Every year your corporation must adopt its annual resolutions: approving the financial statements, electing the directors, appointing the officers. Missing years complicate financings and sales. Catching up is possible from $99 per resolution.
Your corporation is running, the contracts are coming in, the accountant files the tax returns. Everything looks in order. Yet if no one has signed a resolution since the constitution, your corporation is quietly building up a compliance backlog that will resurface at the worst moment: a financing application, a tax audit or the sale of the business.
Why the law requires resolutions
A business corporation is a legal person: it does not think and does not decide by itself. Its decisions are taken by its directors and its shareholders, and the law requires them to be recorded in writing, in minutes of meetings or in signed resolutions. Without that writing the decision may exist in fact, but it is weak in law: hard to prove, open to challenge, and sometimes flatly unenforceable.
The minimum annual ritual
Every year, even for the quietest holding corporation, certain decisions must be recorded. The shareholders must elect or re-elect the directors and receive the financial statements; depending on the situation, they appoint an auditor or dispense with one. The directors, for their part, approve the financial statements and record the financial decisions of the year, dividends first among them.
That last point is worth pausing on. A dividend paid with no resolution authorizing it is an anomaly the tax authorities and lenders notice immediately. The dividend resolution is no lawyer’s affectation: it is the legal foundation of the payment, and the proof that the directors checked the corporation could afford it.
What forgetting costs
Day to day, nothing: that is exactly the trap. The consequences arrive later. In due diligence the buyer or the investor finds an empty book and demands it be put right before signing, in a strong position to negotiate the price down. In a dispute between shareholders, the absence of writings turns every past decision into something to argue about. And in the face of a claim, directors who cannot show they acted by proper resolutions have a far harder time defending themselves.
Catching up, then getting into the habit
The good news: a backlog of resolutions can be put right. You reconstruct the chronology of the decisions actually taken, year by year, and record it in ratifying resolutions, properly dated and signed. It is methodical work rather than complex work, and its cost is modest against what it avoids. Our resolution drafting service applies a sliding scale precisely to make catching up over several years affordable.
Then make it a reflex: at each year-end, when the accountant finalizes the financial statements, have the set of annual resolutions prepared and file it in the minute book. Fifteen minutes a year that keep your corporation beyond reproach.
Written resolution or meeting: two valid routes
The law opens two paths to taking a decision, and it is worth knowing which one you are on. The classic route is the meeting: notice is given, people gather, deliberate and vote, and minutes record it all. It is called for when interests diverge, because the notice and the right to be heard protect everyone.
The second route is the written resolution signed by everyone entitled to vote. Signed by all of them, it has the same effect as a decision taken at a meeting, with no gathering and no notice. It is the mechanism most small businesses use in practice, and it is a real convenience. It carries one strict requirement, however: unanimity of signatures. A written resolution missing a signature is not a weakened decision, it is a decision that was not taken. In a corporation where one shareholder is hard to reach or disagrees, you have to go back to a meeting.
The mid-year decisions people forget to record
The annual set does not cover everything. Between two year-ends several decisions call for their own resolution, and those are often the ones missing from the file. The arrival or departure of a director, moving the head office, a significant borrowing and the security granted over the assets, a suretyship given for a third party, approval of a transfer of shares, the appointment or replacement of an officer, the adoption or amendment of a by-law.
One case deserves particular attention: the owner-manager’s remuneration. Salary, a year-end bonus, a dividend, a shareholder advance: each of these has a different treatment and presupposes a decision by the competent body. When a reviewer reconstructs after the fact what was taken out of the corporation and in what form, a complete absence of writings leaves the interpretation wide open, and rarely in your favour.
Ratify, yes. Backdate, never.
This is the most important distinction in the whole article. Catching up on years without resolutions is entirely legitimate: you adopt today resolutions that record and confirm decisions actually taken at the time, stating the true date of signature and specifying what they ratify. The document is then accurate and says what it is.
Drafting a document and falsely dating it to an earlier year is an entirely different thing. That document will be produced to a bank, a buyer, a court or a tax authority, and its falsity, once discovered, turns on whoever signed it far more harshly than the backlog it was meant to hide. A serious professional will always offer you ratification, never backdating, and that distinction should be among your criteria for choosing who prepares your documents.
How this connects to your other obligations
Resolutions do not live alone. They join the minute book, which keeps them and makes them available. Some trigger a formality with the register: a change of director or of head office must then be reflected in the declaration to the registrar. And a corporation that can show, year after year, that its directors decided by proper resolutions defends itself infinitely better on the day someone challenges a past decision.
Frequently asked questions
Which resolutions must be adopted each year?
The shareholders elect or re-elect the directors and receive the financial statements; depending on the situation, they appoint an auditor or dispense with one. The directors approve the financial statements and record the financial decisions of the year, dividends first among them.
Can years of missing resolutions be caught up?
Yes. You reconstruct the chronology of the decisions actually taken, year by year, and record it in ratifying resolutions, properly dated and signed. It is methodical work rather than complex work.
Can a resolution be backdated?
No. Ratifying today a decision taken earlier, stating the true date of signature, is legitimate. Falsely dating a document to an earlier year is an entirely different thing, and its falsity turns on whoever signed it.