Corporate Annual Returns – What You Need to Know

Just one of the many responsibilities that an incorporated company faces is making sure the annual return is done properly and submitted on time to keep your corporation in good standing. The annual return is separate from your tax return – it is provided by corporations to keep the government informed on any internal changes made during the previous fiscal year. 

The costs and timeline for filing your annual return is dependent upon the jurisdiction of incorporation.

The purpose of the return is to update your corporate records, which can include:

• name of corporation
• registered office address
• corporation number
• financial year end
• description of type of business
• registered office
• corporate directors
• date of last annual meeting

If a corporation does not file its annual return within the time frame allowed (or at all), penalty fees can be applied. If said corporation repeatedly fails to file its return (generally for two consecutive years) the government department or agency in the corporation’s jurisdiction can remove the corporation from government records.

For not-for-profit corporate returns, every registered charity must file an annual information return within 6 months after the end of the charity’s fiscal year.

Similar to the corporate annual return, the annual information return for charities provides the government up to date information on the charity’s records.  However, the annual information return also requires more in-depth reporting on financial information including financial position, compensation, non-cash gifts, assets, liabilities, revenues and expenditures.  

Please contact CorporationCentre.ca to file your corporate annual return. We're happy to help!

Gender Diversity is Important for Your Corporate Board

Ideally, the best corporate board for a given company would be one that is diverse. Hiring board members with the same background and education could find your company "stuck” and unable to draw from variety of experiences.

When it comes to gender diversity, a recent study supports the idea that women who are corporate board members tend to be more open to new ideas than their male cohorts. So, does this make women on corporate boards better than men?

And the survey says…

The International Journal of Business Governance and Ethics put up the survey that polled 624 board directors from all across the Canadian business sphere. The breakdown of those surveyed ranged from 75% male and 25% female. According to the results women were cited as being "more likely to use co-operation, collaboration and consensus building" when presented with the task of problem solving. Across the boardroom, the men were found to come up with their solutions by "using rules, regulations and traditional ways of doing business."

Chris Bart is a professor of strategic management at the DeGroote School of Business at McMaster University and a co-author of the study. Upon reviewing the results he concluded that "The way women operate as directors often contributed to a company’s success, raising the question of why women are still in the minority in Canada’s corporate boardrooms. Why would governance, nominating committees and board chairs not want to have that skill set, that competence available to them in abundance?” asked Bart.

Here are some other qualities found from the women board members who took part in the study:

• Women were less constrained in their problem-solving skills
• More likely to take into account the interest of a wider range of company stakeholders
• Considered fairness an "important factor" in decision making process
• Women are more inquisitive
• Can see more possible outcomes to situation

As for the men who participated in the study, Bart found that, "The old boys club culture is still alive and well in corporate boardrooms across all sectors. Men are pack animals and they are very much quick to recognize the hierarchy of the alpha males in the group,” he said upon the report's release. “They would be very unhappy with people coming in with different values or views to the board.”

Can you look at your corporate board and say it is as diverse as it can be? It might be time to consider shaking things up especially if your business has hit a wall. Nothing like "fresh thinking" to put a company back on track on the road to success. 

How a Shareholders' Agreement Can Protect You and Your Business

Corporate law doesn’t offer a solution for every potential conflict that can occur between partners or shareholders during the course of running your business. Which is why creating a shareholders’ agreement can be a very smart thing to do to protect yourself.  There are many situations in which a shareholders’ agreement can get you of trouble. Here are a few examples:

·         An unfortunate event that occurs such as a conflict with one of the shareholders, an accident, bankruptcy or even death of a shareholder

·         When the shareholders want to maintain equal equity within themselves

·         When shareholders want to participate in company decision-making, such as the introduction of new partners in the company

·         Or changing the shareholder voting rights

Even if you have less than three shareholders, you should write and sign a shareholders agreement. The departure of a partner or even a disagreement between shareholders can often lead to bad blood within your company.  And in situations like these, you want to make sure you’re protected.

If you want to have the best shareholders’ agreement that meets your needs, it is advisable to consult a lawyer. He will determine what clauses should be included in the agreement and suggest solutions tailored to your situation and that of the shareholders. Expect to pay a few hundred dollars for a lawyers’ service.

If there is a dispute or uncertainty on how to proceed in a particular situation, you can refer to the shareholders' agreement for guidance. In the event that the agreement does not cover a particular circumstance or the situation cannot be resolved by the shareholders, an arbitration clause can be inserted in the agreement that requires the dispute to be referred to an independent third party.

Here are some of the clauses that you should be aware of and may wish to put in your agreement:

1.       First refusal: This allows shareholders to have a say over the sale of their shares to someone else who is not a part of the company.

2.       Mandatory offer due to death: Provide what will happen upon the death of a shareholder

3.       Mandatory offer due to withdrawal from business: Provide for situation which could lead to the withdrawal of a shareholder from the company for various reasons

4.       Pre-emptive right: Protects the rights of the shareholders against issuing new shares by the Board of Directors

5.       Shotgun clause: Protection from any disagreements between shareholders

6.       Working conditions: This outlines the working conditions governing the shareholders who work for the company

7.       Voting: Allows shareholders to be elected as board of directors

In starting your business, you should hope for the best, but plan for the worst to occur. By using a shareholders' agreement, you save money, time and frustration in the long run. What you get is greater trust and peace of mind between you and your partners which is fundamental to every successful small business.

Overview of the Canada Not-For-Profit Corporations Act

Recently, a new law called the Canada Not-For-Profit Corporations Act ("CNPCA") came into effect aimed at eliminating unnecessary regulation and providing flexibility to the not-for-profit sector. The new legislation modernizes the corporate governance of not-for-profit corporations by promoting accountability, transparency and efficiency.

The Act in its entirety is lengthy and detailed so not-for-profits will have up to 3 years to transition into compliance. Below is a list of some of the Act’s more important provisions that may affect you and your not-for-profit.

Incorporation:

The process of incorporation has become more streamlined under the new Act making it faster and more efficient. Instead of submitting the letters patent and by-laws for review, incorporations now occur “as of right” upon submission of the signed articles of incorporation.

By-laws:

Before the Act was implemented Industry Canada required incorporating not-for-profits to prepare and submit by-laws governing corporate matters to be reviewed and approved at the time of incorporation.  Under the new legislation it is no longer necessary to draft and submit by-laws with the application for articles of incorporation. The new Act requires by-laws that deal with member issues only. 

Members:

Members’ rights are enhanced under the new Act. The new rights include: the right to submit a notice of proposal to request said proposal to be discussed during a members meeting; the right to request a meeting at any time; the right for non-voting members to vote separately from voting members on matters that impact membership rights; and the right to access corporate records to monitor board compliance.

Directors:

A director’s liability and standard of care are protected by the “due diligence” defence as understood in the common law duty of acting in honest and good faith. In this legislation specific liabilities are given to directors concerning payment and distribution to members, debt obligations, and wages payable to employees. However, directors who meet the standard of care are protected from liabilities through the “due diligence” defence under the new Act.

Financial Accountability:

The Act divides not-for-profit corporations into soliciting and non-soliciting corporations, which are subject to different regulations depending on which category your not-for-profit falls under. Your gross revenues are also dependent upon the rules and requirements for reporting under the new legislation.  

To facilitate the change, Industry Canada will not charge initial filing fees related to transitioning from the CCA to the NFP Act. To view the Act in its entirety, please click here.