Post-Incorporation Matters

• Author: Tina Kamakaris/Jane Kamakaris/Louis Kamakaris
• Pages: 509-548

509

Chapter 28 Post-Incorporation Matters

CHAPTER 28

is chapter covers post-incorporation maintenance requirements under the Ontario Business

Corporations Act (OBCA) and also includes a look at changes which may occur during the life of

a business corporation.

FORMAL MEETINGS

e OBCA requires that the shareholders hold actual annual meetings. Formal meetings are

practical for corporations consisting of many directors and shareholders because meetings permit

everyone to orderly speak and vote on an issue. Following is an overview of the procedure that

is followed in formal meetings:

e chair of the meeting is in charge of the meeting, and the secretary of the meeting takes

down notes which will become the minutes of the meeting. Formal meetings follow standard

parliamentary procedure in that a person makes a motion (suggestion), and another person who

believes the motion is worth discussing, seconds it. A discussion of the motion ensues, usually

by way of a speakers’ list (a list, in order of hand-raising priority, of people who wish to speak to

the motion) until someone “calls the question.” is means there has been sucient discussion

on the motion to permit everyone to determine which way to vote.

e chair or another individual reads the motion to ensure everyone understands it, and asks for

“all those in favour of the motion” to vote by a show of hands. e chair takes a count of the

vote, asks for a show of hands against the motion, and takes a count of that vote. If the motion

receives the required number of votes, the motion is said to be carried. (Some motions require a

majority vote (50 percent plus 1 vote); others require a two-thirds majority, etc. to carry.) If the

motion does not receive the required number of votes, it is defeated. When carried, a motion

becomes a resolution that is included in the minutes of the meeting.

e number of votes for or against the motion, or the fact that it was a vote by a show of hands

(instead of a ballot), need not be recorded. Defeated motions are not normally included in the

minutes. When the meeting concludes, it is either adjourned or terminated. If adjourned, it

means certain matters on the agenda were not reached, and the meeting will reconvene on a later

date. If the meeting is terminated, it is completed.

POST–

INCORPORATION

MATTERS

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510 Legal Office Procedures

In serious or contentious issues, a shareholder has the right to demand a vote by a secret ballot

instead of a show of hands. A secret ballot involves privately marking the vote on paper; it is how

we vote at elections. In that case, the minutes would indicate that the vote was made by ballot.

Preparation and confirmation of minutes When the meeting is over, the corporation’s

secretary of the meeting usually instructs your rm to have the minutes prepared in proper form

for the chair’s signature. Before they become the permanent record of the corporation, however,

the minutes are read at the next meeting for conrmation to ensure that the nal version of the

minutes accurately reects the original. e directors and shareholders each conrm their own

minutes because the other would have no direct knowledge of the events.

OBCA REQUIREMENTS FOR MEETINGS OF DIRECTORS

e OBCA sets out certain requirements for the conducting of meetings of directors, the more

notable of which follow:

Who calls the meetings e board of directors, in its role as the managing body of the

corporation, calls all meetings of directors as well as all meetings of shareholders. e directors

must have a quorum to call a meeting. e sole director of a corporation constitutes a meeting.

Place of meetings e board of directors usually holds directors’ meetings at the corpora-

tion’s registered oce. Under s. 126(1) of the OBCA, unless the articles or by-laws provide

otherwise, the directors may meet at any place.

Chair and secretary Unless the by-laws provide otherwise, the president or, in their

absence, a vice-president who is also a director, acts as chair of the meeting, and the secretary of

the corporation usually acts as secretary of the meeting.

Notice of meeting of directors Unless the by-laws of the corporation provide otherwise,

and they usually do, e.g. they usually require shorter notice, the directors must send a written

notice of the date, time, and place of the meeting to every director listed in the directors’ register

in the minute book at least ten days before the date of the meeting; however, the by-laws of a

corporation generally provide that no notice of a meeting shall be necessary if all directors or

shareholders are in attendance and do not object to the holding of the meeting.

