Post Registration Compliance Management in Canada - An Overview
According to the requirements of Canada Law, it is necessary that the post-formation and ongoing requirements prescribed by the law are fulfilled by the companies registered in Canada. If a company is fully compliant, it helps in protecting the personal assets of the owners and keeps the company in good standing with respect to its state of incorporation.
Enterslice advises and assists in the preparation of a business calendar that records all the important steps and guidelines to be met by your company.
Post-Registration Compliances for companies in Canada to be done within 1 year of incorporation
Following are the major post-registration compliances in Canada that are required to be met by all Canadian companies after their successful incorporation:
- Opening of a Business Bank Account
After the successful incorporation of a company in Canada, the first thing that every company should undertake is opening a business bank account under the name of the company or commonly called a corporate bank account. Once a company is incorporated, it becomes a new person in the eyes of the law, which means that it needs its own separate bank account in its own name. The benefits of opening are not accrued to the company owner unless he/she separates his/her personal funds from the company’s funds.
- Election of the First Directors
At the time of registration of the company, a form was filed entitled Form 2, entailing the details of the Initial Registered Office Address of the company and the first Board of Directors. This form contains the details of the first members of the Board of Directors of the company.
The obligations of the first directors begin from the date the certificate of incorporation is issued and ends on the first shareholders meeting. At the first meeting of the shareholders, the shareholders of the company elect the Directors of the company. Here, the shareholders have the option of choosing the first directors of the company itself or electing new individuals as directors of the company.
- Organisational Meeting
Right after the incorporation of the company, the incorporators or the directors of the company call an ‘organisational meeting’. The notice of this meeting should be sent at least 5 days before the date of the meeting. The notice regarding the meeting should be sent to each director that has been mentioned in Form 2 – Initial Registered Office Address and the First Board of Directors. The notice should specify the time, date and venue/place of the meeting.
The following tasks are undertaken at this meeting by the directors:
- Prepare the bye-laws of the company (these by-laws are then approved by shareholders at the first meeting)
- The forms of security certificates (shares) and the corporate records that the company/corporation will use are adopted
- The directors of the company authorise the issuing of shares and other types of securities
- The directors appoint officers of the company
- The directors appoint an interim auditor who holds office until the first meeting of shareholders is concluded
- The directors make banking arrangements for the company
- And lastly, other businesses of the company are taken care of
- Preparation of by-laws for the company
By-laws are a set of rules and regulations that regulate the internal operations of a company. For instance, you might want to introduce certain rules that you may not find in the Canada Business Corporation Act (CBCA). There is also a possibility that you might want to modify or change some of the rules that are provided in the CBCA (as long as the CBCA permits making such changes). CBCA also provides model by-laws that the companies can incorporate in the preparation of their by-laws.
The following things can be made part of the by-laws of your company:
- You are allowed to set the date of the financial year end of your company
- You are allowed to make banking arrangements for the company
- You can lay down the criteria for the qualification, appointment and duties of the officers
- The responsibility of setting the salaries of the directors and officers of the company can be delegated
- The procedure of calling out and conducting meetings of the directors and shareholders can be laid down in the by-laws
- You can decide the minimum number of people required at the directors’ and shareholders’ meeting with a view to establishing the quorum of the meeting (which refers to the minimum number of people required to make binding decisions)
- The by-laws can make rules that limit modification of the powers conferred on the corporate directors under the CBCA (for example the by-laws can establish that the shares can be issued by the directors subject to the approval of the shareholders)
Unless the by-laws of the company state otherwise, the directors have the power to make, introduce changes and repeal the by-laws of the company. Every new by-law, amendments in the by-laws and even repeal of the by-laws require approval from the shareholders at the first regular meeting of the shareholders conducted after the directors have passed the new or amended by-laws. It must be noted that the effective date of a by-law is the date when it is passed by the shareholder and not the date of approval by the shareholder.
- Issuing shares and other securities by the company
Another major task to be performed after the incorporation of a company is the issuing of shares by the company. A person becomes a shareholder of a company when the company issues shares in the name of that person. Unless decided otherwise by the by-laws, the Board of Directors of the company can issue the shares whenever it wishes, to whomever it selects and for whatever value it decides.
The BoD can decide to issue shares by majority vote. The directors’ decision to issue shares has to be recorded in the minutes of the meeting of the company.
A company cannot issue shares until it has actually received full consideration for that amount of shares. The consideration is usually in the form of money. However, consideration can also be given in the form of property transferred or services rendered to the corporation. The payment for the shares in the form agreed upon by the directors represents the investment of that person in the company.
Every share issued to the shareholder is provided in the form of a share certificate and it must contain the following details:
- Name of the corporation as mentioned in the articles of incorporation
- Name of the shareholder
- The number and class of shares it represents
Generally, the articles of incorporation mention the restrictions on the transfer of shares especially in the case of small corporations. The share certificate issued must refer to these restrictions.
None of the shares contains the nominal value of the certificate. Moreover, it also does not carry any monetary value and no value appears on a share certificate.
- Appointment of the Officers of the company
The day-to-day operations of a company are taken care of by the officers of the company. These officers are appointed by the directors of the company. Together with the Board of Directors, the officers form the management of the company. The directors can ask these officers to take any position in the organisation right from the position of a President to that of a secretary or any other position within the organisation.
