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Governance is what a buyer, a lender or a court looks at when something is at stake. Minute books, registers and properly documented decisions are cheap to maintain and expensive to reconstruct.
Arrange a Call →Privately held OBCA corporations have been required to maintain a register of individuals with significant control since January 1, 2023, and directors and officers who knowingly authorise a contravention face fines of up to $200,000 or imprisonment.
Section 134 of the OBCA imposes two duties. Directors must act honestly and in good faith with a view to the best interests of the corporation, and must exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances. Both duties are owed to the corporation itself, not to any individual shareholder, and directors must disclose material interests in contracts and generally not vote on them.
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Owner-managed corporations often treat corporate records as a formality that can be caught up later. It becomes a problem at exactly three moments: when a buyer's counsel asks for the minute book, when a lender's counsel asks for a certificate of good standing and evidence of borrowing authority, and when a shareholder or a regulator challenges a decision the board made. At each of those moments, contemporaneous records are the evidence, and reconstructing them years afterwards is both expensive and less persuasive.
Governance for a private company is not the multi-committee apparatus of a public issuer. It is a short list: hold and document the annual meeting, keep the registers current, record material decisions by resolution, disclose conflicts before voting, and file what the Corporations Information Act requires when it requires it. Done properly, it takes very little time each year, and it is the difference between a due diligence process that runs smoothly and one that stalls for six weeks while share issuances from 2016 are reconstructed.
Lexaltico LLP maintains corporate records for Ontario and federal corporations, rebuilds neglected minute books, prepares annual resolutions and filings, advises directors on their duties and personal exposure, and acts on board decisions that need to be defensible: related-party transactions, share issuances, dividends, terminations of shareholder-employees and responses to shareholder demands.
Section 134 of the OBCA, mirrored in section 122 of the CBCA, imposes two distinct duties on every director and officer. The fiduciary duty requires them to act honestly and in good faith with a view to the best interests of the corporation. The duty of care requires them to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Neither duty is owed to a particular shareholder; both are owed to the corporation itself.
The Supreme Court of Canada has addressed both. In Peoples Department Stores Inc. (Trustee of) v. Wise the Court confirmed that the fiduciary duty is owed to the corporation rather than to any stakeholder group, and that the duty of care is an objective standard. In BCE Inc. v. 1976 Debentureholders the Court confirmed that directors acting in the best interests of the corporation may consider the interests of shareholders, employees, creditors, consumers, governments and the environment, and that courts will defer to a business decision that falls within a range of reasonable alternatives. That deference, often called the business judgment rule, depends on the board having actually deliberated on an informed basis, which is what the minutes are for.
Conflicts of interest have their own regime. A director or officer who has a material interest in a material contract or transaction with the corporation must disclose the nature and extent of that interest in writing or have it entered in the minutes, and generally must not vote on approving it. Compliance with the statutory disclosure and approval procedure protects the transaction from being set aside solely because of the interest, and failure to comply exposes the director to an accounting for profits. In a small corporation where the same people are directors, officers and shareholders, this is routine and should be documented rather than avoided.
| Record | What it contains | Why it is asked for |
|---|---|---|
| Articles and by-laws | Articles of incorporation and every amendment; by-law No. 1 and any borrowing by-law | Establishes share classes, director numbers and authority to borrow |
| Minutes and resolutions | Director and shareholder meetings and written resolutions | Proves that decisions were authorised, including share issuances and dividends |
| Securities register | Every issuance, transfer and cancellation of shares from incorporation forward | Proves who owns the shares a buyer is purchasing |
| Register of directors and officers | Names, addresses and the dates each began and ceased to hold office | Reconciled against public filings in diligence |
| Register of ownership interests in land | Every ownership interest in land in Ontario, with supporting documents | Required of Ontario corporations; checked in real estate and share transactions |
| Register of individuals with significant control | Individuals holding or controlling 25 per cent or more of shares by number or fair market value, or exercising direct or indirect influence amounting to control | Required of privately held OBCA corporations since January 1, 2023; produced to authorities on request |
The register of individuals with significant control must be updated at least annually and within a prescribed period after the corporation becomes aware of new information. The consequences of ignoring it are unusual for a record-keeping obligation: a corporation that fails to maintain the register commits an offence, and directors, officers and shareholders who knowingly authorise or permit a contravention, or who record false information, face fines of up to $200,000 or imprisonment for up to six months, or both. Federally, CBCA corporations must also send individual with significant control information to Corporations Canada, and certain of that information is publicly searchable.
Approved by the directors and signed by one or more of them before being placed before shareholders.
The OBCA requires annual financial statements to be sent to shareholders at least 10 days before the annual meeting. The CBCA requires 21 days.
Held within 18 months of incorporation and thereafter no later than 15 months after the previous annual meeting and within 6 months of the financial year end. Shareholders elect directors, consider the statements and appoint or waive an auditor.
A non-offering OBCA corporation may dispense with an auditor by the written consent of all shareholders, including holders of non-voting shares, given for that year.
Share transfers recorded, director and officer changes entered, land register and register of individuals with significant control reviewed.
