NUANS Name Search Report

NUANS Name Search Reports

Which Provinces Accept a NUANS report versus a Specific Province Name Clearance Report?

The province and territories which accept the NUANS  report are:  Alberta, Ontario, New Brunswick, Federal, Nova Scotia, Prince Edward Island and Yukon.  All other jurisdictions in Canada will require a name search report specific to that province or territory.

In Alberta and Ontario you are not required to provide a name search report of any type for sole proprietorships, business names or partnerships, however, it is still advisable to perform a preliminary name search since the onus is on you to ensure the name has not been taken by any other business.  If you are ordering a  name search report or a name search specific to a province as required by the type of registration you are wanting, our service automatically includes preliminary name searches. The only time you would order a preliminary name search would be if you are registering a business name, sole proprietorship or partnership in a province that does not require a name search report such as Alberta or Ontario.

Name search reports and NUANS name search reports all provide the same kind of information.  They determine whether a proposed name has been used by any other business across Canada and also provide a list of similar names already registered.  Be advised that these  reports are specific to the province they are ordered for.  For instance a Federal NUANS report cannot be used for an Ontario company.

Purchase a NUANS Name Search Report

What is a Name Search Report

A name search report compares the name of a proposed business to all other names already registered across Canada.

A NUANS report is specific to certain provinces and is a seven-page report which is generated from the search system which compares a proposed name or trade-mark with the database of existing names that have been registered anywhere across Canada.

Let our Experts assist you with obtaining a NUANS or Name Search Report for your New Business
Let our Experts assist you with obtaining a NUANS or Name Search Report for your New Business

What Information is Provided by a Name Search Report or a NUANS Report

By comparing the proposed name against the NUANS name search system or a name granting system in a province or territory, any similarity existing between the proposed name and the names in the database, will show up on the name search report. This will allow you to determine whether you are planning on using a name for your company that is too similar to another name. It is important for your name to be as distinct as possible.  If you are ordering a name search for a province that does not accept the NUANS you will be provided with a name search that compares names to other names in that particular province or territory but the name search report will also look at similar names in other provinces right across Canada that may be a conflict.

 

What is A NUANS Search System

The NUANS search system is a computerized search system which contains a list of all of the company names, sole proprietorships, partnerships, business names and trade-marks registered in the federal, provincial and territorial jurisdictions in Canada. The purpose of the system is to keep track of all names registered across Canada.

Even if a province or territory has its own name search system in place, the NUANS system will pick up those names in its database and therefore when performing a preliminary name search the search system is the best way to get a pre-clearance of your name.

Only search houses can perform preliminary name searches or full NUANS name searches through the NUANS system with the exception of the federal government’s site which provides limited access to doing searches.

The federal website’s preliminary name search system is limited in that it does not allow for broad searches and it is not workable if ordering a Federal NUANS and it is limited with respect to doing preliminary name searches for other provinces and territories.  In order to effectively do a preliminary name search on your proposed business you must have an experienced search house perform the search.

What is a Name Search Report and NUANS Report Used For

A NUANS name search report must accompany articles of incorporation when incorporating a company in the federal, Alberta, Ontario, New Brunswick, Prince Edward Island and Yukon jurisdictions of Canada.

NUANS reports are also required in some provinces for registration of business names and partnerships.  In Ontario and Alberta you are not required to provide any form of name search when registering a sole proprietorship or partnership.

 

Do All Provinces and Territories Accept the NUANS Name Search

Some provinces and territories have their own name search system and they do not except the NUANS name search report. Those provinces and territories will require a name search specific to that jurisdiction.  The jurisdictions in Canada that do not accept the NUANS report are British Columbia, Manitoba, Saskatchewan, Nunavut and Northwest Territories.

If you are registering a sole proprietorship, business name or partnership in a province or territory where a name search or NUANS report is not required (such as Ontario or Alberta), it is a good idea to perform a preliminary name search to ensure the name is available but a full name search report or NUANS report would not be necessary.  All you need to do is ensure the name is available before you register your sole proprietorship or partnership.

Even though not all provinces and territories accept a NUANS report since all names registered in those jurisdictions are recorded in the NUANS database, it is still advisable to do a preliminary name search through the NUANS system to ensure the name is available.  Resources for Canadian Business Owners can provide you with a preliminary name search for situations for situations when a full NUANS report is not required.

If you require a name search report or NUANS name search report to register your company, business name, sole proprietorship or partnership, Resources for Canadian Business Resources Inc. will provide you with unlimited free preliminary name searches when a name search report or NUANS report is ordered through us.

Purchase a Name Search Report

How Does the NUANS Name Search System Capture the Names from the Other Name Search Systems in Canada

The governments which do not accept reports from the NUANS name search system provide a list of any names that have been registered in their province or territory to the NUANS name search system and these names are added to the NUANS system database on a regular basis.

 

Why is a Name Search or NUANS Report Necessary

You cannot incorporate a company with a name that is exactly the same as another name already registered.  It does not matter whether you are registering a company in PEI and the duplicate name is in BC, you will not be able to register an exact name.

When you go to incorporate a company the government must first know if that name has been taken. In order for the government to ensure that the name is free to use it needs to see a NUANS name search report or similar name search report depending on the jurisdiction.

The report will show the government whether there is an exact name already registered for the proposed name you wish to use. The name search report is also your way of determining whether there are additional conflicts to your name. The onus will be on you to look over the entire report and make sure you are not proposing to use a name that is even close to another corporate name or trade-mark since the owner of the name could still have a claim against you if your name is too similar and his or her company name has had a large presence in the marketplace for many years. Order a NUANS name search now.

 

NUANS Ontario
NUANS Ontario Report

How Do You Ensure Your Proposed Business Name is Distinct

Refer to the section on name guidelines for more information on how to ensure you have picked a distinct and descriptive name for your company that will not be challenged by the government or another company.

 

Are There Different Types of NUANS Name Search Reports

Each jurisdiction that accepts the NUANS Name search report will have its own form of NUANS report. If you are incorporating an Ontario company you will be required to obtain an Ontario NUANS Name Search report. If you are incorporating a federal company you will be required to obtain a federal NUANS name search report. If you are incorporating an Alberta company you will be required to obtain an Alberta NUANS Name Search report.  Despite the fact that each of these reports is different, all reports will search the NUANS database system for similar names right across Canada.

 

Why Are Federal Name searches different from Alberta Name Searches, Ontario NUANS, PEI and NB Name Searches

An Ontario company can be incorporated with any name which is different in any regard, even if it is only a few letters in the name. A federal company differs however because when the federal government reviews articles of incorporation together with a Canada NUANS it will not allow any name which is similar to another company in many regards. When you are submitting incorporation documents for a federal company ensure your name is as different as possible from any other company name being used in Canada. Be prepared that the government may also disallow your proposed name if it sounds the same as another existing company even if the spelling is substantially different. You should be prepared that your name might not be accepted. Each time you submit articles for review you will need to submit a new NUANS report. If the first name you pick is too close to others on record, then you will have to buy another federal NUANS and submit again. A qualified search house will be able to assist you with having a better chance of your NUANS report being accepted the first time. Resources for Canadian Business Owners has experience in having proposed names accepted even after they have been rejected. However, some times additional searches must be performed to rule out conflicting companies and there can be an additional cost here. It is possible to obtain an advance Name Decision report from Industry Canada before you submit your articles for filing. Resources for Canadian Business Owners will be glad to submit a request for a Name Decision for your federal incorporation.  This will also include as many preliminary name searches as you require without further cost. We are experienced in reviewing preliminary name search results through the NUANS system to help increase your chances of being accepted the first time round when you are submitting articles of incorporation for companies in the federal jurisdiction.

 

Why Does It Matter if I use a Name Similar to a Name in Another Province 

It may seem that if you are registering a company in Ontario and another company in the Northwest Territories has a similar name, that this should not be a problem. With technology as it is today, companies are conducting business across Canada, if not across the World. You will have no idea whether the company with the name that you are proposing may at some time in the future be conducting business in the very province you wish to register in and then there would be a conflict.  Further, the Canadian government provides that any company that is registered in any province or territory in Canada can apply to be registered to carry on business in another province or territory. It is therefore very important that your proposed name is distinct and descriptive.  This is called an extra-provincial registration.

