This article provides an overview of the importance and value of following proper corporate procedures
and maintaining proper corporate records.
Corporate Record-Keeping: Is It a Legal Obligation?
A short answer is yes. Companies incorporated federally or in the province of Ontario are legally
required to keep corporate records. Failing to keep corporate records is an offence. Pursuant to Section
20(6) of the Canada Business Corporations Act (“CBCA”) and Section 258(1) of the Business Corporations
Act (Ontario) (“OBCA”), a failure to maintain corporate records is an offence and can potentially expose
the corporation to a fine up to five thousand dollars. 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 19 to 21 of the CBCA.
Failure to hold an annual meeting or to sign annual resolutions, or to maintain the minute book properly
constitutes a breach of the OBCA or the CBCA and can potentially expose the corporation to a significant
Federal and Ontario provincial corporations, regardless of their size, have the following key legal
1. To hold annual meetings or pass annual resolutions, and
2. To file annual return and when applicable, information about certain corporate changes (e.g. a
change of directors or registered office address)
I’m Non-Compliant: Are There Any Consequences?
Yes. A failure to hold annual meetings, submit proper filings or maintain the minute books accurately
can have a range of consequences:
– If your corporation does not file the required notices to the business registry, it may not receive
notices from the government, which can result in the corporation being dissolved and its
property becoming the property of the government. This can result in adverse legal
consequences and expense to rectify the situation.
– In a less extreme case, if the business registry does not have your company’s most recent
registered office address on file, you may miss correspondence from the CRA, other government
authorities, courts, or your creditors. As a result, you may not be able to respond, pay penalties
in time or stay aware of other important letters and requests directed to your corporation.
– Annual resolutions concerning financial transactions that are typically passed by the directors of
the corporation, such as the declaration of dividends, management salaries or bonuses, support
the income tax filing position taken by the corporation.
– A review of the corporate records may be required for an audit by Canada Revenue Agency
(“CRA”). In certain cases, CRA can reassess corporations by insisting that transactions reported
in their income tax returns did not actually happen because the required minute book
documentation was not signed.
– In privately held corporations, the shareholders typically waive the statutory requirement for
audited financial statements and appointment of an auditor. If such waivers are not given by
every voting shareholder, then even a minor shareholder can demand that audited financial
statements be prepared and the corporation may incur significant costs.
– If the shareholders would like to sell their shares or if you have a party who is interested in
purchasing your company or funding your business, a legal due diligence involving a review of
the company’s minute book will often be conducted by the purchaser’s or investor’s lawyer.
– If corporate records are not maintained correctly i.e. by adopting proper annual resolutions,
corporate approvals, maintaining records regarding share issuance, and filing notifications to the
business registries, there may be delays and additional expenses incurred to complete a certain
business-related transaction and, in extreme cases, it may not be possible to complete it.
What is a Minute Book and What is Included in It?
While the laws do not require corporations to keep their records in a specific format and they are not
legally required to have a so- called “minute book”, practically speaking, a minute book is a common and
efficient way to do so. Let’s take a look at what usually goes into a company’s minute book.
Incorporation Stage: once your company is incorporated, the very first documents that you should
include in your minute book are:
– Certificate of Incorporation and Articles of Incorporation
– By-laws and organizational resolutions
– Consent to Act as a Director for each director
– Subscription for Shares
– Share Certificates
– Shareholders’ agreement, if applicable
– Forms filed with the provincial and/or federal government
– Registers and Ledgers
– Register of Individuals With Significant Control
Operational Stage: you should maintain the corporate records of the activities and decisions approved
by the company, its directors and shareholders. These typically include:
– Articles of Amendments or Amalgamation, if applicable
– Minutes of shareholders’ and board’s meetings
– Appointment of auditors
– Exemption from the legal requirement of audited financial statements, if applicable
– Change or reappointment of directors
– Approval of the financial statements
– Change or reappointment of officers
– Change in share ownership
– Other corporate changes (e.g. company name change, registered office address change, change
of directors, etc.)
