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Imagine investing your money in a company and not knowing how the company is functioning. We have had many clients who are owners (shareholders) of a company only and not a part of management and not a director, who have been denied access to information about the company. Being left in the dark about what is happening with the company and its financial health can be frustrating, especially when they have a personal money investment in the company. It is vital for a shareholder to understand the company’s inner workings and have unfettered access to corporate records.

For an Ontario corporation, Section 140 (1) of the Ontario Business Corporations Act (referred to as the “Act” for the rest of this article) requires a corporation to prepare and maintain specific records. In summary, a corporation shall prepare and maintain, at its registered office or at such other place in Ontario designated by the directors,

  • the articles and the by-laws and all amendments thereto, and a copy of any unanimous shareholder agreement known to the directors;
  • minutes of meetings and resolutions of shareholders;
  • a register of directors;
  • a securities register complying; and
  • a register of ownership interests in land

Section 140 (2) requires a corporation to maintain:

  • adequate accounting records; and
  • records containing minutes of meetings and resolutions of the directors

Section 145 of the Act however only gives shareholders the right to inspect the documents listed in subsection 140(1) of the Act NOT those in 140(2)!!! For a shareholder to get access to those records, a shareholder may have to get a court order!

The section of the Act dealing with the obligation to produce financial statements is section 154 which says that financial statements are only required to be produced for use at an annual shareholders meeting only, but does not generally allow shareholders to simply attend at the registered office to review them. What if the annual meeting isn’t held? Then you’ve really been denied your right to see the financial records.

Therefore, if the company tries to play hard ball and denies you, as a minority shareholder, access to financial or accounting records, you may need to get an order from the court for disclosure of these documents.

 

Please note the content on this web site is provided for general information purposes only and does not constitute legal or other professional advice of any kind.