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Central Obligations of Provincial and Federal Corporations on an Annual Basis

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    Central Obligations of Provincial and Federal Corporations on an Annual Basis

    Provincial Obligations

    A provincial corporation has three central obligations:

    1. Prepare and file a T2 Income Tax Return each year

    The T2 Income Tax return is due within 6 months from the corporation’s fiscal year end. Typically, a corporation’s fiscal year end is December 31, which means that these obligations must be done by June 30th in each year. This is the work that an accountant does.

    2. File an Annual Information Return

    The Annual Information Return is a provincial return that must be filed  annually. The deadline for this return is also 6 months from fiscal year end. This is a new obligation that was introduced in October of 2021. 

    Moving forward, it is critical that this return is filed. If the return is not filed, the Ontario Ministry will move to strike the corporation off the registry (forcibly dissolve the company). To keep your corporation alive and active, the return must be filed annually.

    This must be filed by the corporation or the corporation’s lawyers.

    3. Update the corporate minute book with annual resolutions

    The minute book of the corporation must be ‘updated’ each year with annual resolutions, which are resolutions in which the shareholders and directors confirm in writing that they have reviewed and approved  of the financial statements prepared by the accountant in the first step. This is the work that a lawyer does.

    Provincial corporation  obligations
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    Federal Obligations

    A federal corporation has the same two obligations as a provincial corporation explained above, however it has one additional annual obligation.

    Federal corporations must file an annual return with Corporate Canada. An annual return is not your income tax return. This is a corporate law requirement and the return is a corporate return. It is completely separate from any filing obligations you may have with the Canada Revenue Agency (CRA) and separate from your obligation to prepare and pass annual resolutions. 

    The annual return notifies Corporations Canada that the company is still active. They’d also like to know of any changes of the address or board of directors to keep their records up to date. The fee is $12.00 each year.

    Failure to do so can lead to Corporations Canada dissolving the corporation.

    Federal Corporate Obligations
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    When is the Filing Deadline for the Annual Return?

    Unlike obligations 1 and 2, the deadline for filing an annual return is within the 60 days following a corporation’s anniversary date. The anniversary date is the date your corporation incorporated, amalgamated or continued under the CBCA. You do not file for the year the corporation was incorporated, amalgamated or continued.

    The date can be found on your corporation’s Certificate of Incorporation, Amalgamation or Continuance. You can also find your anniversary date on Corporations Canada’s online database. Federal business and not-for-profit corporations can search online to find out if their annual return is due.

    If you do not file your annual return on time, the status of your corporation’s annual filings in our online database of federal corporations will be displayed as “overdue” and your corporation will not be able to obtain a Certificate of Compliance.

    Failure to File

    If you don’t file the annual return, technically speaking, Corporations Canada can dissolve your company. That being said, they typically provide a 2-year grace period for filings which should be ample time to submit it – particularly as the whole process can take less than 5 minutes.

    Professional Corporations

    A professional corporation is a corporation owned and operated by one or more members of the same profession. Only members of certain professions, such as physicians, lawyers, accountants, engineers, veterinarians, social workers, and dentists can operate a professional corporation.

    A professional corporation is under provincial jurisdiction, and therefore must fulfill all obligations subject to provincial corporations—that being the filing of an income tax return and the passing of annual resolutions. In addition, a professional corporation must also file for a Certificate of Authorization each year with its regulatory body. The Certificate of Authorization will only be granted by if all individuals who provide services inside the professional corporation are licensees to practice their particular profession.

    A Certificate of Authorization is typically valid for a 12 month period after its issue and expires at the end of each year. If for any reason the certificate of authorization of a professional corporation is not renewed within 12 months after its expiry, the certificate of authorization is automatically revoked.

    Professional Corporate Obligations
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    Reasons why its important to stay up to date

    A corporation that meets their obligations is much more likely to avoid an audit by the CRA, which is significantly more costly than paying one’s accountant and lawyer to ensure that everything is up to date. Further, unless the requirement for an audited financial statement is waived in writing by the shareholders), it is possible for a disgruntled shareholder to claim at a later date that the financial statements should have been audited, which would force a corporation to go back and have its financial statements audited, at a cost of thousands of dollars.

    Conclusion

    Both the annual return and the annual resolutions are legal documents that are typically prepared by a lawyer. A corporate accountant prepares and files the T2 Income Tax Return along with the corporation’s financial statements. If you need assistance in the preparation of and filing of corporate legal documents, contact a lawyer at Kalfa Law to ensure that your corporation is meeting all of its legal obligations.

    FAQ’s:

    What are the obligations required of a provincial corporation?
    A provincial corporation must fulfill the following:
    • File a T2 Income Tax
    • Preparation of annual resolutions
    What are the obligations required of a federal corporation?
    A federal corporation must fulfill the following:
    • File a T2 Income Tax
    • Preparation of annual resolutions
    • File an Annual Return
    What are the obligations required of a professional corporation?
    A professional corporation is required to fulfill the following:
    • File a T2 Income Tax
    • Preparation and passing of annual resolutions
    • File for a Renewal of the Certificate of Authorization
    When is the deadline for a corporation to fulfill its obligation to file a T2 income tax return and file annual resolutions?
    The filing of a T2 income tax return and the preparation and passing of annual resolutions required of provincial corporations must be signed within 6 months of the corporation’s fiscal year end. Typically, a corporation’s fiscal year end is December 31, which means that these obligations must be done by June 30th in each year.
    When is the deadline for a federal corporation to file its annual return?
    The deadline for a federal corporation to file an annual return is within the 60 days following a corporation's anniversary date. The anniversary date is the date your corporation incorporated, amalgamated or continued under the CBCA.
    When is the deadline for a professional corporation to file for a Certificate of Authorization?
    A Certificate of Authorization is typically valid from the date of issue, as indicated on the certificate, until December 31 of the year in which it is issued. If for any reason the certificate of authorization of a professional corporation is not renewed within 12 months after its expiry, the certificate of authorization is automatically revoked.


    -Shira Kalfa, BA, JD, Partner and Founder

    Shira Kalfa is the founding partner of Kalfa Law. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax FoundationWomen’s Law Association of Ontario, and the Toronto Jewish Law Society. 

    © Kalfa Law 2021

    The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.
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