– Significant agreements for your company
– Dividends paid, and
– Changes to the by-laws.
Do you Really Need a Lawyer?
Yes and No. There is no legal requirement that a business registration or record-keeping can only be
done with the assistance of a lawyer. Today, there are numerous do-it-yourself resources and service
providers that operate online that sell basic templates of minute books. Some of them even claim to
provide you with a completed minute book for a reduced price. However, below are just a few
examples that some of our clients faced when using such resources:
- Blank forms of corporate resolutions, by-laws, registers, ledgers and share certificates without
– In an ideal world, such forms can be used by someone who has relevant
professional training and therefore knows how to complete or adopt them
according to the particular corporation’s needs. However, quite often, business
owners may not be aware of all the requirements and try to figure it out on their
– The incorporators may also forget to complete or sign the forms, which in most
cases may lead to deficiencies, delays, legal consequences, and extra fees paid later.
- Lack of Share Issuance Paid-Up Capital
his deficiency we see quite often with new clients who incorporated themselves online. Online platforms do not provide advice or instructions how to properly issue and pay for shares. The incorporators often try to figure it out themselves again. However, if shares are not properly evidenced or paid for, it may lead to unfavorable legal consequences. For example, Section 23(3) of the OBCA states that a share shall not be issued until the consideration for the share is fully paid in money or in property or past service by the shareholders.
– If no appropriate amount of consideration (or other form of consideration) was passed between the shareholder and the company, likely, the shares have not been issued properly which adds a layer of extra work to rectify these mistakes at a later time.
– Directors of the Corporation may be held personally liable in the event that shares are issued in contravention of the legal requirements, established under the OBCA or the CBCA.
– CRA may audit the Corporation and examine whether or not the shares were fully paid off. If this is not the case, then any dividends issued in connection with such shares may be re-characterized by CRA as loans or some other form of individual benefit.
- Absence of Mandatory Filings, Annual Meeting Records, Registers and Ledgers
– Another common deficiency that we notice frequently in connection with online incorporations is lack of necessary corporate filings. For instance, in Ontario, each corporation must submit an Initial Return under the Corporations Information Act within the first 60 days after its incorporation. This filing is mandatory, but it is the one that is missed quite often.
– Due to the lack of guidance and instructions, shareholders often forget to conduct and record, annual meetings, and then to file necessary information to the provincial or federal registry in order to maintain the corporation’s good status. When such filings are missed for two or more years, the corporation may be subject to dissolution.
– Sometimes, clients order only a limited number of services in connection with the incorporation. This results in obtaining an incomplete minute book without necessary registers, ledgers and other documents. In the extreme cases, clients received just the articles of incorporation without obtaining the minute book at all.
We understand the convenience of incorporating online and agree that clients can absolutely navigate
through the process of incorporation and get the things done without any legal help, if they are familiar
with the legal requirements. However, what people do not know is that they may be missing important
elements of the incorporation, or post-incorporation, process which can place them and their
companies offside with provincial legislation or the Canada Revenue Agency rules. Such deficiencies can
result in significant negative consequences down the road.
How Can Solvis Law Help?
We also understand that the work involved in maintaining minute books for our clients, and the
investment that we make to do this work properly, is not always readily apparent to our clients.
However, when relying on the professional assistance, you will have the following benefits:
– Your team at Solvis Law will prepare the complete minute book and file the necessary
documents in time.
– We prepare the annual minutes or annual resolutions and arrange for them to be signed in
– We use our professional database and other methods to track the year end dates and extra-
provincial registration renewals for each of the corporations.
– Solvis Law can also help to rectify your minute book, update your records in the federal or
provincial registries and file the necessary changes.
– If you wish to check on your company’s details – we can also assist you!
At Solvis Law, we are pleased to provide these services. This allows our clients to focus on the
development of their business rather than worrying unnecessarily about the government penalties, tax
re-assessments, shareholder disputes, lapsed business name, and other costs and inconveniences that
can result from improper record-keeping.
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