NUANS Search

Is a NUANS Report Required for a Business Name or Sole Proprietorship Registration

A  NUANS Report is not required in Ontario and Alberta, and some other provinces when registering business names, sole proprietorships and partnerships. In Ontario and Alberta anyone can register the exact same business name or sole proprietorship as one registered already. However, it is advisable that you do a preliminary NUANS name search before you register to ensure no one else is using the name regardless.  This is the one time when you should pay for a preliminary name search for your business name.  There is no need to purchase a full NUANS report or other name search report for a business name, sole proprietorship or partnership being registered in Alberta and Ontario.  All that is required is to do a preliminary name search just to ensure you are picking a name that is different.  It is always advisable not to use a name that is too similar to another name since this would be a conflict for your business in the long run. Some business names such as “Bell Canada” have a high standing in the marketplace because of the number of years the name has been registered and the number of people who know the name.

You should be aware that there is no such thing as a Federal Business Name registration, Federal partnership registration or Federal Sole Proprietorship registration. Business names, partnerships and sole proprietorships are governed by the provincial and territorial jurisdictions in Canada.

What is a Preliminary NUAN Name Search

If you purchase a NUANS Name Search Report and the name you wish to use for your incorporation is on the report as registered for another company or business, you will not be allowed to incorporate with that name. It is therefore important that you do a preliminary NUANS name search first in order to ensure before hand that the name is free.    Otherwise, if you do not first ensure a pre-check of the name is done and you order a full NUANS report or other form of name search report, your registration could be rejected if the name is too similar or the same as another name registered.

Please note however that preliminary NUANS Name Searches are not fool proof and there is always a chance a conflict will show up on the full NUANS Name Search or other name search report that did not come up during the Preliminary NUANS Name Search.

You can keep buying full NUANS Name Search reports but it will become costly. It is better that you check the name first with a Preliminary NUANS Name search. Resources for Canadian Business Owners provides FREE UNLIMITED preliminary name searches with the purchase of a NUANS or Name Search Report.  We will make great efforts to pre-clear your name in advance so that the odds of your proposed name being rejected are reduced.

How do I Arrange to have a Preliminary Name Search

Resources for Canadian Business Owners Inc. will do as many preliminary Name Searches as you wish with the purchase of a full NUANS Name Search or other Name Search Report.  If you are not required to submit a name search report with your registration Resources for Canadian Business Owners will be glad to perform a preliminary name search for you at a nominal fee.  This service should only be used when a name search report is NOT required

How Long Does it Take to Get a Name Search or NUANS Report

If you are ordering a report from a province or territory that does not accept a NUANS report, it can take a few days to a week to obtain the report.  If you are ordering a NUANS name search report, it takes from 40 minutes to three hours to obtain a NUANS Name Search Report. Once you order a NUANS report a confirmation email will be sent to you to let you know that we have received your request. Depending on the number of searches requested at that time it might take us 40 minutes or three hours. Be assured though you will receive the NUANS in the same day whether you order it at 6:00 a.m. in the morning or 10:00 p.m. at night.  Frequently we have someone close to the computer for most of the day right up until late evening so feel free to contact us at any time of the day. We are open 7 days a week. We look forward to serving you.

How Long is a Name Search or NUANS Report in effect.

A NUANS name search report will be in effect for 90 days from the date of issue.  If yuou do not use the report until after that time you will be required to order a new one and most other name search reports are also effective for a similar length period.

Name Searches for Non-Profit Corporations and Charities

We can provide you with information about registered companies, partnerships, sole proprietorships or operating trade names on the public record throughout Canada including extensive due diligence searching and reporting.

We also provide registration services for Canadian companies, sole proprietorships, partnerships and operating trade names in the provinces and territories of Canada.

Our staff has over 30 years’ experience in corporate law and we will be glad to answer your questions.  We take pride in our work and will provide you with the best, fastest, accurate and reasonably priced service available.

Depending on the province or territory you wish to incorporate your non-profit corporation will depend on the type of name report that you get. There is no difference between a name search report for a not for profit corporation or charitable corporation and a share corporation. It is the province or territory that governs the report you get.

For instance, a name search report for a share company being incorporated in Ontario is the same report given to a non profit or charity corporation wishing to incorporate in Ontario, being an Ontario NUANS name search report.

NUANS Search Houses are trained on the best method of performing Preliminary NUANS Name Search reports in order to ensure that the most conflicts to your proposed names can be found prior to ordering a full NUANS Name Search Report.

If you incorporate a numbered company a NUANS name search report will not be required since the government will provide you with the next number in line. An example of a numbered Ontario company would be a corporation having a name such as 9999999 Ontario Inc.

A numbered federal company might be a corporation with a name called 9999999 Canada Inc. and an Alberta numbered company might be 2244444 Alberta Ltd.  The numbers are given out consecutively. You cannot choose the number for your company.

description of officer positions

Appointing Officers

This article will provide guidance on how to appoint officers of a Corporation and how resignations and removal of officers are documented.

The directors of a corporation manage the affairs of the corporation.  As part of that management the directors are responsible for appointing officers to assist them with their duties.

Directors can appoint officers at a meeting or a resolution can be signed by all of the directors appointing officers.  For more guidance on preparing resolutions refer to directors resolutions.  For guidelines on how directors can go about appointing officers at a meeting refer to directors meetings.

The statute of incorporation and the by-laws of a corporation will govern the manner in which officers can be appointed, removed or resign.

Appointing Officers

The directors initially approve the officers of the Corporation upon incorporation or each year at the annual meeting (see below for more information on annual resolutions/meetings).

An example of a resolution appointing officers is as follows:

2-Appointment-of-Officers

Resignation of Officers

When an officer wishes to discontinue working with a company, that person will resign as an officer from the position he or she is holding.  See an example of a resignation of an officer below:

1-Resignation-of-Officer

Once a resignation has been received by the directors of a corporation, they will need to decide whether they wish to appoint another officer to replace the person resigning.  Depending on the type of position, it may not be necessary to appoint a replacement.  In situations where the directors wish to appoint a replacement officer, they will prepare a resolution in the form below:

3-DR-Resigning-Officer

Remove an Officer

The general operating by-law provides the manner in which an officer may be removed.  The directors of a corporation will approve a resolution to remove the officer and appoint a replacement to that position.  Below is an example of this form of resolution:

4-DR-Removing-an-Officer

Annual Resolutions

Each year a company must approve certain matters.  Officers may be excluded from appointment and new ones brought on at this time without being removed or resigning.  For more information these approvals see annual resolutions.

For more information about officers titles refer to Officers Titles.

Notice of Change

Most jurisdictions will provide in the governing statute that a notice of change must be filed to update the government’s database with respect to changes in officers and directors.  In many cases this can be done online using a company that has access to the databases or a paper filing can be done.  Paper filings are not as reliable but in most cases they are free to file.

Statute Reference:

Business Corporations Act (Ontario)

“1(1) “officer” means an officer designated under section 133 and includes the chair of the board of directors, a vice-chair of the board of directors, the president, a vice-president, the secretary, an assistant secretary, the treasurer, an assistant treasurer and the general manager of a corporation, and any other individual designated an officer of a corporation by by-law or by resolution of the directors or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any such office;

“senior officer” means,

(a)   the chair of the board of directors, a vice-chair of the board of directors, the president, a vice-president, the secretary, the treasurer or the general manager of a corporation or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any such office, and

(b)   each of the five highest paid employees of a corporation, including any individual referred to in clause (a);”

“117.  (1)  After incorporation, a meeting of the directors of a corporation shall be held at which the directors may,… (d) appoint officers;”

“127.  (1)  Subject to the articles or by-laws, directors of a corporation may appoint from their number a managing director or a committee of directors and delegate to such managing director or committee any of the powers of the directors.  2006, c. 34, Sched. B, s. 21 (1).”

Canada Business Corporations Act

“2(1) “officer” means an individual appointed as an officer under section 121, the chairperson of the board of directors, the president, a vice-president, the secretary, the treasurer, the comptroller, the general counsel, the general manager, a managing director, of a corporation, or any other individual who performs functions for a corporation similar to those normally performed by an individual occupying any of those offices;”

104 (1) After issue of the certificate of incorporation, a meeting of the directors of the corporation shall be held at which the directors may…..(d) appoint officers;”

Business Corporations Act (Alberta)

“121. Subject to the articles, the bylaws or any unanimous shareholder agreement, (a) the directors may designate the offices of the corporation, appoint as officers individuals of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in section 115(3), (b) a director may be appointed to any office of the corporation, and (c) 2 or more offices of the corporation may be held by the same person.”

