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Summary
Part 11 establishes the financial documents that must be produced by
a corporation and to whom they must be disclosed.
For all corporations incorporated under the Act, the directors are required
to lay before the membership, at each annual meeting, the comparative
financial statements of the corporation, as prescribed, for the fiscal
year just passed and that immediately preceding it. These must be accompanied
by any report of the public accountant and any other relevant financial
information that may be required by the articles, by-laws or unanimous
member agreements. The corporation must ensure that copies of the financial
statements, or the information they contain, are provided to the members,
unless a member specifically declines to receive it. (Sections 172, 175)
Corporations are required to keep copies of their consolidated financial
statements at the registered office and must make them available for
examination, subject to the provisions of the Act. (Section 174)
Soliciting corporations are required to provide copies of all financial
documents to be laid before the members at annual meetings to the Director.
(Section 176)
Directors are required to approve the financial statements to be laid
before the members and at least one director must sign the statements
to that effect. Financial statements may not be issued unless they are
approved and signed and are accompanied by the report of the public accountant,
if any. (Section 177)
A corporation may apply for an exemption from these requirements. (Section
173)
Financial disclosure, or the lack of it, is one of the significant shortcomings
of the existing Act. Under the Canada Corporations Act, while
financial statements must be kept and audits must be performed, the information
need not be released to the membership. This Part is specifically designed
to remedy that situation. Under the provision of this Part, all members
will receive the corporation's financial statements and the report of
the public accountant and will be better informed as to the corporation's
financial state. In addition, the requirement that soliciting corporations
must provide the same information to the Director will ensure public
access to the financial statements of corporations that solicit funds,
or receive money, from the government or the public. This is seen as
desirable given the role of the public in funding such corporations.
Briefing Book
An Act Respecting Not-for-Profit Corporations and
Other Corporations Without Share Capital
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Bill Clause No. 172
Section No. 172
Topic: Financial Disclosure
Proposed Wording
172. (1) The directors of a corporation shall place before the members at every
annual meeting
(a) prescribed comparative financial statements
that conform to any prescribed requirements and relate separately
to |
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(i) the period that began on the date the corporation
came into existence and ended not more than six months before the
annual meeting or, if the corporation has completed a financial
year, the period that began immediately after the end of the last
completed financial year and ended not more than six months before
the annual meeting, and
(ii) the immediately preceding financial
year; |
(b) the report of the public accountant,
if any; and
(c) any further information respecting the financial position of the
corporation and the results
of its operations required by the articles, the by-laws or any unanimous member
agreement. |
(2) Despite paragraph (1)(a), the financial statements referred
to in subparagraph (1)(a)(ii) may be omitted if the reason for
the omission is set out in the financial statements, or in a note to
those statements, to be placed before the members at an annual meeting.
Rationale
Section 172 will ensure that members of a corporation are kept apprised of
the financial status of the corporation on a regular and timely basis. The
public accountant's report, if there is one, will add to the overall view
of the financial position of the corporation as will any other information
required to be placed before the members at the annual meeting by this section.
Such provisions are a standard part of corporate law.
Present Law
None.
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Bill Clause No. 173
Section No. 173
Topic: Financial Disclosure
Proposed Wording
173. On application of a corporation, the Director may exempt the corporation,
on any terms that the Director thinks fit, from any requirement in this Part
if the Director reasonably believes that the detriment that may be caused
to the corporation by the requirement outweighs its benefit to the members
or, in the case of a soliciting corporation, the public.
Rationale
This section is self-explanatory. The intent is to find a balance between rigid
adherence to rules and the reality that there are occasions where the rules
may have an unwarranted negative effect on the corporation. It is for that
reason
that the Director Appointed Under the Act will have the discretion to grant
such exemptions. This power will not be exercised as a matter of course and
the criteria
for its exercise will be determined on a case-by-case basis, taking into account
the specific circumstances as identified in the application. This is a long
standing provision in corporate law.
Present Law
None.
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Bill Clause No. 174
Section No. 174
Topic: Financial Disclosure
Proposed Wording
174. (1) A corporation shall keep at its registered office a copy of the financial
statements of each of its subsidiaries and of each body corporate the accounts
of which are consolidated in the financial statements of the corporation.
(2) Members of a corporation and their personal representatives may on request
examine the statements referred to in subsection (1) during the usual business
hours of the corporation and make extracts free of charge.
(3) On application of a corporation made within the prescribed period after
a request to examine under subsection (2), a court may, if it is satisfied
that the examination would be detrimental to the corporation or a subsidiary,
bar the right to examine and make any further order that it thinks fit.
(4) A corporation shall give the Director and the person asking to examine
under subsection (2) notice of an application under subsection (3), and the
Director and the person may appear and be heard in person or by counsel.
