Corporations Canada - Chapter 4 - Complying with the CBCA

Once your company is set up and properly organized, there are a few simple steps to take each year to ensure that your company stays in compliance with the CBCA.

This section deals only with filings under the CBCA. You will also have to make other filings on behalf of your corporation, for example, to the Canada Revenue Agency. In addition, companies must comply with registration requirements in the province(s)/territory(ies) in which they carry on business activities. These registrations often are required within a few weeks after incorporation. You should communicate with the appropriate provincial/territorial authority in this regard.

Chapter 4.1

Corporate Records

Your company is required to keep certain corporate records at the registered office of the corporation or elsewhere in Canada as set out in your by-laws. These records may be examined by the shareholders and creditors, such as suppliers, of the company on request. These records are:

Although you are not required to maintain a minute book under the CBCA, you will often hear this term. Corporate records are commonly maintained in a single book referred to as the minute book of the corporation. These are available at legal stationers and search houses.

Chapter 4.2

Duties and Liabilities of Management

Because of the scope of the authority that is given to directors and officers, the law imposes a wide range of duties and liabilities on the managers of a corporation. These duties arise under the CBCA, other federal and provincial/territorial statutes and, historically, through court decisions. In general, these duties reflect the position of trust that management holds in relation to the company and its owners, the shareholders.

Among the most important of the duties set out in the CBCA is the duty of care. This duty requires directors and officers to act honestly, in good faith and in the best interests of the company. They must exercise at least the level of care and diligence that a reasonable person would exercise in comparable circumstances. This duty makes it clear that directors and officers must act in the interests of the company, as opposed to their own personal interest.

Directors and officers may not avoid liability because they did not know what the company was doing. In other words, there is a positive obligation on each director and officer to be informed of what is going on within the scope of his or her authority, and to make sure that what is being done is legal and in the best interests of the company. In doing so, the CBCA permits directors to rely on the reports of experts, such as financial statements or legal opinions, in certain circumstances. Nor are directors liable if they exercise the same degree of care, diligence and skill that a reasonable prudent person would have exercised in comparable circumstances.

The CBCA also seeks to avoid conflicts between the interests of the company and those of the directors or officers. For instance, directors and officers are required to disclose in writing any personal interest they may have in a contract with the corporation. Failure to disclose could be grounds for a court to set aside the contract upon application by the company or a shareholder. The CBCA also imposes certain specific liabilities; for instance, directors are personally liable for up to six months' worth of unpaid wages to employees of the company and for any unpaid source deductioons.

Because of the extent of liability imposed on the directors and officers of your company, you may want to consider some means of protection. For instance, your corporation may purchase insurance for directors and officers against any liability for which they become responsible when acting as a director or officer. The company may also indemnify (i.e. compensate for loss; promise to pay for any costs incurred by a person in certain circumstances) its directors and officers for costs they have to pay, except where the director or officer has failed to act honestly and in the company's best interests. The corporation may even advance funds to directors to help them pay defence costs as they are incurred, though these costs must be paid back to the corporation if the director is not successful in defending himself or herself.
(CBCA sections 118–124)

Directors must at all times remain free to assess what is in the best interests of the company and to act on this assessment. For this reason, directors cannot prepare an agreement among themselves in advance on how they will act in a given future situation.

However, all of the shareholders of the company may enter into a unanimous shareholder agreement that transfers some or all of the directors' responsibilities and powers to the shareholders. If power is transferred away from a director, that director cannot be responsible for not exercising that power. (Unanimous shareholder agreements are discussed in more detail in Section 5.4, Shareholder Agreements, of this Guide.)

Chapter 4.3

Meetings of Your Board of Directors

Since directors are responsible for overseeing the operations of the company, there are many occasions when a directors' meeting may be necessary. After the initial organizational meeting, boards of directors of most companies meet on a regular basis, such as monthly, quarterly or even annually, depending on the needs of your company, to oversee the operations of the business. Directors may also need to meet to conduct special business. For example, directors' meetings are required to replace retired directors or officers, make by-laws, issue shares or recommend a significant change in the way the corporation conducts its business. Directors must also meet to call the annual general meeting of shareholders and to approve financial statements. Immediately after the annual general meeting of shareholders, the directors just elected meet to appoint officers for the coming year.

Meetings of the board can be held whenever and wherever the board wants, unless the by-laws or articles of your company say differently. A quorum of the directors must be present and at least 25% of them must be resident in Canada.
(CBCA sections 103, 104, 110, 114, 117)

The CBCA permits directors to conduct business by using signed resolutions instead of holding actual meetings. This can be very useful in a small business having only a few directors (or even one). Meetings can also be held entirely by telephone or electronically, or attended by one or more directors by telephone or electronically if the by-laws permit and so long as all participants in the meeting can communicate fully.

Chapter 4.4

Annual General Meetings of Shareholders

Annual general meetings are meetings of the shareholders of the corporation, which must be held each year during the company's existence. The directors of a company must call the first annual general meeting within 18 months of its date of incorporation, and some corporations hold this meeting following the organizational meeting of directors. After the first meeting, the corporation must hold a general meeting within 15 months of its previous annual general meeting and within 6 months of its financial year end.