Business Corporations Act (British Columbia)

“141 (1) Subject to subsection (3) and to the memorandum and articles of a company, the directors may appoint officers and may specify their duties.

(2) Unless the memorandum or articles provide otherwise,

(a) any individual, including a director, may be appointed to any office of the company, and

(b) 2 or more offices of the company may be held by the same individual.

(3) An individual who is not qualified under section 124 to become or act as a director of a company is not qualified to become or act as an officer of the company.

(4) Unless the memorandum or articles provide otherwise, the directors may remove any officer.

(5) The removal of an officer is without prejudice to the officer’s contractual rights or rights under law, but the appointment of an officer does not of itself create any contractual rights.”

The Business Corporations Act (Saskatchwan)

“116 Subject to the articles, the bylaws or any unanimous shareholder agreement: (a) the directors may designate the offices of the corporation, appoint as officers persons of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in subsection (3) of section 110; (b) a director may be appointed to any office of the corporation; and (c) two or more offices of the corporation may be held by the same person.”

The Corporations Act (Manitoba)

“99(1).  After the issue of the certificate of incorporation, a meeting of the directors of the corporation shall be held at which the directors may…..(d) appoint officers;”

By-law Provisions Regarding Officers

An example of a clause in a general operating by-law which governs how officers are appointed is as follows:

Appointment – The board may from time to time designate the offices of the Corporation, appoint officers (and assistants to officers), specify their duties and, subject to the Act or the provisions of any unanimous shareholder agreement, delegate to such officers powers to manage the business and affairs of the Corporation.  A director may be appointed to any office of the Corporation.  Except for the chairman of the board and the managing director, an officer may but need not be a director.  Two or more offices may be held by the same person.”

An example of a clause in a by-law which provides for the removal or resignation of an officer is as follows:

“ Term of Office (Removal) – In the absence of a written agreement to the contrary, the board may remove, whether for cause or without cause, any officer of the Corporation.  Unless so removed, an officer shall hold office until his successor is appointed or until his resignation, whichever shall first occur.”

dividend resolution

Declaring a Dividend on Shares of a Company

Dividends are payments declared by the directors of a company which are paid to the shareholders (owners) of a private or public company out of the profits of that company.  When declaring a dividend the dividend must be declared equally to all shareholders of a class of shares and are paid out to each shareholder in proportion to the number of shares held.

When declaring a dividend, dividends can be paid as money, shares, warrants or property.

The directors of a company will pass a resolution at a meeting of the directors or by a resolution signed by all of the directors declaring a dividend to the shareholders of a specific class of shares.

Example of a Dividend Calculation

Below is an example of how a dividend is calculated and declared:

  • Declaring a Dividend in the aggregate amount of $10,000
  • The company has 2 shareholders with 100 issued and outstanding shares.
  • Shareholder #1 owns 40 shares.  Shareholder #2 owns 60 shares.
  • Shareholder #1 will receive $4,000 in dividend profits
  • Shareholder #2 will receive $6,000 in dividend profits
  • The dividend per share is equal to $100

Relevant Dates When Declaring a Dividend

  • The date the dividend is being declared payable.  Dividends cannot be declared payable in the past and this date must be either the same date of the resolution approving the dividend or for a future date.
  • The date upon which the shareholders of record is determined.  This provision comes into play more for public companies since shares for those companies regularly trade and the number of shareholders changes from day to day however even private companies must follow the same rules.  A record date must be determined when declaring a dividend and the only shareholders who would receive the dividend would be those who were shareholders of record on that particular date.  This prevents a shareholder who held shares in the company prior to the declaration of the dividend having a right to a dividend declared after he or she is no longer a shareholder.
  • The date of the directors resolution approving the dividend.  Frequently resolutions are left undated but it is very important when declaring a dividend to include the actual date the resolution was approved so that it is very clear that the dividend is being declared for a current or future date.

Which Classes of Shares are Eligible for Dividends

Common shares have the automatic right to receive dividends, however, preference or special classes of shares are only entitled to receive dividends if the Articles of the Corporation provide for it.   As well, there may be certain terms outlined in the Articles to be considered when declaring a dividend on special or preference shares.

 

Statutes Governing the Declaration of Dividends in Canada

Income Tax Act (Canada) deals with dividends in several different sections and it is a good idea to discuss dividends with your accountant before declaring them since there are tax consequences upon declaration of a dividend.

 

Approval for declaring a dividend is governed by the companies act or corporations act in each individual province or territory of Canada.  The various corporation statutes across Canada will provide either some or all of the following provisions:

A corporation shall not declare or pay a dividend if there are reasonable grounds for believing that (a) the corporation is, or would after the payment be, unable to pay its liabilities as they become due; or (b) the realizable value of the corporation’s assets would thereby be less than the aggregate of its liabilities and stated capital of all classes.

A corporation may pay a dividend by issuing fully paid shares of the corporation and a corporation may pay a dividend in money or property.

If shares of a corporation are issued in payment of a dividend, the declared amount of the dividend stated as an amount of money shall be added to the stated capital account maintained or to be maintained for the shares of the class or series issued in payment of the dividend.

Solvency Test When Declaring a Dividend

Most statutes will have a solvency test that must be met before any dividend is issued.    The company must not be insolvent and a dividend must not be declared if it would render the company insolvent thereafter.

Resolutions to Approve a Dividend

Example of a Resolution to Approve a Regular Dividend for Money:

“BE IT RESOLVED THAT a dividend in the aggregate amount of $** payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation is declared payable on [declaration date] to the shareholders of record of the Corporation as of [record date].

Any director and/or officer of the Corporation be and is hereby authorized and directed from time to time to execute and deliver all documents, agreements or other writings, whether under the corporate seal of the Corporation or otherwise, as may be necessary or advisable, and to sign for and in the name on behalf of the Corporation all such documents and writings and to take all such steps as in his or her opinion may be necessary or advisable for the purpose of giving effect to the foregoing.”

Certificates of Status for Canadian Companies

Example of a Resolution to Approve a Dividend for Property:

“BE IT RESOLVED THAT a dividend in the form of [described property] now registered in the name of the Corporation (the “Property”) is declared payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation.

Payment of the dividend shall be effected by transferring the Property now registered in the name of the Corporation to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation on [declaration date] to the shareholders of record of the Corporation as of [record date].

The amount of the dividend shall be equal to the fair market value of the Property, which is [$500,000].

Any director or officer of the Corporation is authorized and directed to do all things and executed all instruments and documents necessary or desirable to carry out the foregoing.”

Example of a Resolution to Approve a Dividend for Shares:

“BE IT RESOLVED THAT a dividend in the aggregate amount of $1,000 is hereby payable to the holder(s) of the issued and outstanding [common] shares in the capital of the Corporation on [declaration date] to the shareholders of record of the Corporation as of [record date],  such dividend to be paid and satisfied in full by the issuance to such holder(s) of the aggregate amount of [500] fully paid and non-assessable common shares.

The directors of the Corporation hereby determine that there shall be added to the stated capital account maintained for the [common] shares of the Corporation the amount of $1,000 in respect of the [500 common] shares of the Corporation issued in payment of the dividend declared.

Any one of the directors or officers is authorized and directed to do all things and execute any agreements or documents in order to effect the foregoing including the issuance of a certificate or certificates representing the [500 common] shares to the holders(s) of [common] shares of the Corporation.’

Declaring a Dividend[margin_25t]

Capital Dividends

These dividends are a different type of dividend and the rules are different.  This article is with respect to regular dividends only.  For more information about these dividends refer to Capital Dividend.

 

Buy Dividend Resolutions

If you wish to make things easy refer to this link for a number of templates that can be purchased relating to Approving Dividends Templates.

 

For more information about dividends refer to:

Capital Dividend

Capital Dividend Upon Redemption

Stock Dividend

Annual Resolutions

Annual Resolutions

This Article will be specific to the annual corporate approvals (frequently called annuals or annual resolutions) required for companies incorporated pursuant to the Business Corporations Act (Ontario) and the Canada Business Corporations Act.  Most other jurisdictions in Canada would have the same or similar requirements.

In order to document these approvals a series of resolutions are prepared and signed by the directors and shareholders of the company.  Below is a breakdown of each document that is normally prepared and approved.

