News & Views
Taking the Extra Minute
Written by Craig Sandler
Updating your corporation's minute book is time well spent and saves headaches down the road
When was the last time your corporation’s minute book was updated? If it’s been more than a year, it’s time to take a look at it, and to consider instituting processes to ensure that the practice occurs more regularly.
Have you ever asked yourself why it is necessary that your minute book and corporate records be kept up to date? The short answer is that it is a requirement of the law. The Business Corporations Act, both Ontario and Federal, state that a corporation shall maintain records containing minutes of meetings and resolutions of both directors and shareholders. However, apart from the statutory obligation, there are many practical benefits to an updated minute book, a few examples of which are:
Avoiding Shareholder Disputes – the minute book should act as a vehicle to properly and formally record all actions requiring shareholder approval, allowing you to avoid misunderstandings in the event of a shareholder dispute. This applies to shareholder approval provided during shareholder meetings as well as to unanimously signed shareholder resolutions in lieu of meetings. There are too many instances of a shareholder challenging a corporate action after the fact, and the corporation, due to outdated and poor record keeping, not being able to resolve the issue quickly.
Defending Your Tax Filings – by properly recording in the minute book all dividends, management bonuses, share transfers and such other transactions, you will be creating a clear and traceable paper trail to respond to queries from Canada Revenue Agency with respect to your tax filings and thereby avoid unnecessary fines or penalties.
Generating Accurate Annual Returns – depending on your jurisdiction of incorporation, you may be required to file an annual return with the relevant Ministry in order to maintain your corporate status. The filing is made easier when all important information, such as names and addresses of directors, is recorded in the minute book, together with updates as and when changes occur. This allows you to easily access and refer to the information required in advance of the filing deadline.
Providing Proof Of Good Standing – virtually all corporate acquisition transactions or financing arrangements will require a certificate of good standing and/or an opinion from counsel that the minute book and corporate records are up to date. If the annual returns are not filed when due, a certificate of good standing may not be obtainable from the Ministry. Likewise, corporate counsel is not going to be prepared to provide a formal opinion in the absence of up to date corporate records.
Keeping Your Public Information Current – the minute book should record specific business changes as they occur, such as changing the registered address or adding/removing directors and officers. When this happens, there should be a procedure in place to ensure that these changes are filed and reflected in the public records of the Ministry. Having current information available for the public to view could save significant time and avoid legal disputes when a corporate transaction occurs.
Attracting Suitors – when you’re being courted, whether by a third party purchaser or an investor or an inside partner/employee, who wish to purchase, acquire or invest in the corporation, one of the first questions you will be asked is what state the corporate records are in. Being able to promptly provide up to date records in a minute book that contains all pertinent information that the purchaser or investor may wish to see, will serve to facilitate their due diligence investigations and smooth the transaction.
The minute book is an essential tool to help you organize your corporation’s important information, so that it is readily available when required. To avoid an urgent and costly rush to update the minute book at the 11th hour, consider instructing your accountant to annually provide to your corporate counsel the pertinent information required to prepare the annual resolutions and simultaneously update the minute book. You can then take comfort in the knowledge that not only is your minute book and corporate records up to date, but your legal requirements have been met.
If you would like to learn more about how we can assist you in maintaining your minute book, please feel free to contact us.
*The material provided in this article is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
About the Author:
Craig Sandler is a seasoned advisor to business in all areas of corporate and commercial law. Acting for large corporations, mid-sized firms and small start-ups alike, he offers informed, practical advice on asset sales and acquisitions, commercial agreements, leasing arrangements and everyday business issues.
Changes finally coming to Construction Lien Act
Written by David Meirovici
On December 12th, 2017, Bill 142, known as the Construction Lien Amendment Act, 2017 (the “Act”) was approved into law. This amendment marks the first meaningful change to Ontario construction law in the last 35 years. Despite becoming law, the most significant aspects of the Act however will not take effect until being proclaimed by the Lieutenant Governor early this year.
To get you ready, here are three significant changes both owners and contractors can expect once the Act comes into force:
1. Timeline to Register and Perfect a Construction Lien – To allow contractors and owners more time to resolve their disputes outside of courtroom, the timelines for both registering a construction lien and commencing a construction lien action will both be extended. In particular, the timeline for “preserving” (i.e. registering) a construction lien on title will be changed from 45 days - calculated from the date of last service to the site - to 60 days, and the timeline to then “perfect” that lien (by commencing a construction lien action) will be amended from 45 days - calculated from the last possible date to preserve a lien - to 90 days. This change will increase the total length of time prior to commencing a construction lien action from 90 days to 150 days.
2. Introduction of the Prompt Payment Regime – The Act will institute a brand new “prompt payment” regime, setting strict and specific timelines for payment of contractors and subcontractors. These timelines will not only solidify expectations - by ensuring a contractor is paid by an owner prior to his/her requirement to pay subcontractors - but will set automatic and mandatory interest penalties should the payment schedule not be met. Owners, contractors and subcontractors will still be entitled to dispute any invoices received but will now be required to submit a “notice of non-payment”, outlining their reasons for disagreement within 14 days of the invoice having been rendered. Payments under this new regime will not affect regular holdback rights.
3. Mandatory Adjudication –Lastly, the Act will provide for the first time, a mandatory dispute resolution process. This interim adjudication step will require disputing parties to first refer any issues related to payment, value of services, or any other matters agreed to, to a licensed adjudicator either chosen by the parties or by a governing authority. The adjudicator will be required to render a decision within 30 days with the cost of their services (regardless of outcome) to be split amongst the parties. The adjudicator’s decision will be binding on the parties, and will require payment within 10 days.
These changes, amongst others, are welcome news to both sides of the construction industry, striking a balance in providing owners greater opportunity to avoid construction liens, while offering greater certainty to contractors and subcontractors in getting paid for their work.
Expect to hear more from us once the official date for proclamation is announced.
About the Author:
David Meirovici practices primarily in the areas of commercial and residential real estate, acting on behalf of individuals, corporations and financial institutions. In addition, David is a member of our corporate law group, providing support on commercial transactions as well as advising on will and estate matters.