What type of record keeping is required for my Corporation?
It is a requirement of both the Canada Business Corporations Act and the Ontario Business Corporations Act to hold annual shareholders and Directors meetings (or to have resolutions signed by all of the voting shareholders or all of the directors in lieu thereof). Although it is very unlikely that the Director (under the Act) would discover and render any fines, both Acts provide minority shareholders with certain rights if the Act is not complied with. Further, if the corporation wishes to dispense with the requirement of an audit all of the shareholders, including the non-voting ones, must sign the resolution.
Will CRA want to see my corporate records if they audit my corporation?
The Minister of Revenue through the Canada Revenue Agency (CRA) on any audit will want to review the minute book of the corporation. Although the contents of the minute book do not guarantee the validity of any transaction, their absence opens a very wide door for CRA to reassess undocumented financial acts of the corporation.
Who might want to review my corporate records?
The lawyer acting for a purchaser of either the corporate assets or the shares of the corporation will want to see the records to make sure they have been kept up to date. The corporate records tell the history of the corporation and, if incomplete, could affect the due diligence required and could prevent the deal from proceeding. Very often missing signatures, over a period of time, will be impossible to obtain due to death or relocation of a shareholder/director. While many lawyers provide a “catch up” resolution for the missing years there is no provision in either the Federal or Provincial Statutes for such a procedure. The result is that a buyer, who develops cold feet, might have grounds to walk away from a transaction if due diligence becomes impossible to perform.
Are there any other advantages of maintaining my corporate record?
The preparation of the annual minutes or resolutions for the shareholders and directors should trigger a review by your lawyer. This is one of the main tools for a lawyer to keep track of the well-being of his or her client. A review of the financial statements and the annual transactions could lead to anything from a proposal under the Bankruptcy and Insolvency Act, to a re organization, including a holding company and/or family trust to reduce or defer taxes. It may also lead to a recommendation to put security in place in favour of the shareholder/owner to protect his/her personal investment in the company.