The Canada Business Corporations Act

Corporations operating in Canada are subject to the Canada Business Corporations Act.

Passed in 1985, Bill C-44 is the Canada Business Corporations Act. It is a law that governs the activity of business corporations in Canada, including rules of incorporation, recordkeeping, powers and responsibilities of corporate officers as well as procedures for legal prosecution.

Corporations

Under the act, a corporation is allowed to operate in Canada as if it possesses the same rights and privileges of permanent residents or citizens of Canada. So long as it follows the rules set out in the act, it retains this status. When a company incorporates, it must furnish the following information to the government: its name, the province its head office will be located in, the type and number of shares it will issue and how it will issue them.

Officers

A corporation's officers are the individuals who decide how a corporation will act. Their authority in determining a corporation's activities is limited by the act. When a corporation is accused of violating one of its articles, bylaws or shareholder agreements, its officers may not enter the dispute, because it would generate conflict of interest. Nor may they enter into disputes over whether they, as officers, have the power to exercise authority on behalf of the corporation.

Corporate Records

The act requires a corporation to keep records at one of its offices, which describe in detail the articles and bylaws it is subject to, any shareholder agreements it has agreed to, minutes of shareholder meetings and resolutions as well as a current securities register. The securities register documents the names and addresses of shareholders, the number of shares held by each and when they were issued or transferred. Corporations violating this requirement can be fined.

Financial Disclosure

A corporation must present its shareholders with yearly financial reports.

Corporations are required to present financial statements for the previous financial year to their shareholders at annual meetings. The figures must be presented such that they offer a comparison to those of the financial year preceding it. The statements must also include any auditor's reports conducted on the corporation's finances and any other information relevant to the corporation's financial position. Copies of these financial records must be kept in one of the corporation's offices. Shareholders and officers of the corporation must be allowed to examine these documents at any time, free of charge.

Liability

Officers of a corporation can be imprisoned for crimes the corporation commits.

In most cases, corporations found guilty of breaking Canadian laws can be prosecuted through normal court procedures, but, in cases in which the corporation itself is unable to fulfill a sentence, its officers may be punished on the corporation's behalf. For instance, if a corporation was found guilty of a crime punishable by imprisonment, one of its officers would be required to serve the jail time.

References

• Canadian Department of Justice: Bill C-44

Resources

• Industry Canada: Corporations Canada