Is Your Corporation Up To Date?
Do you own a corporation? Have you updated your corporate records each year as required by the Business Corporations Act (Ontario)? Have you routinely filed information returns in accordance the Corporations Information Act when you have moved offices or changed directors? If you haven’t, what does this mean for your corporation?
What does the Business Corporations Act (Ontario) Require?
The Business Corporations Act (Ontario) requires a corporation’s directors and shareholders to prepare annual resolutions in which each director and shareholder approve the annual financial statements of the corporation, among other routine business and corporate matters.
Most small businesses run as corporations do not prepare these resolutions. How detrimental can this be to the legal veracity of the corporation? Can the government shut down the corporation? The answer, yes it can.
Can These Issues Be Fixed?
In order to rectify the status of the corporation, first we must determine the nature of the deficiency. If the corporation has not been dissolved by the government, then all that is needed to bring the corporation back in order is ratifying and rectifying resolutions together with omnibus annual resolutions of the directors and shareholders. If the corporation has been dissolved by the government, then you will need to file Articles of Revival to revive the corporation. Either way, we can help.
My Corporation Has Been Dissolved
A corporation may be involuntarily dissolved (cancelled) by order of the Director of the Companies and Personal Property Security Branch (CPPSB) under the Business Corporations Act (Ontario) for reasons such as:
- The corporation has not maintained the required number of directors;
- The corporation has not maintained the required number (at least 25 per cent) of resident Canadian directors;
- The corporation has been convicted of an offence under the Criminal Code of Canada or any federal statute or an offence as defined in the Provincial Offences Act, and cancellation of the certificate is in the public interest; or
- The corporation has engaged in conduct that is oppressive to its minority shareholders, directors or any other person who is effected by the corporation.
In all cases, the CPPSB will send a letter called a ‘Notice of Dissolution’ to the registered office of the corporation which will give the corporation an opportunity to be heard and to rectify the deficiency. Only in circumstances where no response is provided by the corporation will the CPPSB proceed to dissolve the corporation.
If you are concerned that your corporation may have been dissolved without your knowledge, we will conduct a search of the corporate registry in Ontario, or Canada as the case may be, to confirm whether it is still in existence. If it is not, we will assist you in preparing Articles of Revival together with all of the necessary resolutions to revive your corporation and bring it into good standing so that it may continue to conduct business.
My Corporation Has Not Been Dissolved
Once we confirm that your corporation has not been dissolved by searching the corporate registry, we will proceed to prepare ratifying and/or rectifying resolutions together with omnibus annual resolutions. These are required under law (OBCA). Further, should your corporation be audited by the Canada Revenue Agency (CRA), one of the first documents the CRA will ask for is the minute book and corporate records for the corporation. For this reason, you want to ensure that your corporate records are up to date.
Ratifying resolutions are required where there have been no annual resolutions approving the financial statements each year, but no other major changes have occurred in the corporation that need rectification. Ratifying resolutions simply affirm that all acts of the directors and officers for the period of time in which there has been no resolutions, is approved, ratified and confirmed.
Rectifying resolutions are required where there have been no annual resolutions approving the financial statements each year AND there have been defects in the corporate records or substantive changes have occurred to the corporation that went undocumented. For instance:
- If shares were transferred to one’s children or spouse, but were not reflected in the minute book;
- If shares were held by an individual who died many years ago, but the shares were never transferred to his or her beneficiary; or
- A director had resigned but no new director was elected and no information return was filed with the government.
In these cases, a rectifying resolution is needed in which these deficiencies are corrected. As well, a statutory declaration of the director or officer is required in which the person with knowledge of the corporation confirms what was not documented.
In both cases above, omnibus annual resolutions will be needed in addition to the ratifying or rectifying resolution. An omnibus annual resolution is simply an annual resolution that covers more than one fiscal year. If for instance, the corporation did not prepare annual resolutions approving the financial statements since 2012 then the omnibus resolution we prepare would cover the 2012, 2013, 2014, 2015 and 2016 fiscal year periods. If dividends were issued or management bonuses declared then separate resolutions will be required.
We Can Help
No matter what your corporate issue is, we can solve it.
If you suspect your corporation has not prepared the required paperwork for many years, speak to one of our corporate lawyers about the status of your corporation and what we can do to help!
Written By: Shira Korolnek, associate corporate lawyer.
Case Law
Twomey v. The Queen, 2012 TCC 310 – Where errors are discovered in corporate records, a taxpayer may be able to correct the errors using correcting resolutions
**Disclaimer
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
Kendal Steele