- The first meeting of the Shareholders
The Directors of the corporation have to call for the first shareholders’ meeting of the company within a period of 18 months from the date of incorporation. The shareholders’ meeting is generally held after the first organisational meeting of the directors has taken place.
The following things are executed at the end of the shareholder’s meeting:
- The directors are elected
- The by-laws established by the directors are either established, amended or rejected
- Appointment of the auditor takes place. This auditor can be the same person adopted by the directors or can be a new appointee.
Major Post-Registration Compliances in Canada
In order to keep benefiting from the incorporation under the CBCA, every company in Canada needs to fulfil certain compliances with Corporations Canada. Depending on the type requirement, every company needs to file returns annually or when the circumstances change. The major compliances that every company need to follow are as follows:
- Filing of Annual Returns
Filing annual returns gives up-to-date information about the company to Corporations Canada. Irrespective of the size of your corporation, your corporation has to file annual returns in case your company’s legal status is ‘active’ (which means that the company is not dissolved, amalgamated or discontinued).
It must be noted that the annual return of your corporation is different from the tax return of your company. The tax return of your company is filed with the Canada Revenue Agency. In order to avoid the situation of administrative dissolution, your company should file annual returns.
The annual return of your corporation is signed by an individual who has relevant knowledge of the company and who has been authorised by the directors to file the returns.
There are several ways to file annual returns. One of the best ways is to file online. After filing the return, you will receive an email confirming that your return has been processed. You are required to keep the original signed annual return with the corporate records.
The annual returns are supposed to be filed after the anniversary date and not before, as it will not be accepted on the ground that the return will not reflect the anniversary date of each year.
Consequences of not filing Annual Returns
Corporations Canada has the power to dissolve the company in case of non-filing of annual returns. Canadian law asks to dissolve the corporation after 1 year of non-filing. The policy, on the other hand, is to dissolve the company after a period of 2 years of non-filing.
After the above period elapses, a final notice of 120 days is given by Corporations Canada with the intention to dissolve the corporation and provide an additional 120 days time period to file the annual returns. This final notice is sent to all the registered addresses that Corporations Canada has on file. The name of the corporation is also published in the monthly transaction.
Despite the above notices, if a corporation fails to submit the annual returns, Corporations Canada will issue a certificate of dissolution after the expiration period.
- Filing a change in Registered Office Address
The company is required to notify Corporations Canada of any change made to the registered office address of the company within a period of 15 days from such change. An additional address can be provided if there is one.
If the additional address is different from the new registered office address, then also the company is required to include the additional address when filing the change of registered office address.
Following is the procedure for moving the registered office address within the same province or the territory indicated in the articles:
The process of change in the registered office address within the same province or within the same territory indicated in the articles can be done online.
All you require is your corporation name and the corporation key.
You also need a form signed by a person who has relevant knowledge of the corporation and who has been authorised by the directors, such as a director of the corporation or an authorised officer of the corporation or an authorised agent.
Following is the procedure for moving the registered office address into another province or territory other than the one mentioned in the articles:
In case you decide to move the registered office address of your company to a province or territory that is different from the one mentioned in the articles of incorporation, then you are obligated to amend the articles. For such a task, you are required to file articles of amendment.
- Filing changes regarding the Directors
Every company in Company is required to notify Corporations Canada of any changes in the Board of Directors within a period of 15 days from any one of the following events:
- The new directors are appointed, or
- When someone ceases to be a director
The company is also required to notify Corporations Canada of any change of address of a director within a period of 15 days of being informed of such change. It is also incumbent on the directors to inform the company about the change in their address within a period of 15 days.
The Directors are free to provide either a residential address or an address for service. The address for service is the address where the director or anyone on his /her behalf accepts the legal documents and where an acknowledgement or some delivery receipt can be provided. The address for service can be the residential address of the director or a business address.
The reason for notifying the change in the address is that the directors have the power and the responsibility to manage the affairs of the company. Therefore, the stakeholders of the company have a right to know who the current directors are and where they can be reached.
- Amending the Articles
If there is a change in the number of directors from the number indicated in the articles of the Corporation, then the company is obligated to indicate such changes by making amendments in the articles. Thereafter, the change in the director’s information should also be made.
- Business Licensing
The companies are also required to obtain the necessary business licenses from the provincial and federal governments depending on the type of business activities carried out by the company.
- GST/HST Registration:
A company should also register for the GST/HST registration and obtain the GST/HST number. If your company anticipates that its annual gross revenue will breach the threshold of $ 30,000 CAD, then it should get itself registered and obtain the GST/HST number and start charging sales tax on your customers. Though it is not mandatory for a business to get itself registered before crossing the mark of $ 30,000, it is advised by advisors at Enterslice to get registered before touching the threshold limit of $ 30,000 CAD.
- Filing of Annual Tax Returns
All the companies are required to file their annual tax returns within a period of 6 months after the end of each tax year. The tax year of a company is its fiscal period. Corporate income tax returns are supposed to be filed with the Canada Revenue Agency (CRA).
Companies in Canada file their annual corporate income tax returns in the form T2 Corporation Income Tax Return. In order to claim tax refunds, companies are supposed to file their income tax returns no later than 3 years after the end of the tax year.