Rationale
As with section 172 this section is intended to ensure that members have ready
access to the company's financial statements. The holding of such statements
at a the registered office ensures that they are available at a location
known and accessible to the members. (Subsections 174(1) and (2))
Subsections 174(3) and (4) are necessary as, while access to financial statements
and related documents is important, it is conceivable that there will be times
when providing such access will cause harm to the corporation that will outweigh
the need for disclosure. Harm to the corporation as a whole would act to the
detriment of all the members and therefore must be considered to outweigh the
right of an individual or group of individuals to have ready access to such
documents. It is for this reason that the corporations have the right to apply
to a court for an order barring an individual from accessing the documents.
The notice requirements concerning such application are in keeping with the
principles of fundamental justice.
Present Law
None.
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Bill Clause No. 175
Section No. 175
Topic: Financial Disclosure
Proposed Wording
175. (1) A corporation, within the prescribed period, shall send a copy of
the documents referred to in subsection 172(1) or a copy of a publication
of the corporation reproducing the information contained in the documents
to each member, other than a member that has informed the corporation in
writing that the member does not want a copy of the documents or publication.
(2) A corporation, instead of sending copies of the documents or the publication
in accordance with subsection (1), may
(a) publish, in accordance with the regulations, a notice that
includes the information required to be set out in the documents referred
to in subsection 172(1); or
(b) if the by-laws so provide, publish a notice stating that the documents
referred to in subsection 172(1) are available at the registered office of the
corporation and that any member may, on request, obtain a copy free of charge
at the office or by prepaid mail. |
Rationale
As with the preceding sections this section will ensure that the members
of a corporation are kept apprised of the financial situation of the company.
This
section will ensure that such information is received in a timely manner. It
also allows sufficient advance notice in order that the information may properly
be appraised in advance of the meeting as prescribed (not less than 21 days
and not more than 60) at which the statements are to be tabled. Moreover,
members
can inform the corporation, in writing, that they do not wish to receive this
information. (Subsection 175(1))
Subsection 175(2) provides alternative means of distributing this information
to permit corporations the flexibility to tailor the distribution according
to, for example, their size or previous expressions of interest on the part
of the membership.
Present Law
None.
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Bill Clause No. 176
Section No. 176
Topic: Financial Disclosure
Proposed Wording
176. (1) A soliciting corporation shall send a copy of the
documents referred to in subsection 172(1) to the Director
(a) not less than the prescribed period before each annual meeting
of members, or without delay after a resolution referred to in paragraph
166(1)(b) is signed; and
(b) in any event within the prescribed period after the preceding annual
meeting should have been held or a resolution in lieu of the meeting should have
been signed, but no later than the prescribed period after the end of the corporation's
preceding financial year. |
(2) A subsidiary corporation is not required to comply with this section if
(a) the financial statements of its holding corporation
are in consolidated or combined form and include the accounts of the
subsidiary; and
(b) the consolidated or combined financial statements of the holding
corporation are included in the documents sent to the Director by the holding
corporation in compliance with this section. |
Rationale
Where the corporation meets the definition of a soliciting corporation as set
out in the Act, a copy of the material identified in section 172(1) must also
be sent to the Director Appointed Under the Act. This requirement is to ensure
public access to the financial statements. If a corporation is soliciting funds
from the public proper disclosure warrants that the financial statements of that
corporation are available to the public.
There is an exemption for subsidiary corporations whose financial statements
are included in the consolidated statements. These provisions are standard
in corporate law.
Present Law
None.
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Bill Clause No. 177
Section No. 177
Topic: Financial Disclosure
Proposed Wording
177. (1) The directors of a corporation shall approve the financial statements
referred to in section 172 and the approval shall be evidenced by the manual
signature of one or more directors or a facsimile of the signatures reproduced
in the statements.
(2) A corporation shall not issue, publish or circulate copies of the financial
statements referred to in section 172 unless the financial statements are
(a) approved and signed in accordance with subsection (1); and
(b) accompanied by the report of the public accountant of the corporation,
if any. |
Rationale
The purpose of section 177 is to ensure that the directors of a corporation,
those individuals who are charged with the oversight and general direction
of the corporation, are fully apprised of the financial situation of the
corporation.
Reviewing and approving the corporations'financial statements is central to
the directors'fiduciary duty to the corporation.
The requirement, in subsection 177(2), that this approval occur prior to the
distribution of the statements by the corporation is logical as subsequent
approval would strip the action of much of its utility. The requirement that
the statements be accompanied by the public accountant's report, if there is
one, is intended to ensure that the members of the corporation have as clear
a picture of the corporation's financial state as possible.
Present Law
None.
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Corporate and Insolvency Law Policy