For more information about the rules of preparing and signing resolutions refer to Preparing Resolutions.[margin_30t]

Annual Resolutions can also be approved a meetings of the directors and shareholders and public companies will hold meetings each year to approve annual resolutions.

Purchase a Word Version Version of Annual Resolutions
Purchase Word Versions of Dividend Approval Resolutions

 

Approval of Financial Statements by Directors

All Canadian companies are required to file a federal tax return each year and as part of that procedure financial statements are prepared by the accountant of the Corporation.

As part of the annual resolutions, the directors of the Corporation must (a) approve the financial statements, (b) approve the directors executing the financial statements; and (3) approve the financial statements being shown to the shareholders.  Below is a form of resolution that handles all three of these approvals:

Annual Resolutions - Approval of Financial Statements

Statute Reference:

Business Corporations Act (Ontario)

“Section 155.  The financial statements required under this Act shall be prepared as prescribed by regulation and in accordance with generally accepted accounting principles.  R.S.O. 1990, c. B.16, s. 155.”

“Section 159.  (1)  The financial statements shall be approved by the board of directors and the approval shall be evidenced by the signature at the foot of the balance sheet of any director authorized to sign and the auditor’s report, unless the corporation is exempt under section 148, shall be attached to or accompany the financial statements.  R.S.O. 1990, c. B.16, s. 159 (1); 2010, c. 16, Sched. 5, s. 1 (2).”

Note:  An offering corporation is a public corporation.  Financial statements of public corporations must be audited.  The above paragraph is referring to non-offering corporations, which are private corporations, and have an option to be audited or unaudited.

Canada Business Corporations Act

“Section 158 (1) The directors of a corporation shall approve the financial statements referred to in section 155 and the approval shall be evidenced by the manual signature of one or more directors or a facsimile of the signatures reproduced in the statements.”[margin_30t]

Acceptance of Financial Statements by Shareholders

Once the directors have approved the financial statements they are mandated to provide the shareholders with a copy of the financial statements.  Below is an example of a shareholders resolution acknowledging receipt of the financial statements:

Annual Resolutions - Acceptance of Financial Statements

Statute Reference:

Business Corporations Act (Ontario)

“Section 154.  (1)  The directors shall place before each annual meeting of shareholders,….(a)  in the case of a corporation that is not an offering corporation, financial statements for the period that began on the date the corporation came into existence and ended not more than six months before the annual meeting or, if the corporation has completed a financial year, the period that began immediately after the end of the last completed financial year and ended not more than six months before the annual meeting;”

Canada Business Corporations Act

“Section 155 (1) Subject to section 156, the directors of a corporation shall place before the shareholders at every annual meeting (a) comparative financial statements as prescribed relating separately to (i) the period that began on the date the corporation came into existence and ended not more than six months before the annual meeting or, if the corporation has completed a financial year, the period that began immediately after the end of the last completed financial year and ended not more than six months before the annual meeting, and (ii) the immediately preceding financial year;”[margin_30t]

Election of Directors by Shareholders

The shareholders of the Corporation will elect the directors of the Corporation for the next year as part of the annual resolutions.  Even if the directors are not changing a resolution should be prepared to elect the directors.  If this resolution is not approved the current directors would still hold office.

Annual Resolutions - Appointment of Directors

Statute Reference:

Business Corporations Act (Ontario)

“Section 119 (4)  Subject to clause 120 (a), shareholders of a corporation shall elect, at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, directors to hold office for a term expiring not later than the close of the third annual meeting of shareholders following the election.  R.S.O. 1990, c. B.16, s. 119 (4).”

Canada Business Corporations Act

“Section 106(3) Subject to paragraph 107(b), shareholders of a corporation shall, by ordinary resolution at the first meeting of shareholders and at each succeeding annual meeting at which an election of directors is required, elect directors to hold office for a term expiring not later than the close of the third annual meeting of shareholders following the election.”[margin_30t]

Consent to Act as a Director

Every director who is elected or appointed must consent to act as a director of the Corporation and agree in writing to act.  A consent to act is only required to be provided once during the term of appointment, however, customarily these consents are included in the annual resolutions package.

25% of the directors must be resident Canadians and the consent confirms the residency.

The statute also provides that directors can hold meetings by electronic means provided the directors consent to such meetings.

Not just anyone can be a director of a corporation.  Refer to Qualifications of Directors of Federal Companies and Qualifications of Directors of Ontario Companies for more information.[margin_15t]

Annual Resolutions - Consent to Act

Statute Reference:

Business Corporations Act (Ontario)

“Section 1(1) “resident Canadian” means an individual who is,

    (a)   a Canadian citizen ordinarily resident in Canada,

    (b)   a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or

    (c)   a permanent resident within the meaning of the Immigration Act (Canada) and ordinarily resident in Canada;”

“Section 118(3)  At least 25 per cent of the directors of a corporation other than a non-resident corporation shall be resident Canadians, but where a corporation has less than four directors, at least one director shall be a resident Canadian.  2006, c. 34, Sched. B, s. 19 (2).”

“Section 119(9)  Subject to subsection (10), the election or appointment of a director under this Act is not effective unless the person elected or appointed consents in writing before or within 10 days after the date of the election or appointment.  1999, c. 12, Sched. F, s. 8.”

“Section 119(10)  If the person elected or appointed consents in writing after the time period mentioned in subsection (9), the election or appointment is valid.  1999, c. 12, Sched. F, s. 8.”

“Section 119(11)  Subsection (9) does not apply to a director who is re-elected or re-appointed where there is no break in the director’s term of office.  1999, c. 12, Sched. F, s. 8.”

“Section 126(13)  Unless the by-laws otherwise provide, if all the directors of a corporation present at or participating in the meeting consent, a meeting of directors or of a committee of directors may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and a director participating in such a meeting by such means is deemed for the purposes of this Act to be present at that meeting.  R.S.O. 1990, c. B.16, s. 126 (13).”

Canada Business Corporations Act

“Section 2(1) resident Canadian means an individual who is (a) a Canadian citizen ordinarily resident in Canada, (b) a Canadian citizen not ordinarily resident in Canada who is a member of a prescribed class of persons, or (c) a permanent resident within the meaning of subsection 2(1) of the Immigration and Refugee Protection Act and ordinarily resident in Canada, except a permanent resident who has been ordinarily resident in Canada for more than one year after the time at which he or she first became eligible to apply for Canadian citizenship;”

“Section 106(9) An individual who is elected or appointed to hold office as a director is not a director and is deemed not to have been elected or appointed to hold office as a director unless (a) he or she was present at the meeting when the election or appointment took place and he or she did not refuse to hold office as a director; or (b) he or she was not present at the meeting when the election or appointment took place and (i) he or she consented to hold office as a director in writing before the election or appointment or within ten days after it, or (ii) he or she has acted as a director pursuant to the election or appointment.”

“Section 114(9) Subject to the by-laws, a director may, in accordance with the regulations, if any, and if all the directors of the corporation consent, participate in a meeting of directors or of a committee of directors by means of a telephonic, electronic or other communication facility that permits all participants to communicate adequately with each other during the meeting. A director participating in such a meeting by such means is deemed for the purposes of this Act to be present at that meeting.”[margin_30t]

Appointment of Officers by Directors

The directors elected at the annual meeting or by annual resolutions will then appoint the officers they wish to assist them for the next year.  It can be the same officers as in the previous year.  The form of approval is as follows:

Annual Resolutions - Appointment of Officers

Statute Reference:

Business Corporations Act (Ontario

“Section 133. Subject to the articles, the by-laws or any unanimous shareholder agreement, (a) the directors may designate the offices of the corporation, appoint officers, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except, subject to section 184, powers to do anything referred to in subsection 127 (3); (b) a director may be appointed to any office of the corporation; and (c)  two or more offices of the corporation may be held by the same person.”

Canada Business Corporations Act

“Section 121 Subject to the articles, the by-laws or any unanimous shareholder agreement, (a) the directors may designate the offices of the corporation, appoint as officers persons of full capacity, specify their duties and delegate to them powers to manage the business and affairs of the corporation, except powers to do anything referred to in subsection 115(3); (b) a director may be appointed to any office of the corporation; and (c) two or more offices of the corporation may be held by the same person.”[margin_30t]

Appointment of Accountant or Auditor

The shareholders of a Corporation will either appoint an accountant or appoint an auditor for the ensuing year.  Below is the form of resolution that can be modified for either situation.

