Routine Management

OBCA and the CBSA require corporations to complete certain tasks at regular intervals.

Larger corporations usually complete their routine management tasks at directors and shareholder meetings.

Smaller corporations where almost everyone agrees on what needs to be done can meet their obligations by circulating prepared resolutions for signing by required individuals.

Shareholders Meeting

The most important requirement of a corporation is annual shareholders meeting.

In annual meetings shareholders review the performance of the corporation replacement and election of new officers or directors can be decided in these meetings.

For small corporations with one or just a few directors, corporation act offers an alternative to a physical gathering of shareholders and they can conduct meeting on paper.

Corporation act has very specific requirements for shareholder meeting. The requirements differ according to the type of meetings and the type of corporation.

First annual meeting should be called no later than 18 months after incorporation. Subsequently no later than 15 months after the first meeting.

Meetings can be held any place that is approved by directors.

Business to be conducted at annual meetings

Review the corporation’s financial statements.

Inspect auditor’s report on the financial statements.

Elect directors.

Appoint auditors.

Confirm, amend or reject bylaws.

Notice Requirements

Shareholders are entitled to notice of the time and place of shareholders meetings.

In case of an offering corporation, notice must be sent no more than 50 and no less than 21 days before the meeting.

Chairing the Meeting

Unless otherwise conditioned by unanimous agreement or bylaws, all meetings must be chaired by the president of the company..

Voting

Each shareholder is entitled to one vote for each share he / she holds unless the articles of incorporation define otherwise.

Proxies

Any shareholder may appoint another person to attend a shareholders meeting and vote on his or her behalf. This appointment is called proxy.

Auditors and Financial Statements

All corporations are required by law to prepare and circulate financial statements before the annual meeting unless requirement is waived by the shareholders.

Financial statements are prepared by qualified accountants.

Sometimes financial statements are audited by independent auditors to ensure the accuracy and reliability.

Annual Meeting Proceedings

Call to order by the chair.

Confirmation that quorum has been achieved.

Review and acceptance (by majority vote) of the minutes of the previous meeting.

Review and confirmation or rejection (by majority vote) of the financial statement and auditor’s report.

Election of a new board of directors.

Review and confirmation or rejection (by majority vote) of new bylaws and amendment to existing bylaws.

All other business set out in the notice.

Notice of Change

All notices of change should be filed with ministry after passing the resolutions and keeping records in the minute book.

Notices of change must be filed within 15 days for both provincial and federal corporations.

Annual Return

Both federal and provincial corporations must file annual return.

Declaration of Dividends

The articles of incorporation specify which class of shares enjoy the right to a dividend, as well as any special attributes of the dividends.

For the large offering corporations, distribution of dividends can mean corporation is in a good health.

In small corporations, the distribution of dividends can be used as tax reduction tool.

In corporations where share ownership often changes, it is important for the directors to establish a record date for entitlement to dividends.

Dissenting Shareholders

Both CBSA and OBCA give shareholders right to dissent in case they are unhappy. These rights arise whenever the corporation proposes following changes:

Amend its articles to add, change, or remove a provision restricting the issue, transfer, or ownership of shares of the class owned by the shareholders.

Amend its articles to add, change or remove a provision restricting the business that the corporation may carry on.

Amalgamate with an unrelated corporation.

Be continued in another jurisdiction.

Sell, lease or exchange all or substantially all its property.

Changes that require shareholders’ approval

Changing the corporation’s name.

Adding, changing or removing restrictions on the business or powers of the corporation.

Changing the maximum number of shares of a particular class that may be issued and changing the price of such shares.

Creating new classes of shares.

Changing the designation of any class of shares, changing or adding any rights, privileges, restrictions, or conditions attaching to a class of shares.

Changing the shares of any class into a different number of shares of the same class or into the same or a different number of shares of a different class.

Dividing, or authorizing the directors to divide, a class of shares into two or more series of the same class of shares.

Changing the number of directors.

Adding, changing or removing restrictions on the issue, transfer, or ownership of shares.

Changing the location corporation’s registered office.

Changing the corporation’s stated capital if it is mentioned in the articles.

Adding, changing or removing any other provision that is permitted by the act to be set out in the articles.

These changes have to be reported by articles of amendment (Form 3 provincial). A resolution must be passed and circulated before reporting these changes.

