The financial statements required under the Ontario Business Corporations Act (the “OBCA”) must be prepared as prescribed by the general regulation and in accordance with generally accepted accounting principles (OBCA, s. 155). Financial statements must include:
a balance sheet;
a statement of retained earnings;
an income statement; and
a statement of changes in financial position.
Financial statements are usually one of the most important sources of information available to shareholders with respect to their investment, and the directors of a corporation are responsible for them. The financial statements must be approved by the board of directors. This approval must be evidenced by the signature, of any director authorized to sign, at the foot of the balance sheet. The financial statements must be accompanied with an auditor’s report, unless the corporation is exempt under the OBCA (OBCA, s. 159(1)). An auditor’s report is not required if the corporation is not an offering corporation and all of the shareholders consent (in writing) to the exemption for that financial year (OBCA, s. 148).
At the annual meeting of the shareholders, the directors must present (in a non-offering corporation):
financial statements for either
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;
the auditor’s report, if any; and
any further information respecting the financial position of the corporation and the results of its operations required by the articles, the by-laws or any unanimous shareholder agreement (collectively, the “Corporate Documents”).
Not less than 10 days before each annual meeting of shareholders, the corporation must send a copy of the Corporation Documents to all shareholders other than those who have informed the corporation (in writing) that they do not wish to receive a copy of the Corporate Documents (OBCA, s. 154(4)).
Copies of the latest financial statements of each subsidiary of a holding corporation must be kept at the holding corporation’s registered office and must be available for examination by the shareholders of the holding corporation (and their agents and legal representatives) who may make extracts, on request, during the normal business hours of the holding corporation (OBCA, s. 157(1)).
It should be noted that this article is only in reference to non-offering corporations. Offering corporations are bound by further provisions under the OBCA and other legislation.
If you have questions about financial statements or corporate compliance, get in touch with us.
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