“I don’t create companies for the sake of creating companies, but to get things done.”
– Elon Musk
The shareholders of a corporation are responsible for the appointment of a board of directors. In Canada, corporations must have a minimum of one director. It is not uncommon for the controlling shareholder of a corporation to appoint themselves as the only director, giving them full control over the management and strategy of the company.
Directors of a corporation are responsible for the supervision and activities of the corporation to ensure it conducts itself accountably in all dealings. One of the most important duties a director has is the duty of care. Duty of care requires that, in carrying out their functions, directors must:
- Exercise at least the level of care and diligence that a reasonable person would exercise in similar circumstances.
- Act honestly at all times, in good faith and in the best interests of the corporation, as opposed to their own personal interests.
As a shareholder of a company, controlling or otherwise, it is good practice to maintain certain records related to the operations and structure of the corporation. Documenting the ownership structure and annual return of any corporation you have an interest in, will help your family should you ever be unable to manage your own affairs.
RECORD TYPE: Corporate Structure
Corporations can be owned by individuals, other corporations or Trusts. The corporate structure of your business holdings should be clearly documented using an Ownership Diagram detailing the type and number (or percentage) of shares you and your partner/spouse own of each company. Holding companies should be clearly indicated, along with the ownership of all Operating companies.
Suggested Action: Upload a copy of your Corporate Structure and Ownership Diagram.
RECORD TYPE: Minute Book
A Corporate Minute Book is an accounting of all important transactions and records of the corporation, including but not limited to, the articles of incorporation, bylaws, share registry, minutes of meetings and shareholder resolutions. Many business owners have their lawyer or accountant maintain the minute book to ensure all required documents are updated each year in accordance with Federal and Provincial regulations.
Suggested Action: Upload a copy of key Minute Book documents such as Article of Incorporation and Share Registry along with any other documents you may need quick access to for each corporation you own an interest in.
RECORD TYPE: Shareholders’ Agreement
Although there is no legal requirement for a Shareholders’ Agreement, it is strongly recommended as it sets out the rights and obligations of shareholders and how the corporation will be managed. Sometimes referred to as a Unanimous Shareholders’ Agreement (USA), taking the time to draft one can help to avoid disagreements between shareholders by creating a guide to dispute resolution.
Suggested Action: Upload a copy of the Shareholders’ Agreement for any corporation where you are a shareholder.
RECORD TYPE: Buy-Sell Agreement
Corporations with more than one shareholder should require all to enter into a Buy-Sell Agreement that specifies how the business will be operated in the event of shareholder conflict, bankruptcy, divorce, retirement, disability or death. Properly structured, a Buy-Sell Agreement will help to ensure a smooth transfer of shares by avoiding the need to negotiate the terms of sale during difficult times.
Suggested Action: Upload a copy of any Buy-Sell Agreement that you have entered into as a shareholder or key employee of a business.
NEXT Steps
- Download Resources
Click the Resources link to download and print the various worksheets and templates applicable to your needs. Set aside some time over the next few days to complete each one. Remember to involve your partner/spouse should you have one. - Gather Documents
Complete each worksheet or template and gather other statements and documents for each type of Record to be uploaded to this Tile. - Upload Documents
Using a scanner or the Sidedrawer Mobile App, upload all statements and documents to the appropriate Record for secure storage and collaboration with your family and trusted advisors. - Add Collaborators
From the Sidedrawer home screen, click on the Collaborator icon to add someone you wish to give access to one or more of your Records. Enter their email, name and relationship to you, then select the Record and permissions to be granted.
Click here to print the Corporate Governance Document Checklist.