For federal corporations use form 4, articles of amendment (Canada).

Articles of amalgamation

Amalgamating corporations must file articles of amalgamation.

The articles must be accompanied by a declaration for each amalgamating corporation and signed by a director to the following effect:

There are reasonable grounds for believing that the amalgamating corporations are able to meet their liabilities and that the amalgamated corporation will be able to discharge its post amalgamation liabilities as they become due.

There are reasonable grounds for believing that the value of the new corporation’s assets is at least equal to the total amount of its liabilities and the stated capital of its shares.

There are reasonable grounds for believing that no creditor will be prejudiced by the amalgamation or that all known creditors have been given notice of the amalgamation.

Any objections to the amalgamation lodged by notified creditors are frivolous and the creditors have been informed of the corporation’s intention to treat objections as frivolous.

Continuance

Sometimes a corporation may want to change its jurisdiction. A provincial corporation may want to become a federal corporation. This movement of corporation from one jurisdiction to another is called a continuance of the corporation.

A corporation must obtain the permission of its current jurisdiction to leave or transfer out of the jurisdiction and then must meet the requirements of the new jurisdiction.

Leaving a jurisdiction

The proposal to leave a jurisdiction must first be approved by shareholders special resolution.

Dissenting shareholders have the right to be paid fair market value for their shares.

The applicant must include the corporation’s name, Ontario corporation number, Date of incorporation or amalgamation, and the following information:

Whether it is an offering corporation.

Evidence that it is up-to-date in filing notices under the corporation’s information act.

A statement on any actions, suits, or proceedings to which the corporation is subject.

The name of the jurisdiction in which the corporation wishes to be continued.

A statement on the reason of change.

A statement confirming that the laws of the new jurisdiction will protect the interests of any entity with a claim against the corporation.

A statement that the continuance has been properly approved by the shareholders.

The consent of the corporation’s tax branch of the Ministry of Revenue and if the corporation is an offering corporation of the Ontario securities commission.

If the director approves the application, the corporation has 90 days to complete the continuance in the new jurisdiction, after which time the approval expires.

Use form 7, application to continue in another jurisdiction (Ontario).

Entering the jurisdiction

Articles of continuance for entering a jurisdiction require the same information as articles of incorporation, with the addition of the original name of the corporation and any new name under which it will carry on business in Ontario, the jurisdiction from which it comes, date of incorporation or amalgamation.

Dissolution of corporations

Corporations can be dissolved in following four ways:

Voluntary Dissolution

A voluntary dissolution occurs when the shareholders of a corporation decide to close a corporation.

A corporation must file form 10, Articles of dissolution (Ontario) that contains following information:

Name of corporation and Ontario corporation number.

The date of incorporation or amalgamation.

Authorization to dissolve corporation.

The corporation has paid all its debts.

The corporation has distributed its remaining assets or property.

There are no court proceedings pending against the corporation.

The corporation has advertised its dissolution in the Ontario gazette and in one newspaper of general circulation.

The corporation has the consent of the Ministry of Revenue and has made all of its filings under the corporation information act.

Dissolution for non-compliance

A corporation may be dissolved by director if there is sufficient cause for non-compliance.

Sufficient cause to warrant cancellation will include following:

The corporation does not have a board of directors.

The corporation does not have a majority of directors who are resident Canadians.

The corporation has been convicted of a criminal offence and dissolution is deemed to be in the interest of public.

The corporation has acted or has threatened that it will act in a manner that is oppressive or unfairly prejudicial to or that unfairly disregards the interest of any security holder, creditor, director or officer of the corporation.

Voluntary wind up

A volunteer winding up occurs when the shareholders vote to bring in an outsider (a liquidator or trustee) to manage the corporation’s affairs and bring its life to an end.

A voluntary winding up requires a special resolution of the shareholders, who may, after voting to wind up the corporation, appoint an outsider of their own choice.

Court order winding up

A judge may order that an outsider be brought in to wind up the affairs of a corporation under judicial supervision.

 Disclaimer:

This information is for educational purposes only. It does not constitute any legal advice or opinion. Please do not use any of its contents without seeking a professional advice.

References:

The fundamentals of corporate law and procedure

By Mark Walma and Patricia McCann – Smith

Publisher: Edmond Montogomery Publications Limited, Toronto, Canada.