Quorum of directors A quorum is the minimum number of directors who must be present

at the meeting in order to conduct a valid meeting. Each corporation’s quorum is usually set

in its by-laws. Under s. 126(3) of the OBCA, subject to the articles or by-laws, a majority of

the number of directors or minimum number of directors required by the articles constitutes a

quorum at any meeting of directors. If a corporation has fewer than three directors, all directors

must be present to constitute a quorum. e quorum may exercise all of the powers of the board.

Conflict of interest e OBCA requires directors to notify the corporation of any conict of

interest. Consequently, directors having a conict of interest regarding a contract or transaction of

the corporation must not attend any part of a meeting of directors during which such a contract

or transaction is discussed and must not vote on any resolution to approve such a contract or

transaction. If no quorum exists for the purpose of voting on a resolution to approve a contract

or transaction only because a director is not permitted to be present at the meeting, the remaining

directors are deemed to constitute a quorum for the purpose of voting on the resolution.

Legal TIP

The directors do

everything relating to

the management of the

corporation, which is

what the shareholders

elect them to do.

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511

Chapter 28 Post-Incorporation Matters

Voting rights and manner of voting of directors Normally, each director is entitled

to one vote. e directors usually vote by a show of hands. Most matters, or matters other than

fundamental changes, are decided by a simple majority vote, usually 50 percent plus 1 vote.

Unless the by-laws provide otherwise, the chair of the meeting has no second (or casting) vote to

break a tie.

OBCA REQUIREMENTS FOR MEETINGS OF SHAREHOLDERS

e OBCA sets out certain requirements for the conducting of meetings of shareholders, the

more notable of which follow:

Who calls shareholders’ meetings Generally, the directors call all the meetings on

behalf of the shareholders.

Who chairs the shareholders’ meetings Unless the by-laws provide otherwise, the

president or, in his or her absence, a vice-president who is also a director, acts as chair of the

meeting, or if neither of them is present within fteen minutes after the time appointed for the

meeting, the shareholders may choose a chair from those shareholders who are present. All ques-

tions proposed for the consideration of the shareholders are decided by the majority of the votes

cast. e chair presiding at the meeting shall not have a second, or casting, vote to break a tie

vote. e sole shareholder of a corporation constitutes a meeting.

Place of shareholders’ meetings Subject to the articles and any unanimous shareholder

agreement, the directors determine the place of the shareholders’ meetings, which may be in or

outside Ontario. Unless the directors determine otherwise, the shareholders’ meetings are usually

held at the registered oce of the corporation. Where the shareholders’ meeting is held electron-

ically, the meeting is deemed to have been held at the registered oce of the corporation.

Annual meetings (of shareholders) To protect the shareholders who, unlike directors,

do not hold meetings regularly, the act requires the directors to call an annual shareholders’ meet-

ing, at which meeting, the directors must present to the shareholders the nancial situation of

the corporation. e directors must call the very rst annual shareholders’ meeting not later than

eighteen months after incorporation. ey must call all other annual meetings not later than

fteen months after the last annual meeting. e shareholders may hold, and vote at, meetings

by telephonic or electronic means.

Special meetings (of shareholders) In addition to the annual meetings, the directors

may call special meetings of the shareholders whenever they require the shareholders to pass

special resolutions. ere are special meetings only of shareholders (not directors) because only

the shareholders are empowered to pass special resolutions. According to subsection 96(5) of the

OBCA, all business is deemed to be special business requiring special meetings of shareholders,

except the following:

• Consideration of the minutes of an earlier meeting

• Financial statements and auditor’s report

• Election of directors, and

• Reappointment of the incumbent auditor

Notice of annual meeting (of shareholders) e directors must send written notice of

meeting (of shareholders), Precedent 28.2, at least ten days, but not more than fty days, before

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