By Nathalie Tinti, Associate
I have been questioned by clients why they should care about maintaining their corporate records. Businesses generally have a lot to deal with on a day-to-day basis, and the work load, especially for small businesses, can often seem overwhelming. So when Barriston LLP calls you to tell you it's time to come in to sign annual corporate resolutions, it may seem like just another headache. We've set out the top five reasons why you should get them done on a timely basis, from year to year:
- You don't have to meet with yourself: The Ontario Business Corporations Act stipulates that you must have an annual shareholder meeting not more than 15 months after your last one. Chances are, if you are a sole shareholder or small, closely-held company, this does not happen. Annual resolutions, signed by all of the shareholders can take the place of holding an actual meeting (with yourself!).
- Filing Requirements: Within 15 days after every change that takes place in the information set out in your initial return (usually filed on incorporation) you must file a 'Notice of Change'. A "change" includes every change in the board of directors, officers or their residential addresses, or a change in the corporation's address. When we prepare your annual resolutions we inquire as to whether you would like to make any changes. We then document those changes in the resolutions and file the Notice of Change on your behalf.
- Bonuses and Dividends: If any bonuses or dividends have been declared in the past year, the annual resolutions should also include a resolution approving them. Often accountants will have very explicit instructions about when a bonus or dividend is issued or declared and payable. These dates have income tax implications, so documenting them is important.
- Penalties for failure to file: The Corporations Information Act sets out penalties for individuals (up to $2,000) and for corporations (up to $25,000) where reporting requirements are not complied with. Directors and officers of corporations that violate the reporting requirements can be held personally liable.
- Penalties for failure to comply: The Business Corporations Act (Ontario) stipulates that anyone who fails to comply with the requirements of the Act is guilty of an offence and on conviction is liable to a fine of not more than $2,000 or to imprisonment for a term of not more than one year, or to both, or if such person is a body corporate, to a fine of not more than $25,000. Again, officers and directors may be personally liable.
On the sale of your business you may be required to provide your minute book for inspection by the Purchaser's solicitor. If the minute book is well-maintained, it certainly creates an image for the history and management of your entire business and may make your company more marketable.