You are the proud owner of a corporation, happily managing the day to day affairs. But are there are other things that you should be aware of? Section 268(1) of the Business Corporations Act (the Act) states that “every corporation shall, on the prescribed date, send to the Registrar an annual return in the prescribed form and the Registrar shall file it”.
What does that mean?
An annual return confirms that the corporation is still active or in existence. It confirms that the registered office and records address are current, who are the current directors (and who are no longer directors) and who are the voting shareholders of the corporation. A corporate annual return is not be confused with your corporation’s corporate tax returns – these are two separate and apart returns – one is for financial matters (your corporate tax return) and one is for legal matters (the corporate annual return).
One month prior to the anniversary date of your incorporation, a corporate annual return will be mailed to the registered office of the corporation, or if you provided Corporate Registry with an email address when you incorporated (this is a fairly new feature, commenced in 2019), to your email address.
In the first year of your anniversary, you will need to include the names and addresses of the voting shareholders of your corporation on your annual return form. You must include all of the shareholders in the corporation that own up to 100% of the voting shares, or if there are a large number of shareholders, (i.e., more than 10), the names and address of the first 5 shareholders with the largest percentage of voting shares. It is essential that you review the annual return to confirm that the registered office address is correct. If there have been changes to the directors of the course of the year, this information must also be updated with Corporate Registry. You will need to “inactivate” those directors who are no longer and include the names and addresses of directors who have been appointed over the course of the year.
It is important to note that there is no governing body that will follow up with you if you have not filed your corporation’s annual return. The onus is on you to ensure that this is done every year. This is why it is so important that your corporation’s registered office/email address is up to date with Corporate Registry. If it is not, you will not receive the annual return form from Corporate Registry.
What happens if you don’t file your annual returns? If no annual return is filed with the Corporate Registry after the first year and a second annual return form is issued, your corporation’s status will go from “active” to “start”. This means that the Corporate Registry has initiated the process to “strike” your corporation from Corporate Registry. If you fail to file annual returns after two years, on the third anniversary, your corporation’s status will go from “start” to “struck”, meaning that your corporation has been “struck” from Corporate Registry and is no longer considered an “active” corporation under the Act. This has very real implications for you if you are still running your business. It means that you no longer have the protection of being a corporation – there is no layer of protection from legal liability. You will be treated as if you were carrying on business as a sole proprietor. If your business is sued while being struck from Corporate Registry, it will not be the corporation that is sued (because it is no longer considered active), it will be you, on a personal level, as a sole proprietor who will be sued. This means that if the lawsuit is successful, your personal assets can be seized to satisfy the judgment. So…. Yes, it is important to file your corporate annual returns.
What happens though if you haven’t filed your annual returns and your corporation is struck? Do you have to start over? No, not to worry, this happens very often when individuals incorporate through the local registry shop. Oftentimes, you are not made aware of this very important step, or you simply have forgotten the advice provided to you. We can revive your corporation and bring it back to active status. Reviving your corporation is a process whereby we confirm your information with Corporate Registry, file all outstanding annual returns and obtain Articles of Revival for you. It is not an onerous task, but it is an avoidable one and depending on how many annual returns are outstanding, it can be expensive. Please do not hesitate to contact us for assistance as we are always happy to help!