The Ontario annual return within six months of financial year end, and any Notice of Change within 15 days of a change in directors, officers or registered office.
A corporation that persistently fails to file can be dissolved for default. Revival is available through articles of revival, but in the interim contracts, bank arrangements and licences are disrupted, and property of a dissolved Ontario corporation can be forfeited to the Crown, which brings its own recovery process. Falling behind is far more expensive than staying current.
Limited liability protects shareholders, not directors acting in that capacity. Section 131 of the OBCA makes directors jointly and severally liable to employees for up to six months of unpaid wages and up to twelve months of accrued vacation pay for services performed while they were directors, with parallel liability under the Employment Standards Act, 2000. Directors can be assessed personally for unremitted payroll source deductions and net HST, and can be liable under the Occupational Health and Safety Act and environmental legislation for orders and offences. Section 130 imposes liability for authorising certain improper distributions, including dividends or share redemptions that render the corporation unable to meet the statutory solvency tests.
The available protections are indemnification and insurance. The OBCA permits a corporation to indemnify a director or officer against costs, charges and expenses reasonably incurred in respect of proceedings arising from their office, provided they acted honestly and in good faith with a view to the best interests of the corporation, and in criminal or administrative proceedings had reasonable grounds to believe their conduct was lawful. Corporations may also purchase directors and officers liability insurance. Both should be in place before a problem arises, and the by-laws should be checked to confirm the indemnity is mandatory rather than permissive.
Resigning does not erase liability for the period served, and a resignation that is not filed within 15 days can leave a former director shown on the public record. Anyone leaving a board should confirm that the resignation is recorded in the minute book, that a Notice of Change is filed, and that any personal guarantees they gave in support of corporate obligations have been released, since guarantees survive the end of the directorship.
A rebuild starts with the public record: a corporate profile report showing the currently registered directors, officers and address, and the filing history. We then reconcile that record against whatever internal documents exist, trace share ownership from incorporation forward, identify missing resolutions for issuances, transfers, dividends and borrowing, and prepare the documents required to bring the record into order, including ratifying resolutions where past acts need confirmation. Where a share transfer was never documented, a properly evidenced rectification may be required.
The right time to do this is before a transaction, not during one. In a sale process, missing records show up in the first week of diligence and become a condition of closing, negotiated under time pressure with a buyer who now has a reason to ask what else has not been done. In a financing, they delay funding. Handled in advance, a rebuild is a defined piece of work with a fixed fee.
We offer annual corporate maintenance on a fixed-fee basis: the annual resolutions or meeting documents, updates to all registers, the annual return, and a short review each year identifying anything that requires a filing or a decision. For boards that want more, we also provide governance reviews covering board composition, conflict of interest procedures, delegation and spending authority, and the interaction between the by-laws and any shareholder agreement. Contact our corporate group to arrange a records review or ongoing maintenance.
Shareholders are not passive under the OBCA. They are entitled to examine specified corporate records during normal business hours, including the articles, by-laws, any unanimous shareholder agreement, minutes of shareholder meetings and the registers, and to obtain copies. Shareholders and creditors may also obtain a list of shareholders on delivering the required statutory declaration limiting the use of the list to purposes connected with the corporation. Refusing a request that the statute grants is not a strategy; it converts a records question into an oppression complaint.
Shareholders holding not less than five per cent of the issued shares carrying the right to vote may requisition a meeting of shareholders to transact the business stated in the requisition. If the directors do not call the meeting within the period the Act allows, the requisitioning shareholders may call it themselves and the corporation must reimburse their reasonable expenses unless the shareholders resolve otherwise. Boards receiving a requisition should get advice immediately, because the timelines are short and mishandling the process tends to strengthen the requisitioner's position.
When a shareholder demand arrives, the useful first steps are consistent: identify precisely what is being asked for and whether the statute or an agreement entitles the shareholder to it, preserve documents, avoid taking retaliatory action such as terminating a shareholder-employee or cutting off information, and respond in writing within a reasonable time. Retaliation is frequently the conduct that turns a manageable disagreement into a successful oppression application, because it supplies the unfair prejudice that the remedy requires.
Directors facing a conflict between their duty to the corporation and the interests of the shareholder who appointed them should be clear about where the duty lies: it is owed to the corporation. Where a transaction involves a related party, the safer process is disclosure of the interest, abstention from the vote, approval by disinterested directors or shareholders, and a record showing the board considered the terms on their merits. That sequence is straightforward to follow in advance and very difficult to reconstruct after a claim is filed.
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Lexaltico LLP
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This site publishes several hundred pages about Ontario law. They are written carefully, they cite statutes and cases by name, and they are reviewed. None of that makes them advice about your matter. Law is applied to facts, and we do not know yours.
The difference is practical rather than technical. A page explaining that spousal support is usually indefinite after a twenty year marriage is accurate as a general statement and may be wrong about you, because of a domestic contract you signed, a period of separation you have forgotten, or an income that is not what a tax return says it is.
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Case results described anywhere on this site are real and are described accurately, and they are specific to their own facts. A settlement at three times the original offer happened because of that employer, that contract and that person’s history. It says nothing about what your matter is worth.
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