At the annual general meeting of shareholders, provided a quorum is present, the shareholders appoint auditors, elect directors, review financial statements and raise any other business they wish to address.

Appendix G of this guide provides a sample notice of an annual general meeting to be held, together with a sample of the minutes of such a meeting. The agenda and the proceedings can be modified from this sample according to the circumstances for your own company to ensure that all of the required business is conducted.

The annual general meeting should be held at the place in Canada where the registered office is situated or in a place outside Canada specified in your company's by-laws, or such other place as the directors determine. Your company must send notice of the time and place of the meeting to shareholders entitled to vote not more than 60 and not less than 21 days before the date of the meeting. For example, if the meeting is to take place on May 20, the notice should not be sent sooner than March 31 nor later than April 30. This notice can be provided electronically to shareholder who consent to receiving it electronically and who designate a system for receiving it and if the by-laws or articles do not provide otherwise.
(CBCA Part XX.I)Unless the articles of incorporation otherwise provide, each share of the company entitles the holder of the share to one vote.

Section 136 of the CBCA permits shareholders to waive notice of meetings (attendance is generally deemed to be waiver of notice). This is useful for companies having only one or two shareholders. Furthermore, if all of the shareholders of a corporation entitled to vote sign a written resolution dealing with items usually covered at the meeting, no meeting is necessary.

A shareholder entitled to vote has the right to appoint a proxy holder to attend and vote at any shareholders' meeting on behalf of that shareholder. For a company having 15 or more shareholders, special rules apply. For example, management would have to send a form of proxy and management proxy circular along with notice of a meeting, but these rules are beyond the scope of this guide (see Section 5.3, Shareholders' Meetings, of this guide for more information on shareholders' meetings in private companies).
(CBCA sections 132, 133, 135, 136, 139, 140; CBCA Regulations 32–36)

Chapter 4.5

Common Filing Requirements

The table below illustrates the CBCA filings you will, or may, be required to make. Note that the list does not address many possible changes to your articles nor requirements specific to public companies.

Annual Return

Every corporation must submit an annual return to Corporations Canada using Form 22 — Annual Return (see Appendix H of this guide for a sample form correctly filled out), either by traditional means or electronically through the Corporations Canada On-line Filing Centre.

Annual returns must be filed within six months of the taxation year-end of your company.

An annual return filing fee must be submitted to Corporations Canada along with your annual return. It may be paid by cash, American Express®, MasterCard®, Visa® or cheque made payable to the Receiver General for Canada in the amount of the applicable filing fee. The annual return filing fees are lower when paid on-line (by American Express®, MasterCard® or Visa® only) than when paid through any other means. Fees are now $20 when submitted on-line and $40 for all other means. When payment is made through the Corporations Canada On-line Filing Centre, the Strategis Secure On-Line Electronic Commerce System ensures that on-line credit card payments are processed with complete security.
(CBCA section 263; CBCA Regulations — Schedule II)

Common Filing Requirements

Note: Fees may be paid by cash, American Express®, MasterCard®, Visa® or cheque made payable to the Receiver General for Canada.

A complete list of current fees is available from Corporations Canada — see the Contacts Section.

Certificate of Compliance

You may be required at some point in time to provide to a supplier, banker, etc. a certificate of compliance for your company. A certificate of compliance is issued by the Director under the CBCA at the request of the company or another interested party. It states that the company in question has paid all fees, sent all forms required under the CBCA, and existed as of a specific date.

The need for a certificate of compliance usually arises in the context of a financing transaction such as a loan. Another example is when someone is making a substantial equity investment and wants assurance that your corporation has not been dissolved.

Administrative Dissolution and Revival

It is important to comply with the filing requirements set out in this section, especially the annual return.

In the case of repeated or persistent non-compliance with the Act or non-payment of fees, the Director under the CBCA could dissolve your corporation, which would end its existence. This may happen, for example, if your company fails to file its annual return (Form 22 — see Appendix H of this guide for a sample).

Notices from Corporations Canada pertaining to non-compliance under the CBCA are sent to the address on record. If a response is not received, perhaps because the notices cannot be delivered due to the corporation's failure to submit the correct address in Form 2, the Director under the CBCA could proceed with a dissolution, even though the corporation does not want to be dissolved.

Corporations Canada will make several attempts to have the company correct any filing deficiencies by sending out notices of non-compliance (provided, of course, that it has the correct mailing address on file). If the company still does not comply (for example, by filing the outstanding form(s) after notice has been sent), the Director under the CBCA will issue a certificate of dissolution, and the corporation will cease to exist.

For a corporation to become re-activated, it will have to go through a procedure known as revival. It will have to remedy the non-compliance, file articles of revival and remit the prescribed fee for revival.
(CBCA sections 209, 212–214)

An information kit detailing all the required steps for a revival is available from Corporations Canada (see the Contacts section).

There are additional circumstances under which the Director under the CBCA has the power to dissolve corporations. Alternatively, the Director under the CBCA may seek compliance through civil court action for specific acts of non-compliance.

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		Created: 2005-05-29 Updated: 2006-02-09	Top of Page	Important Notices