Annual Resolutions - Appointment of Accountants

Statute Reference:

Business Corporations Act (Ontario)

“Section 149(2)  The shareholders shall at each annual meeting appoint one or more auditors to hold office until the close of the next annual meeting and, if an appointment is not so made, the auditor in office continues in office until a successor is appointed.  R.S.O. 1990, c. B.16, s. 149 (2).”

“Section 149(7)  The remuneration of an auditor appointed by the shareholders shall be fixed by the shareholders, or by the directors if they are authorized so to do by the shareholders, and the remuneration of an auditor appointed by the directors shall be fixed by the directors.  R.S.O. 1990, c. B.16, s. 149 (7).”

Canada Business Corporations Act

“Section 162 (1) Subject to section 163, shareholders of a corporation shall, by ordinary resolution, at the first annual meeting of shareholders and at each succeeding annual meeting, appoint an auditor to hold office until the close of the next annual meeting.”

“Section 162(4) The remuneration of an auditor may be fixed by ordinary resolution of the shareholders or, if not so fixed, may be fixed by the directors. 1974-75-76, c. 33, s. 156; 1978-79, c. 9, ss. 1(F), 4″[margin_30t]

Consent to Non-Appointment of An Auditor

Most companies do not have their financial statements audited by an auditor.  Instead they have financial statements prepared by an accountant.   In those cases, the shareholders of the Corporation must approve the non-appointment of an auditor.  This approval requires the consent of all of the voting and non-voting shareholders as follows:[margin_15t]

Annual Resolutions - Exemption to Non-Appointment of Auditor

Statute Reference:

Business Corporations Act (Ontario)

Section 148. In respect of a financial year of a corporation, the corporation is exempt from the requirements of this Part regarding the appointment and duties of an auditor if, (a) the corporation is not an offering corporation; and (b) all of the shareholders consent in writing to the exemption in respect of that year. 1998, c. 18, Sched. E, s. 23.

Canada Business Corporations Act

Section 163 (1) The shareholders of a corporation that is not a distributing corporation may resolve not to appoint an auditor. 163 (2) A resolution under subsection (1) is valid only until the next succeeding annual meeting of shareholders. (3) A resolution under subsection (1) is not valid unless it is consented to by all the shareholders, including shareholders not otherwise entitled to vote.

Note:  Reference to distributing corporation is another way of saying public corporation.

Appointment of Auditor

In the case where an auditor is being appointed for an upcoming financial year of the Corporation, the auditor should receive notice of its appointment as follows:[margin_20t]

Annual Resolutions - Notice of Appointment of Auditor

Statute Reference:

Business Corporations Act (Ontario)

Section 149 (9)  The corporation shall give notice in writing to an auditor of the auditor’s appointment forthwith after the appointment is made.  R.S.O. 1990, c. B.16, s. 149 (9).

Canada Business Corporations Act

Silent

When Should Annual Resolutions Be Approved

The financial statements of a Corporation must be finalized and incorporated into the corporate tax return for the company within six months of the end of the financial year.  Therefore, the annual resolutions cannot be dated prior to the financial statements being prepared and no later than six months after the financial year end.

Declaration of Dividends

As part of the preparation and approval of annual resolutions frequently dividends will be declared.  For more information about how to approve a dividend refer to Declaring a Dividend.

Capital Dividend Upon Redemption

Capital Dividend Upon Redemption

Under certain circumstances, and provided the Articles of the Corporation provide, the directors of a Corporation may approve a deemed capital dividend upon redemption of a class of shares.

Redemption of Shares Resulting in a Capital Dividend upon Redemption

When shares are redeemed they are cancelled and, in some cases, returned to Treasury.  The Articles of a corporation set out the basis pursuant to which a class of shares can be redeemed and the amount of money those shares can be redeemed for.  If the Articles do not contain any provisions for redemption, the shares cannot be redeemed.

Statute Governing Capital Dividends Upon Redemption

Section 83 of the Income Tax Act (Canada) governs the basis upon which a capital dividend can be declared .  Refer to Section 83 of the Income Tax Act for more information on the legal requirements to be followed when declaring a capital dividend upon redemption.

Director Approval of a Capital Dividend Upon Redemption

The directors of a Corporation must approve a capital dividend upon redemption and a certified copy of such resolution must be filed with Revenue Canada Agency along with the election form.

Once issued shares of a corporation are redeemed, the share certificate evidencing those shares will be marked cancelled and the share register for those shares will be reduced by the number of shares redeemed.

Example of Directors Resolution Approving Capital Dividend Upon Redemption

Below is an example of a directors resolution approving a deemed capital dividend upon redemption:

 

Capital Dividend upon Redemption of Shares

Certified copy of Resolution of the Directors Approving a Capital Dividend upon the Redemption of Shares:

Capital Dividend upon Redemption of Shares

Many statutes will have a legal requirement which provides that a company cannot declare a dividend unless there are reasonable grounds it will be able to pay its liabilities.  Below is a form of confirmation of Solvency by the President of a company upon a redemption.

Solvency Certificate

Buy Dividend Resolutions

If you wish to make things easy refer to this link for a number of templates that can be purchased relating to Approving Dividends Templates.

 

For more information about dividends refer to:

Declaring a Dividend

Capital Dividend

Stock Dividend

 

capital dividends

Capital Dividend

Under subsection 83(2) of the Income Tax Act (Canada), the directors of a private Canadian corporation may pay a capital dividend to its shareholders out of the capital dividend account of the Corporation.

Capital Dividend Account

The capital dividend account records tax-free surpluses accumulated by a Canadian private company. These surpluses may be distributed free of tax in the form of capital dividends to the Canadian resident shareholders of a corporation.

Revenue Canada Election Requirement for a Declaration of a Capital Dividend

A corporation that intends to pay a capital dividend must file an election in respect of the dividend when the dividend is paid or becomes payable, although a late filing can be done only in certain circumstances.

Revenue Canada Agency Rules Respecting Capital Dividends

For more information about the Revenue Canada Agency rules around capital dividends, refer to:

Election for a Capital Dividend

Election Form and Procedure for Paying a Capital Dividend

The directors of a corporation must approve a capital dividend.  This can be done by holding a validly held directors meeting or by all of the directors signing a directors resolution.  Examples can be found at Ontario Directors Resolutions.

Once approved the President, or another officer, must certify that the resolution approved by the directors respecting the capital dividend is in full force and effect.

The certified copy of the resolution must be filed together with Election Form T2054.  There are very specific rules around the timing of filing of the election form.

Directors Resolution to Approve a Capital Dividend

Below is an example of a directors resolution approving a capital dividend:

directors resolution approving a capital dividend

 

Below is an example of a certified copy of a directors resolution approving a capital dividend which must be annexed to Form 2054:

directors resolution approving capital dividend

Buy Dividend Resolutions

If you wish to make things easy refer to this link for a number of templates that can be purchased relating to Approving Dividends Templates.

 

For more information about dividends refer to:

Declaring a Dividend

Capital Dividend Upon Redemption

Stock Dividend

What Goes in a Minute Book

What Goes in a Minute Book

 

Below is an detailed explanation of what goes in a minute book.  When a new company is incorporated there is a three step process:  (1) obtaining a Certificate of Incorporation, (2) setting up a minute book and, in some cases, (3) filing an Initial Return.

Many new business owners do not want to pay to set up a minute book for their company.  Since they are able to open up a bank account without showing a minute book they will forego having a book prepared.  This can be problematic in the future. For more information refer to Why a Company Needs a Minute Book.

 

Minute BookSetting Up Your Minute Book

The very first documents that are included in the minute book are called the “organizational documents of the company”.  The documents that will be prepared and inserted in the minute book will be:

General Operating By-law – A by-law is a list of rules.  Some of the things that you will find in a by-law are:

  1. How many people must attend at directors and shareholders meetings for the meeting to be validly called
  2. What the procedure is for calling directors and shareholders meetings to ensure it is a valid legal meeting
  3. How many votes are required to approve an item of business at a directors or shareholders meeting
  4. Which directors and officers can sign agreements on behalf of the company and obligate and bind the company under those agreements
  5. What is the procedure for removing a director or officer of a company
  6. How is an officer or director replaced or new officers and directors appointed
  7. Who can borrow money upon the credit of the company

A general operating by-law in most cases sets out the provisions of the statute governing the company but some of those provisions can be varied for the particular circumstances.

