Incorporating a business in Canada is a significant milestone for entrepreneurs however, beyond the initial incorporation process, business owners must navigate a series of ongoing obligations to ensure compliance with the law and maintain the integrity of their corporations. Under the Canada Business Corporations Act (CBCA), federally incorporated businesses in Canada are subject to specific post-incorporation obligations aimed at promoting transparency, accountability, and good corporate governance.Â
Recently, the CBCA underwent notable amendments with the passing of Bill C-42, introducing new reporting requirements for corporate transparency and accountability. In this article, we delve into the post-incorporation obligations under the CBCA and explore the implications of the recent amendments for Canadian corporations. You can read our previous article, Corporate Transparency & Accountability: Recent Amendments to The Canadian Business Corporation Act for a full review of the recent changes to the CBCA.
Understanding Post-Incorporation Obligations under the CBCA
Federally incorporated corporations in Canada are governed by the CBCA, which sets forth various obligations that businesses must fulfill after the incorporation process. These obligations encompass a range of activities aimed at maintaining accurate records, facilitating transparency, and upholding corporate governance standards. Key post-incorporation obligations under the CBCA include:
Filing Annual Reports
One of the fundamental obligations for federally incorporated businesses is the filing of annual reports with the registrar of corporations. These reports, due within two months after each anniversary of the corporation's recognition date, contain essential information such as the corporation's name, registered office address, details of directors and officers, and the date of the last annual general meeting.
Maintaining Corporate Records
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Under the CBCA, corporations are required to maintain accurate and up-to-date corporate records at their registered office. These records include the notice of articles, articles of incorporation, minutes of meetings and resolutions of shareholders and directors, registers of shareholders and directors, financial statements, and the Individuals with Significant Control (ISC) Register which is a new requirement introduced by the recent amendment of the CBCA.
Section 21.1 of the CBCA now mandates that corporations maintain an Individuals with Significant Control (ISC) Register, which contains details of individuals with significant control over the corporation. The ISC Register includes information such as beneficial ownership, control, and influence, encompassing details such as the names, dates of birth, residential addresses, addresses for service, and citizenship of individuals with significant control.
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Information Sharing, Public Availability, Inspection and Copying of Records
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Corporations must permit shareholders, creditors, and their agents to inspect and obtain copies of corporate records upon request, subject to certain exceptions and limitations. This requirement ensures transparency and accountability in corporate governance practices. The Director is now empowered to share information received for the ISC Register with provincial corporate registries or government departments responsible for corporate law, facilitating inter-governmental collaboration and enforcement efforts.
Information pertaining to individuals with significant control must also be made available to the public, including names, residential addresses, addresses for service, dates of becoming or ceasing to be individuals with significant control and descriptions of their interests and rights in respect of shares.
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Holding Annual General Meetings (AGMs)
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Another important obligation under the CBCA is the holding of annual general meetings (AGMs) of shareholders. AGMs provide shareholders with the opportunity to exercise their rights and powers, including electing directors, appointing auditors, and approving financial statements.
Conclusion
Navigating post-incorporation obligations under the CBCA is essential for federally incorporated businesses in Canada to ensure compliance with legal requirements, uphold corporate governance standards and enhance corporate transparency and accountability. The recent amendments introduces increased penalties for non-compliance with the CBCA, with fines of up to one million dollars or imprisonment for a term not exceeding five years, reflecting Canada's renewed commitment to combatting money laundering and enhancing corporate governance. Understanding these obligations and staying abreast of legislative changes, can help businesses fulfill their obligations and stay ahead in their compliance program.
Arcstone Law Corporation assist small and large companies in carrying out a comprehensive review of their compliance needs and providing regulatory filing services to federally incorporated corporations and societies. We also help businesses initiate a compliance audit in other to test readiness for compliance. You can contact us by email at admin@arcstonelaw.com or book a consultation on our website. All legal services are rendered through Arcstone, a law corporation.
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Contributor:Â
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Name: 'Bolanle Oduntan*
Title: Managing LawyerÂ
Email:Â bolanle@arcstonelaw.com
*practicing through Arcstone Law Corporation
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