Is Your Business Corporation Compliant With Canada’s Business Corporation Laws?
Does Your Corporation Keep An Updated Minute Book? Do You Prepare Annual Resolutions and File Annual Returns?
Do you know that the Ontario Business Corporations Act (“OBCA”) and the Canada Business Corporations Act (“CBCA”) require every business corporation registered in Canada to stay compliant with Canada’s business laws by preparing their annual minutes/resolutions, maintaining an updated corporate minute book and filing their annual returns? Founders and owners of privately held corporations often forget this important aspect of their business corporation, leaving their business liable for an offence under the law. This Article explains what your corporate minute book is and how automating its update by engaging a Virtual Minute Book can save your corporation.
What Is A Minute Book?A minute book is a binder that contains all your corporation’s records as a business and legal entity from incorporation to dissolution. According to the law, minute books should be kept at the corporation’s registered office or at any other place in Canada designated by the directors, usually the lawyer’s office. Your minute book should include corporate records such as your:
- Articles of Incorporation
- Articles of Amendment
- Articles of Amalgamation
- Article of Continuance
- Corporate Bylaws
- Organizing resolutions
- Annual Minutes and resolutions of shareholders and directors
- Corporate agreements such as loan agreements or shareholders’ agreements
- Ledgers and registers
- Copy of filed Form 1
- Copy of filed Annual Returns
- All corporate decisions
Why Should I Keep My Minute Book Updated?
- To obtain a Business Loan or Financing
Banks, credit unions or other lenders would typically request an inspection of your minute book before financing. By having an updated minute book, you are showing that your corporate house is in order and you are creditworthy. - To Sell Your Business
At a point in your business life, an attractive acquisition opportunity might surface. You will want to show your prospective purchaser that the corporation is in a good financial position. A minute book that is not updated, or that has inconsistent information, may delay the completion of a purchase deal or outrightly prompt your prospective purchaser to take the deal off the table, causing the transaction to fail. - To Attract Investors
Prospective investors want to know how your corporation is doing before investing. An updated minute book shows credibility and is attractive to investors. - For Corporate Audit Purposes
Auditors should be able to review the history and current happenings in the corporation immediately to avoid extra costs and penalties for the corporation. - It is a legal obligation
Corporations are required by law to hold annual shareholder’s meetings or pass a written resolution in lieu of meetings. Minutes of such meetings are to be filed in the minute book. As highlighted below, the CBCA and OBCA clearly state their position about this important aspect of your business corporation.
Common Reasons From Business Owners For Failure To Update Minute Books
- The difficulty of access to the minute book
- Out of sight is out of mind
- The erroneous belief that the minute book is in the lawyer’s office hence they are taking care of it
- Ignorance of the legal obligation to keep minute books constantly updated
- Ignorance of the fact that accountants no longer automatically file annual returns when filing a corporation’s tax returns
Regardless of the reasons given, the provisions of the law are clear regarding this issue. Section 140(2) of the OBCA provides that every corporation should maintain updated corporate records. Section 20(6) of the CBCA and Section 258(1) of the OBCA provides that any corporation that fails to maintain its corporate records is guilty of an offence and on conviction is liable to a fine not exceeding five thousand dollars. The law also requires that your Annual returns be filed within six months of your corporation’s year-end. Directors may be subject to fines if they do not comply with the legal obligation to file corporate annual returns and for a CBCA corporation, the government may take steps to dissolve the corporation, if an annual return is not filed within sixty days of its anniversary date. Note that this is one of the offences that could lead to the corporate veil being pierced.
The Virtual Minute Book By Rabideau Law Is Here To Help
In view of the discussions above and as a way of its continued support of small to medium businesses, Rabideau Law has created the Virtual Minute Book Program. This Program takes the responsibility of filing annual returns and updating minute books on a yearly basis away from the business owner by automating the process and ensuring:
- your annual returns are filed in a timely fashion
- your annual resolutions are prepared
- you have access to your updated minute book at any time and anywhere you are as long as you have internet access
The experienced business lawyers at Rabideau Law are here to help your business succeed. For more information about subscribing to the Virtual Minute Book Program, contact a member of the Rabideau Law Business Law Practice Group here.
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The blog published by Rabideau Law is intended as general information only and does not serve as legal advice. By viewing the blog posts, the reader understands there is no solicitor-client relationship established. Readers are urged to consult the business and corporate lawyers at Rabideau Law on business-related concerns.