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Running a Corporation
By Jessica A. Spataro
| Mar 6, 2020
Running a Corporation: Ongoing Requirements
This blog overviews some of a corporation’s ongoing requirements. Note that some of these obligations vary depending on whether you incorporate provincially under Ontario’s Business Corporations Act or federally under the Canada Business Corporations Act, and whether you are an offering/distributing or non-offering/not distributing corporation. Your lawyer can help you understand these differences.
All corporations are required to prepare and maintain the following records at their registered office or another location designated by the directors:
- The articles, bylaws, and all amendments thereto;
- A copy of any unanimous shareholder agreement known to the directors;
- Minutes of meetings and shareholders resolutions;
- A register of directors, setting out the names and addresses of the directors and the dates on which they became and ceased to be directors;
- A securities register, listing those who hold or have held securities in the corporation;
- A register of transfers of securities;
- A register of the corporation’s interests in land and supporting documents (for Ontario corporations only);
- Copies of all notices of directors and change of director or director’s address (for federal corporations only);
- Adequate accounting records; and
- Records containing minutes of meetings and resolutions of the directors and any committee thereof.
Annual Shareholder Meetings
Directors of the Corporation must call an annual shareholders meeting:
- No later than 18 months after the corporation comes into existence; and
- No later than 15 months after holding the last preceding annual meeting (and, for federal corporations, within 6 months after the corporation’s financial year-end).
However, if all shareholders entitled to vote at a meeting sign a written resolution dealing with some or all of the matters that would otherwise have been dealt with at the meeting, this resolution is valid as if it were passed at the meeting. Where the resolution covers all matters required to be dealt with at the meeting, a meeting is no longer necessary.
The annual shareholder meeting must cover the following topics:
- Review minutes of the previous shareholders’ meeting;
- Shareholders shall appoint one or more auditors to hold office until the close of the next annual meeting (if the corporation is eligible and all of the shareholders (voting and non-voting) have consented in writing to an audit exemption, then accountants and not auditors may be appointed);
- Directors must provide the required financial statements for the previous financial period;
- Directors must provide the auditor’s report, if any;
- Directors must provide any further financial information respecting the corporation and the results of its operations required by the articles, by-laws, or any unanimous shareholders agreement; and
- Shareholders shall elect directors when required.
The directors must approve the financial documents referred to in points 3-5 above by having two authorized directors (or one, if there is only one director) sign the foot of the balance sheet.
The corporation must send a copy of the documents referred to in points 3-5 above to all shareholders who have informed the corporation that they wish to receive a copy of those documents not less than 10 days (non-offering corporation) or 21 days (offering corporation) before the annual shareholders’ meeting or before signing a resolution in lieu of the meeting.
Special Business and Special Meetings of Shareholders
Directors may at any time call a special meeting of shareholders. All business transacted at a special meeting and all business transacted at an annual meeting other than the consideration of minutes of an earlier meeting, the financial statements and auditor’s report, election of directors, and reappointment of the incumbent auditor (accountant) is deemed to be special business.
Notice of Meetings
Notice of the time and place of shareholder meetings must be sent, within the timelines specified in the applicable act, to each shareholder entitled to vote at the meeting, each director, and the auditor of the corporation, if any. The specific time lines vary depending whether it is a federal or provincial corporation and whether it is an issuing/distributing corporation as follows:
- Provincial issuing corporation: not less than 21 days and not more than 50 days before the meeting;
- Provincial non-issuing corporation: not less than 10 days and not more than 50 days before the meeting;
- Federal distributing corporation: not less than 21 days and not more than 60 days before the meeting;
- Federal not distributing corporation: not less than 21 days and not more than 60 days before the meeting, unless the articles or by-laws specify a shorter period in which notice may be sent.
For a special meeting the notice of meeting must include, in sufficient detail, the nature of the special business and the text of any special resolution to be submitted at the meeting.
Corporations must file a number of returns and notices under Ontario’s Corporations Information Act or the Canada Business Corporations Act, as applicable. If filed after the deadlines set out below, the corporation may be subject to late filing fees and other penalties.
Every corporation, other than an exempt corporation, must file an initial return within 60 days from the date of incorporation using the required form. The initial return must include:
- Corporation name;
- Ontario corporation number;
- Date of incorporation or amalgamation, whichever is the most recent;
- Names and addresses for service of the corporation’s directors;
- Date on which each director became a director and, where applicable, the date on which a director ceased to be a director;
- If the corporation has share capital, a statement as to whether each director is or is not a resident Canadian;
- Names and addresses for service of the corporation’s five most senior officers;
- Date on which each person referred to in point 7 became a senior officer, and, where applicable, the date on which a person ceased to be a senior officer;
- Address of the corporation’s head or registered office; and
- Whether the corporation prefers communication in English or French.
The classes of corporations exempt from filing an initial return are:
- Corporations subject to the Bank Act;
- Corporations that operate railways or telegraph lines or carry on the business of a railway express company or the business of leasing or hiring railway sleeping, parlour, or dining cars in Ontario;
- Corporations subject to theTelephone Act;
- International Bank for Reconstruction and Development approved by theBretton Woods and Related Agreements Act; and
- Municipalities within the meaning of theMunicipal Affairs Act.
In addition, extra-provincial corporations (including federal corporations) who begin carrying on business in Ontario must file this initial return within 60 days of carrying on business in Ontario.
Your lawyer incorporating your business can file this initial return on your behalf.
Certain corporations must also file a return each year using the required form. The form requires much of the same information as the initial return, plus an indication as to whether there has been a change to the information in the corporation’s most recently filed notice or return, and all changes in the information.
Corporations that file a tax return under section 150 of the Income Tax Act or an information return under section 149.1(14) of the Income Tax Act must deliver an annual return to the Canada Revenue Agency or to the Minister in electronic format. The corporation must deliver this annual return within the time period for delivery of the tax return.
Pursuant to Ontario’s Corporations Information Act, only corporations in the following classes must file an annual return:
- Corporations incorporated in Ontario;
- Corporations subject to the Corporations Act; and
- Foreign corporations with a license endorsed under the Extra-Provincial Corporations Act.
Pursuant to the Canada Business Corporations Act, all federal corporations must file an annual return with Corporations Canada.
Often, your accountant can file the annual return when they file the corporation’s tax return.
Notice of Change
Every corporation must file a notice of change for every change in the information previously filed, within 15 days after the change takes place. Upon request, your lawyer can file this notice on your behalf.
Declaring dividends is the process in which a corporation pays out a portion of its profits to some or all of its shareholders. This occurs by the board of directors passing a resolution stating the amount of the dividend, the class of shares to receive it, and the payment date.
Subject to its articles and any unanimous shareholder agreement, the board of directors may declare and a corporation may pay a dividend by issuing fully paid shares of the corporation or options or rights to acquire fully paid shares. The corporation may pay a dividend in property or money.
The board of directors cannot be compelled to pay a dividend, since the corporation’s profits belong to the corporation – not the shareholders. Also, a corporation is prohibited from issuing dividends if the payment would render the corporation insolvent or impair its ability to repay its capital.
For more information and for assistance in complying with these requirements, contact your lawyer.