.|
|Financial Statement Requirements||For CBCA CorporationsAnnual financial statements must consist of at least the following statements:
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:
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)
|Appointment of Officers||If there are any changes to the Officers, they need to be appointed by a Directors resolution. (Section 133 of the OBCA and Section 121 of the CBCA)|
|Consider Financial Statements||The shareholders of a Corporation must receive and consider the financial statements provided to them by directors. (Section 154 of the OBCA and Section 155 of the CBCA)|
|Waiver of Appointment of Auditor||The shareholders of a Corporation will either appoint an accountant or appoint an auditor for the ensuing year. As auditing is costly, Shareholders could exempt the corporation form this requirement. However, this exemption must be unanimously passed by all the shareholders of the Corporation. (Section 148 of the OBCA and Section 163 of the CBCA)|
|Election of Directors||If there are any changes to the Directors, they need to be appointed by a Shareholder resolution. (Section 119(4) of the OBCA and Section 106(3) of the CBCA)|
Failing to Maintain Annual Returns or Annual Resolutions
Should a CBCA company fail to file its annual returns it will be dissolved. Dissolution will prevent the corporation form having the legal capacity to conduct business. While the law allows Corporations Canada to dissolve a corporation after one year of non-filing, it is their policy to only dissolve a corporation when it has not filed its annual return for two years.
Failing to maintain corporate records is an offence. Pursuant to Section 20(6) of the CBCA and Section 258(1) of the OBCA, anyone who fails to maintain corporate records is guilty of an offence and liable on summary conviction to a fine not exceeding five thousand dollars. More importantly, maintaining proper corporate records will help ensure a corporate veil is not pierced. Limitations of personal liability is commonly considered one of the key benefits of incorporation. Failing to maintain corporate resolutions is a factor courts will consider when determining whether to not to pierce a corporate veil. The specifics of the records that must be kept for a corporation can be found in Section 139 to 147 of the OBCA and Sections Section 19 to 21 of the CBCA.
In summary, Corporations must complete annual resolutions, either at a meeting or by unanimously signing a written resolution. Failing to complete such resolutions could have sever repercussions. Pawlina Law can help ensure your corporate records are up to date. Furthermore, we have significant expertise in finding and fixing corporate deficiencies.