Documenting annual meetings

Both provincial and federal corporations require directors and shareholders to hold annual meetings[1]. Although other business may be conducted at these meetings, the main purpose of the annual meeting of the Board of Directors is to approve the most recent financial statements of the corporation, and the main purposes of the annual shareholders meeting are to receive the financial statements, to elect the directors and to decide whether or not the corporation must engage an auditor for the ensuing fiscal year. Corporations are required to keep minutes of these meetings in their corporate records book.

If the directors or shareholders unanimously decide not to hold an annual meeting, they may sign written resolutions in lieu thereof confirming their decisions with respect to the subjects that would have been discussed at the meeting. These written resolutions must also be kept in the corporate records book.

Government corporate registry filings

All provincial corporations and all federal corporations who conduct business in the province of Québec, must file an annual updating declaration with the Registraire des entreprises. The purpose of the declaration is to ensure that the information available to the public on the Québec corporate registry (such as the address of the head office and the names of the directors, officers and shareholders) is accurate. Failure to file two consecutive annual updating declarations can result in the cancellation of the corporation’s registration. For a provincial corporation, such cancellation automatically causes the corporation to be dissolved.

Federal corporations must file an annual return with Corporations Canada for the purpose of maintaining the federal corporate registry. Corporations Canada may dissolve a corporation that fails to file two consecutive annual returns.

Would you like someone to prepare your annual resolutions or assist you with your government filings? We’re here to help. Contact us to schedule a consultation with one of our lawyers.   

[1] In some cases, the sole shareholder of a provincial corporation can choose not to establish a Board of Directors and would then not be required to comply with the annual meeting obligations.

The general rule is that if there are more than twelve months remaining in the term of the lease when the building is sold, the purchaser of the building can terminate the lease twelve months after the sale, as long as they give a notice of at least six months to the tenant. To illustrate, if a building was sold on January 1, 2021, the new landlord could terminate the lease on January 1, 2022 as long as notice was given to the tenant no later than June 30, 2021.

However, the same article creates an exception to the general rule for leases registered on land registry. As long as the lease is registered prior to the sale of the building, the new landlord cannot terminate it and must continue to respect its provisions until the end of its term.

Since Mr. Chef’s lease is not registered, he has no recourse against the new landlord.

Tenants, protect yourselves and avoid the negative financial impact of having to relocate your business by registering your lease today. The process is simple and inexpensive and can be done either right after signing your lease or at any time thereafter (so long as it is before the sale of the building). Usually, all your lawyer will need to complete the registration is a copy of your lease.

Do you have questions about the registration process or a lease that you would like to register? We’re here to help. Contact us to schedule a consultation with one of our lawyers.   

Take the example of Mr. A, a real estate developer who has just discovered that the property he’s been coveting for a residential condo development has just been put on the market. When he visits the current owner of the property, Ms. B, she informs him that there are several interested parties, however, she’s willing to sell to Mr. A if he immediately signs a promise to purchase at a price above market value.

Mr. A is not new to the real estate game and knows that there are numerous legal and fiscal advantages to the property being owned by a corporation. He therefore indicates in the promise to purchase that he is signing for the benefit of a corporation to be created and that said corporation will ultimately sign the deed of sale and become the owner of the property.

Mr. A promptly incorporates NiceCondos Inc. A few days later, he starts having regrets about his decision to overpay for the property and decides not to go through with the sale, believing that since he signed on behalf of a corporation, NiceCondos Inc. would be responsible for any damages suffered by Ms. B due to the loss of the sale.

Imagine his surprise when he receives a claim for damages from Ms. B, and his lawyer tells him that he is personally responsible for her losses. Why is that the case? The answer lies in article 320 of the Civil of Québec, which states the following:

“A person who acts for a legal person before it is constituted is bound by the obligations so contracted, unless the contract stipulates otherwise and includes a statement to the effect that the legal person might not be constituted or might not assume the obligations subscribed in the contract.”

In other words, it’s not enough for someone to state that they are signing a contract on behalf or for the benefit of a corporation to be created, even if the other party is perfectly aware of this fact.

How could Mr. A have avoided this situation? It is important to note that corporations can now be created quite quickly (in some cases in less than 24 hours), so the first question anyone should ask is whether there is real urgency justifying the signature of a contract immediately. In almost all cases, no harm will come from delaying the signature of the contract by a few days.

If the contract must be signed without delay, it must explicitly state that the person signing for the corporation to be created shall under no circumstances be liable for the performance of the obligations set out in the contract, even if the corporation is never created or never agrees to respect the terms of the contract.

Of course, Mr. A could also have had his lawyer review the contract before signing!

Do you have questions about a contract that you’re being asked to sign? We’re here to help. Contact us to schedule a consultation with one of our lawyers.   

• Will your business have locations only in Québec? If the answer to this question is yes, chances are a provincial corporation is right for you. If your business will have locations in other Canadian provinces or territories, you may want to consider a federal corporation. Corporations must register in each province in which they do business, and many Canadian jurisdictions offer a simplified (and in some cases less costly) registration procedure for federal corporations. If your business will have locations in other countries, or frequently do business with parties in other countries, a federal corporation may be advantageous because official government documents are issued in both English and French. The government of Québec issues such documents only in French. A provincial corporation may, in certain circumstances, be required to provide official translations, which can sometimes be costly.
• Will you be the sole director and shareholder? With a provincial corporation, you will benefit from more simplified and less formal procedures, namely when it comes to annual meetings or the dissolution of the corporation.
• Will the corporation’s directors be Canadian residents? There is no residency requirement for the directors of a provincial corporation, whereas at least 25% of the directors of a federal corporation must be Canadian residents. For federal corporations with less than four directors, at least one must be a Canadian resident.
• Do you already own a corporation? If so, it would generally be best to incorporate the new corporation in the same jurisdiction as the existing one. If you one day decide to merge the two entities, the process will be easier and less costly if they are incorporated in the same jurisdiction.

It is worth noting that since a federal corporation whose head office is in Québec will need to register in that province, the overall cost of setting up a federal corporation is greater than a provincial one due to the additional registration and government fees. A federal corporation is also slightly costlier to maintain because it will need to file annual declarations both federally and provincially.

Have you decided which jurisdiction is right for you? Would you like more information? Book a consultation with one of our corporate lawyers.

Author: Laurie Meitin