All companies must have a general operating by-law which is enacted by the directors and confirmed by the shareholders.   If you obtain a general operating by-law for your company you will be able to determine how to conduct business properly.

If meetings are held that violate the legal requirements for a meeting you could have issues with this in the future and in particular, in the case where a director or shareholder is objecting to an approval that was put through.  If the approval at a meeting was not documented or documented incorrectly it could invalidate that approval and you may be forced to set aside that resolution.

In some provinces the general operating by-law provisions are included as part of the Articles of the company in a document called a Memorandum of Association.

 

Borrowing By-law – This by-law provides who has authority to borrow on behalf of the company and normally provides for the directors and officers to have this right.  Banks frequently wish to see this by-law if the company wishes to borrow money.

Need a By-law?  Purchase a Microsoft Word Version of By-law.

First Directors Resolutions – The individuals who agreed to be the first directors on the articles of incorporation have a legal obligation to approve certain things right after incorporation including:

  1. Appointing the officers
  2. Allotting shares and confirming the amount paid for those shares
  3. Enacting the general operating by-law

Once the first director has approved these matters he can then resign if he wishes or he can continue as a director of the company.

First Shareholders Meetings – There cannot be a first shareholders meeting until the shares have been allotted.  As indicated above the first directors allot the shares to the shareholders.  A shareholder (owner of a company) does not have to be a director and a director does not have to be a shareholder, however, frequently the owners of a company also wish to manage the company so they will be both a shareholder and a director.  Some of the items approved at the first shareholders meeting are:

  1. Determine how many directors there will be
  2. Appoint the Auditor or the Accountant
  3. Accept any resignations of the first directors and confirms the appointment of all directors

Consent to Act of directors – Directors need to consent to act as directors and this consent must be signed and inserted into the minute book of the company.  This ensures that a director is not elected to the board of directors and his name is not put on the public record without his or her consent.

Exemption from Appointment of an Auditor – Most private companies are not required to have audited books.  However, in many cases the statute governing the Canadian company will require that the shareholders approve an audit not being performed.

Registers – All statutes have a requirement that registers be prepared for a company.  The registers you will find in a minute book are:

  1. Directors Register – lists the dates of appointment and resignation of each of the directors and their addresses
  2. Officer Register – lists the dates of appointment and resignation of each of the officers, the positions they hold in the company (i.e. President, Secretary, Vice-President) and their addresses
  3. Shareholder Register – lists all of the individuals or companies that hold shares in the company, the number of shares they own and the date they received those shares.  It also records when shares are returned to the company or transferred to other individuals or companies
  4. Shareholder Ledgers – Each shareholder will have a ledger showing the date upon which he or it received shares, how many shares were allotted and the reason why those shares were allotted.  It will also show when those shares are transferred to others, if applicable.

Forms – All companies must file returns with the particular Canadian government under which they are incorporated.  When changes to directors and officers occur the government will expect you to provide them with an amended form showing all current addresses.  This section of the minute book contains a record of all filings made to the government.  It does not typically contain tax returns but you can store any documents you wish in a minute book.

Example of Share Certificate
Example of Share Certificate

Share Certificates – Every shareholder has a right to a share certificate.  This certificate evidences ownership.  If you have not set up a minute book for your company you will not have any proof of ownership.

 

Maintaining a Minute Book for a Company

After the initial “organization of the company” there may be circumstances where there may have to be changes to the structure.  Some of the circumstances where changes may occur are:

  1. A new by-law may need to be enacted such as a by-law to vary the borrowing rights of the company
  2. New investors may be needed to move the company forward and those investors may wish to hold shares in the company
  3. A director may resign and a replacement may need to be elected or new directors may be brought on because a new shareholder wants to be a director as well
  4. The company may wish to enter into a major transaction and the directors may need to approve the form of agreement respecting same
  5. A shareholder may wish to leave the company and will want to transfer his shares back to treasury or transfer the shares to the other shareholders on a prorated basis
  6. The company may wish to conduct business in other jurisdictions in Canada or countries outside of Canada and those governments may request the directors to approve the registration

 

For information on directors meetings refer to How to Conduct a Proper and Legal Directors Meeting.

 Buyer Beware – Blank Minute Book

We all like bargains.   There are services on the market which claim to provide you with a completed minute book for a reduced price.  What you are given is a book with a number of blank resolutions, blank registers and blank share certificates.

In some cases you will be provided with the resolutions and the by-law but they will not be filled out and you will be left with trying to figure out how to complete them properly.  In many cases there will be no instructions for this.

When you purchase a minute book be sure to ask what you are getting.  The organization and set up of a company does cost a bit of money because it takes a number of hours to put together.  The questions you should ask are:

  1. Will there be a by-law?
  2. Are there resolutions in the package which will show the actual names of the directors or officers or do the resolutions have blanks in them for insertion of the names?
  3. Are you provided with a questionnaire which asks (1) who will the officers be, (2) who will the shareholders be and how many shares will be held which would indicate the company is setting up the company properly?
  4. Will the registers be filled in with the proper individuals’ names?
  5. If the resolutions will have blanks for names and numbers of shares will there be an instruction sheet included?

Depending on what you feel confident about doing, price shopping should be considered to ensure that the product you are receiving warrants the price paid in comparison to the different types of packages you can buy. i.e. the price of a blank minute book should be much lower than the price of a personally completed minute book.

 

If you are provided with no by-law and no resolution templates then you will need to understand how to complete the documents from scratch.

If you are provided with a by-law and resolutions with blank spaces for names, then you will need to be confident enough to fill in those blanks.

In the long run it is easier to have someone skilled at completing the documents for you.

 

If

directors-resolution-to-approve-an-agreement

Directors Resolution to Approve an Agreement

The directors of a corporation are elected by the shareholders to manage the affairs of the corporation.  The duties of the directors are outlined in the statute of incorporation, in the by-laws and as the shareholders may direct from time to time.  The directors appoint officers to assist them with the day to day matters.  For small operations there may be one shareholder, one director and one officer and this may be the same person.  For larger operations, there may be numerous directors and officers.

One of the duties of the directors of a corporation is to approve agreements, contracts, leases and other documents that the corporation is or has entered into with other parties.  The officers will present these documents to the directors for their approval before entering into the particular agreement or contract.

There are two ways in which a directors resolution to approve an agreement can be documented: (1) directors approval BEFORE the agreement has been signed, and (2) directors approval AFTER the agreement has been signed.  Technically all agreements, leases, promissory notes, contracts, etc. should be shown to the directors before they are executed by the corporation’s officers, however, in some cases this does not happen, and the agreement has to be approved after the fact.

Legalities Around Preparing a Directors Resolution to Approve an Agreement

The statute of incorporation provides clear instructions as to how directors approve matters. Most statutes will provide for the manner in which a meeting can be held in order that a directors resolution to approve an agreement can be passed.  Many statutes also provide for directors to approve matters without holding a meeting.  In this case, ALL of the directors must sign a resolution.  An example of a clause in a statute providing for directors to sign without holding a meeting is shown below:

“Resolutions in writing

129 A resolution in writing, signed by all the directors entitled to vote on that resolution at a meeting of directors or a committee of directors, is as valid as if it had been passed at a meeting of directors or a committee of directors.”

 

The Characteristics of a Directors Resolution to Approve an Agreement

A Directors Resolution to approve an agreement has a standard layout that provides for the following:

  • Recitals (these explain what the agreement or matter is about and what the directors hope to achieve by the approval)
  • Approval of the Terms and Conditions of the Agreement
  • Approval of the form of Agreement
  • Approval of the authorized signing authorities who can sign the agreement on behalf of the corporation
  • Approval of the delivery of the agreement by the authorized signing authorities
  • A catchall phrase

Frequently, as well, parties outlined in a directors resolution will have their names defined.  An example of this would be 222553 Ontario Inc. (hereinafter referred to as “222553”).  If the name of the company has been defined in this manner, then every time the name of  222553 Ontario Inc. shows up in the resolution after it is defined it will be shown as 222553.  You will find examples of resolutions on this page that show how this is done.

 

How to prepare a Directors Resolution to Approve an Agreement BEFORE it is signed

The following will outline the different paragraphs that should be in the directors resolution in order for it to cover all requirements for proper approval..

Recitals

The first step is to describe the agreement being signed in the recitals.  Below are some examples:

EXAMPLE 1:  “WHEREAS the Corporation wishes to enter into an agreement of purchase and sale (the “Agreement”) among the Corporation, 4211323 Ontario Inc. (“4211323”) and John Doe dated the 10th day of July, 2015, pursuant to which the Corporation shall purchase from 4211323 all of the assets of a business known as The Green Tree;”

EXAMPLE 2: “WHEREAS the Corporation wishes to enter into an employment agreement (the “Agreement”) between the Corporation and John Doe dated the 10th day of July, 2015 which sets out the terms of employment of John Doe;”

EXAMPLE 3: “WHEREAS the Corporation wishes to enter into a lease agreement (the “Lease”) between the Corporation and John Doe Realty Inc. (“John Doe”) dated the 10th day of July, 2015 pursuant to which John Doe will rent to the Corporation the premises located at 1145 Midland Avenue, Scarborough, Ontario under the terms and conditions more particularly described in the Lease;”

Approval of Agreement

Below are some examples of the language used in resolutions to approve an agreement:

EXAMPLE 1:

“NOW THEREFORE BE IT RESOLVED THAT:

  1. The entering into of the Agreement by the Corporation, pursuant to the terms and conditions thereof, is hereby approved.
  2. The form of Agreement, as presented to the directors of the Corporation, is hereby approved.”

EXAMPLE 2:

“NOW THEREFORE BE IT RESOLVED THAT:

  1. The entering into by the Corporation of the Lease, pursuant to the terms and conditions therein, is hereby approved.
  2. The form of Lease, annexed hereto as Schedule “A”, is hereby approved.”

 

Authorized Signing Authority for a Directors Resolution to Approve an Agreement

The next step in the directors resolution is to determine who the signing officers will be that have authority to execute the agreement on behalf of the corporation and to determine who can deliver the agreement.  The by-laws of a corporation determine who can sign agreements on behalf of a corporation.  A standard clause in a by-law will be as follows:

“Execution of Instruments – Deeds, transfers, assignments, contracts, obligations, certificates and other instruments may be signed on behalf of the Corporation by any officer or director of the Corporation.  In addition, the board may from time to time direct the manner in which and the person or persons by whom any particular instrument or class of instruments may or shall be signed.  Any signing officer may affix the corporate seal to any instrument requiring the same.”

This is a standard clause that can be found in a by-law.  This clause provides that any one officer or director can sign agreements on behalf of the Corporation.  This clause also provides that the Board may from time to time determine any other person to have authority to execute agreements.  The second clause is very important because it allows for a broader form of approval.  The paragraph above provides that the directors may approve something other than any officer or director approving an agreement.  For instance, they could have an employee sign the agreement on behalf of the Corporation if they wished.  This approval would be acceptable as long as the directors approved this change from the provisions located in the by-law.

If there is no clause in the by-law that provides for the directors to determine from time to time who can sign, then the directors must abide by the execution of instruments clause that is there.   See below for an example.

“Execution of Instruments – Deeds, transfers, assignments, contracts, obligations, certificates and other instruments may be signed on behalf of the Corporation by any two officers or directors of the Corporation.”

In the above case, if the by-law provides for the following, then two officers and directors must sign any agreement, contract, etc. on behalf of the Corporation and this clause cannot be varied unless the directors and shareholders approve an amendment to the by-law.

Below are examples of approval resolutions which determine who can sign and deliver an agreement on behalf of a company.

EXAMPLE 1: “Any officer or director of the Corporation is hereby authorized to execute and deliver the Agreement on behalf of the Corporation.”

EXAMPLE 2: “John Doe is hereby authorized to execute and deliver the Agreement on behalf of the Corporation.”

Catchall Phrase in a Directors Resolution to Approve an Agreement

The final clause in a directors resolution to approve an agreement is the catchall phrase.  This gives the authorized signing authority the right to execute all other ancillary documents that may be required to implement the transaction contemplated by the Agreement.  Below is a catchall phrase:

“Any officer or director of the Corporation be and is hereby authorized and directed to do all acts and things and to execute or cause to be executed all such instruments, agreements and documents as in his opinion may be necessary or desirable to complete the transactions contemplated herein.”

Below is an example of a resolution providing for approval of an agreement that has not yet been signed.  Note that the paragraph at the bottom below the resolution refers to a statute.  This statute reference should be changed to show the statute refer for the particular company you are preparing the resolution for.

Directors Resolution Approving an Agreement BEFORE it has been Executed

How to prepare a Directors Resolution to Approve an Agreement AFTER it is signed

Below is an example of a resolution providing for approval of an agreement that has already been signed. Resolutions that are approved after they are signed are “approved, ratified and confirmed“.

Directors Resolution Approving an Agreement AFTER it has been Executed

Directors Meetings – How to Conduct a Proper and Legal Directors Meeting

 

This Article will provide you with the basics of how to conduct a properly constituted meeting of the directors.

Understanding Statute Requirements for Conducting a Directors Meeting

When conducting meetings of the directors the reference for the rules and laws respecting holding meetings will be found in the statute of incorporation and the by-laws. You can determine the statute of incorporation by referring to the articles of the corporation.

Most governments now put statutes online. Once you know the name, doing a search of that statute will pull it up quickly.

The by-laws of a company usually mirror the statute requirements but in some cases statute requirements can be varied and in cases such as this the by-law may be modified to suit the specific purposes of the company. Therefore, it is important to first determine the statute requirement and second review your articles and by-laws to determine if any variations to the requirements of the statute have been implemented.

An example of a clause in a statute that can be varied is:

“Quorum
(3) Subject to the articles or by-laws and subsection (4), a majority of the number of directors or minimum number of directors required by the articles constitutes a quorum at any meeting of directors, but in no case shall a quorum be less than two-fifths of the number of directors or minimum number of directors, as the case may be. R.S.O. 1990, c. B.16, s. 126 (3).”

The above clause provides the legal requirements for determining a quorum for conducting directors meetings. The first line of the statute indicates “Subject to the articles or by-laws”. This means that this section of the statute can be varied and changed if the articles or by-laws of the corporation indicate so.  If the section had been worded as follows:

“(3) A majority of the number of directors or minimum number of directors required by the articles constitutes a quorum at any meeting of directors, but in no case shall a quorum be less than two-fifths of the number of directors or minimum number of directors, as the case may be.”

This would mean that this section of the statute cannot be varied and in order to conduct a meeting of the directors a quorum for conducting a meeting could not be less than two-fifths of the number of directors.

 

Notice of a Directors Meeting

The first step to holding a meeting is to provide the directors with notice of the meeting.

In order to call a directors meeting proper notice of the meeting must be sent to all of the directors of the corporation. It is not possible to hold a legal validly called meeting of the directors unless every director has been invited to attend. If all of the directors have not been given proper notice of the meeting then the matters approved at the meeting would be null and void.

The proper manner in which notice is given to the directors is defined in the statute of the corporation. In most statutes, the following will need to be included in the notice of meeting:

Date and Time of the Directors Meeting (including the date and time of the meeting).

Place of Directors Meeting (which in most cases, and subject to the statute and by-laws) is frequently the registered office address of the corporation. Some statutes will require that a certain number of meetings be held in the jurisdiction of incorporation (i.e. province, state, country, as the case may be). As well, there may be restrictions in conducting meetings outside of the jurisdiction in that director approval may be required before meetings can be held. The statute of incorporation will clearly outline these requirements but you should also refer to the operating by-law of the corporation.

Matters to be Discussed at the Directors Meeting – Describing the matters to be discussed at a directors meeting is not in most cases necessary in accordance with the statute requirements, however, it is a good idea to have a clear outline of the proceedings to be conducted so that matters are proceeded with timely and in the proper order.  Any resolutions that are going to be submitted to the directors should be prepared for them to review.

No special form is required with respect to preparing a notice. As long as you include the above-noted criteria then the notice will be legally valid.

 

Timing of Calling a Directors Meeting and Delivery of the Notice of Directors Meeting

There are two aspects to providing the directors with proper notice of a directors meeting. First, you need to know how many days’ notice the directors need to receive. Secondly, you need to know how the notice should be delivered.  An example of a clause in a by-law that sets out how much notice a director must be given before a directors’ meeting is called is as follows:

“Notice of Meeting – Notice of the time and place for the holding of a meeting of the board shall be given to every director of the Corporation not less than two clear days (excluding Sundays and holidays as defined by the Interpretation Act) before the date of the meeting. Notwithstanding the foregoing, notice of a meeting shall not be necessary if all of the directors are present, and none objects to the holding of the meeting, or if those absent have waived notice of or have otherwise signified their consent to the holding of such meeting. Notice of an adjourned meeting is not required if the time and place of the adjourned meeting is announced at the original meeting.”

An example of a clause in a by-law that sets out the method for mailing notices for a directors meeting is as follows:

“Method of Giving Notices – Any notice, communication or other document required to be given by the Corporation to a shareholder, director, officer, member of a committee of the board or auditor of the Corporation pursuant to the Act, the regulations, the articles or by-laws or otherwise shall be sufficiently given to such person if:
a) delivered personally to him, in which case it shall be deemed to have been given when so delivered;
b) delivered to his recorded address, in which case it shall be deemed to have been given when so delivered;
c) mailed to him at his recorded address by prepaid ordinary mail, in which case it shall be deemed to have been given on the fifth day after it is deposited in a post office or public letter box; or
d) sent to him at his recorded address by any means of prepaid transmitted or recorded communication, in which case it shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch.

If a notice or document is sent to a shareholder by prepaid mail in accordance with this paragraph and the notice or document is returned on three consecutive occasions because the shareholder cannot be found, it shall not be necessary to send any further notices or documents to the shareholder until he informs the Corporation in writing of his new address.”

 

In order to determine the notice requirements for YOUR company, you must review the general operating by-law AND the statute requirements to ensure you are following the proper procedure. It is possible to have provisions in a by-law that are contrary to law. If this is the case, then the statute will override.

Waiver of Notice of Meetings

If some of the directors of a meeting did not receive a notice of that meeting but they attended the meeting, then by virtue of their attendance at the meeting they would be deemed to have been given notice.

In some cases, where a director has not been given proper notice and does not attend the meeting, he can provide a form of waiver. By providing this waiver of notice, the matters approved at the meeting will be legally approved.   An example of a form of waiver of notice is as follows:

Directors Meeting Waiver of Notice

Directors Meetings Held by Telephone or Other Electronic Means

Meetings of directors can be held by electronic means such as telephone, etc., however, it is important that the statute and by-laws of the company be reviewed to determine under what basis these types of meetings can be held. Frequently, all the directors of a company must approve any meetings being held electronically and therefore if a meeting is held without proper approval it means that ALL matters approved at that meeting are null and void.

The statute will govern the manner in which meetings by telephone or other communications can be conducted. The by-law may contain a summary of these provisions. Normally, all directors must consent to the holding of telephone meetings. An example of the consent that can be agreed to by the directors is:

However, it is cautioned to review the corporate statute governing the corporation and the by-laws in place to ensure the wording of the consent to be signed by the directors is in accordance with the statute requirements.

 

Who Calls a Directors Meeting

The general operating by-law and the statute will govern who can call a directors meeting. Normally a quorum of directors may call a directors meeting.

Residency Requirements of Directors in Attendance at a Directors Meeting

Residency requirements of directors relates to the statute requirements for having a certain number of directors be living in the jurisdiction where the company was formed. In some cases there are no residency requirements. It is important to check the by-law and statutes just to ensure that there is no legal requirement for a certain number of directors resident in that jurisdiction to be in attendance for a properly formed meeting to commence.

Further, there could be a requirement that certain members of the board of directors must be in attendance at the meeting as well although this is rare to see and if there such requirements, they would be contained in the by-law or in a shareholders agreement.

Quorum Requirements for Directors Meetings

Not only do all directors need to be provided with notice of any directors meeting, there must also be a quorum in attendance before the meeting can be validly called. A quorum is the number of directors that must be in attendance in accordance with the by-laws, or if the by-laws are silent, the statute under which the company acts. The statute requirement is normally a majority of the number of directors but you may be able to vary that requirement, if your statute provides for this, you may be able to have less than a majority or more than a majority. Therefore, if there are five directors and a quorum to conduct business is a majority, then all fie must receive notice and three must be in attendance at the meeting.

 

Conflicts of Interest of Directors and Officers

If a matter is being brought before the directors at a meeting and one of the directors is an officer or director of another company involved in the same transaction then this might create a conflict of interest and that director has an obligation to let the other directors know of his involved.

More simply said, if ABC Company is holding a directors meeting to approve a contract between ABC Company and DEF Company, and one of the directors of ABC Company is also a director of DEF Company then he might have an interest in having the contract approved. Therefore the other directors have to be forewarned of his interest so they can make an unbiased decision on whether to approve ABC Company entering into the contract.

Chairman and Secretary of the Directors Meeting

There must be a Chairman for the meeting and in most cases there will also be a Secretary. The Chairman of the meeting is frequently the President and the Secretaryof the meeting is frequently the Secretary of the Corporation.

The Chairman of the meeting should not be confused with an appointed Chairman of the Board of Directors. The directors of a company can appoint a Chairman, Chairperson, Chair or Chairman of the Board from amongst themselves. If so appointed the Chairman would also act as Chairman of all meetings of the board. In the case where there is no appointed Chairman of the Board, then the President or Chief Executive Officer normally acts as Chairman of the directors meetings.

The Chairman of the meeting will present facts, information and documentation to the board for their review and approval. The Secretary of the meeting will record everything that happens at the meeting and document same in the form of Minutes of the Meeting.

The Chairman and the Secretary can be the same person. The minutes must reflect who acted as Chairman and who acted as Secretary.

It is a good idea to refer to the general operating by-law to determine what it says about who has authority to act as Chairman of the meeting. This can be found in the description of the officer positions of the Corporation.

How to Approve Resolutions at a Directors Meeting

The Chairman of the meeting should be prepared prior to the meeting to explain the purpose of the approval. He or she should also prepare the form of resolution that needs to be approved.

For example, if the directors are approving a change of the registered office address then a resolution can be prepared in the following form:

“BE IT RESOLVED THAT the registered office address of the Corporation should be changed to….”

The Chairman would explain to the directors that a resolution needed to be approved to reflect the change of address and provide them with a copy of the proposed resolution to review.

After the resolution has been reviewed by the directors, one director will move to approve the resolution, a second director will second the motion and the resolution will be carried. The wording will be as follows:

“It was moved by John Doe, seconded by Rick James and carried that the following resolution was approved:

BE IT RESOLVED THAT the registered office address of the Corporation should be changed to…..”

Ratifying Matters that Should have Been Approved in the Past

Sometimes it comes to the attention of the directors that a certain matter should have been approved previously and they need to ratify the approval. In this cases, the directors would use the language:

“BE IT RESOLVED THAT the entering into of the agreement between the Corporation and John Doe, dated the 15th day of January, 2015, is hereby approved, ratified and confirmed.”

How Many Directors at a Directors Meeting are Needed for an Approval

The by-law of the Corporation determines what percentage of the number of directors must approve a resolution. In most cases it will be a majority. However, a review of the by-law should be done to determine this to be true. As well, the by-law can provide for the Chairman to have what is called a casting vote. If the Chairman has this right it means that in the case where there is a tie on the issue in question, the Chairman has the right to add an additional casting vote to make the final determination.

How to Terminate a Directors Meeting

When all matters have been presented to the directors, the meeting can be terminated. A director will move for the termination, another director will second the motion and the Chairman will confirm the approval to terminate the meeting has been carried.

Who Signs the Minutes

Both the Chairman and Secretary should sign the minutes or, in the case where the Chairman and Secretary of the meeting are the same person, the Chairman should sign.

Preparing Minutes

Subsequent to the meeting, minutes must be prepared to document the proceedings and all approvals that took place at the meeting. The minutes should document the proceedings as follows:

  • Date, time and location of Meeting
  • Confirmation of the Chairman and Secretary of Meeting
  • Confirmation of Notice having been sent to all the directors and approving all waivers of notice to be annexed to the meeting
  • Confirmation of a Quorum being in attendance
  • Approve the moving, seconding and carrying of all resolutions approved at the meeting including the complete text of all resolutions being included in the minutes.

Termination of the meeting

The Secretary of the Corporation normally prepares the minutes.

Distributing Minutes of the Directors Meeting to the Directors for their Approval

All of the directors of the Corporation should be provided with an opportunity to approve the form of minutes. Once approved, the minutes should be executed inserted into the minute book along with all attachments.