Once your accountant finishes the year-end financial statements, the directors approve them, sign the balance sheet, and present them to the shareholders. In Canada the corporate statutes require it every year; in the US it is good practice and often a lender’s requirement.
It is also the natural moment to tidy the year’s records: the statements show the dividends, shareholder loans and bonuses that should each have their own resolution.
- Approved by
- The directors
- Signed by
- One or more directors sign the statements (Canada); every director signs a written resolution
- Shareholders
- Receive the statements, usually with the annual resolutions
- Filed with the government
- Not with the corporate registry; the statements go with the tax return
- Deadline
- Before the annual meeting or annual resolutions; in Canada, the T2 is due six months after year-end
When you need one
- Every year, once the year-end financial statements are final.
- Before the annual shareholders’ meeting, or the written resolutions that replace it.
- When a lender’s covenant requires approved annual statements by a set date.
- Before declaring a year-end dividend or bonus that depends on the year’s results.
Who approves it
In Canada, the directors approve the statements and show it by signing them, then present them to the shareholders. US statutes don’t require either step for a private corporation, though many boards do it anyway.
| Jurisdiction | Rule |
|---|---|
| Canada, federal (CBCA) | Directors place comparative financial statements before every annual meeting (s. 155) and approve them, shown by the signature of one or more directors (s. 158). Shareholders get a copy at least 21 days before the meeting, or before signing the written resolution that replaces it, unless they have said they don’t want one (s. 159). |
| Ontario (OBCA) | A corporation that isn’t an offering corporation places statements for a period ending no more than six months before the annual meeting (s. 154(1)). The board approves them, shown by a director’s signature at the foot of the balance sheet (s. 159(1)). Copies go to shareholders at least 10 days before the meeting or the written resolution, unless they opt out in writing (s. 154(4)). |
| British Columbia (BCBCA) | Directors produce statements by each annual reference date and place them before the annual general meeting if one is held (ss. 185, 198). They are approved by the directors and signed by one or more of them (s. 199). All the shareholders can waive the statements for a year by unanimous resolution (s. 200). |
| Alberta (ABCA) | Statements are placed before every annual meeting (s. 155), approved by the directors and signed by one or more of them (s. 158), and sent to shareholders 21 days before the meeting or the written resolution (s. 159(1)). The shareholders can waive the advance copies by unanimous resolution (s. 159(3)). |
| Quebec (QBCA) | The board presents statements for the year ended no more than six months before the annual meeting (s. 225), at least a balance sheet and an income statement (s. 226). They can’t be issued until the board approves them, shown by one or more directors’ signatures (s. 227), and the board can’t delegate that approval (s. 118). |
| Delaware (DGCL) | No requirement to prepare, approve or send annual statements. A stockholder can demand to inspect the last three years’ annual statements, in writing and under oath, for a proper purpose (s. 220). |
| Model Act states (MBCA) | The Act doesn’t require statements, but a shareholder can ask in writing for the latest annual statements the corporation has prepared (s. 16.20). |
Before you sign
- Read the statements. Compare the bank balance and the shareholder loan accounts with your own records, and ask your accountant about anything you don’t recognize.
- Check the year’s decisions are on record. Each dividend, bonus, shareholder loan and major purchase in the statements should have its own resolution.
- Decide about the audit. In Canada, if the corporation won’t appoint an auditor, the shareholders’ audit exemption resolution goes with the annual resolutions.
- Plan the annual resolutions. The same package usually re-elects the directors and deals with the auditor.
Sample wording
Adapt the wording to your corporation: replace everything in square brackets, and check your articles, bylaws and any shareholder agreement first. Each person signs and dates a copy, and a scanned or electronic signature is usually fine.
Resolutions of the directors of [Corporation name] (the “Corporation”)
BE IT RESOLVED THAT:
1. The financial statements of the Corporation for the financial year ended [date], consisting of [the balance sheet, statement of income, statement of retained earnings and statement of cash flows, with the notes], [together with the accountant’s compilation or review engagement report], are approved.
2. [Name], a director, is authorized to sign the balance sheet to evidence that approval.
3. The financial statements be presented to the shareholders [at the annual meeting / with the annual resolutions of the shareholders].
The foregoing resolutions are passed by the signatures of all the directors of the Corporation, as of [date].
______________________________
[Name], director
______________________________
[Name], director
Resolutions of the shareholders of [Corporation name] (the “Corporation”)
BE IT RESOLVED THAT:
1. The financial statements of the Corporation for the financial year ended [date], approved by the directors, are received.
2. [Name] and [name] are elected directors of the Corporation, to hold office until the next annual meeting or until their successors are elected or appointed.
3. [The appointment of an auditor is waived for the financial year ending date, as set out in a separate resolution / Name of firm is appointed auditor of the Corporation until the next annual meeting, at a fee the directors set.]
The foregoing resolutions are passed by the signatures of all the shareholders of the Corporation entitled to vote on them, as of [date].
______________________________
[Name], shareholder
______________________________
[Name], shareholder
In a small Canadian corporation this resolution, signed by all the voting shareholders, usually replaces the annual meeting.
Action by unanimous written consent of the board of directors of [Corporation name] (the “Corporation”)
RESOLVED, that the financial statements of the Corporation for the fiscal year ended [date], prepared by [accountant], are approved and accepted; and
RESOLVED FURTHER, that the officers of the Corporation are authorized to deliver them to [the stockholders / name of lender], as required.
This consent is signed by all the directors of the Corporation, is effective as of [date], and will be filed with the minutes of the proceedings of the board.
______________________________
[Name], director
______________________________
[Name], director
After you sign
- Have a director sign the statements where the statute requires it: in Ontario, at the foot of the balance sheet.
- Send copies to the shareholders within the required time, unless they have opted out.
- File the tax return with the financial information. In Canada, the T2 is due six months after year-end, with the statements in GIFI format. In the US, Form 1120 is due by the 15th day of the fourth month after year-end, and Form 1120-S by the 15th day of the third month.
- Send the statements to your lender if a covenant requires it.
What to keep in your minute book
- The signed directors’ resolution and the signed financial statements.
- The shareholders’ annual resolution, or the minutes of the annual meeting.
- The accountant’s report and the year’s tax return.
Common questions
Are the directors approving the statements the same as an audit?
No. An audit is an independent examination by a public accountant. Directors’ approval means the board has reviewed the statements and accepts them as the corporation’s statements. Most small corporations have a compilation or review engagement instead of an audit.
Do we have to hold a meeting to approve the statements?
No. Directors can approve them by written resolution, and in Canada the shareholders can receive them by written resolution in place of the annual meeting.
Do the financial statements get filed with the government?
Not with the corporate registry, for a private corporation. They go to the tax authorities with the corporation’s tax return.
Are US corporations required to approve annual statements?
Delaware and the Model Business Corporation Act don’t require it, though shareholders can ask for statements the corporation has prepared. Many boards approve them anyway, and lenders often require it.
This page is general information about corporate resolutions in the United States and Canada, not legal or tax advice. The sample wording is a starting point: your articles, bylaws and any shareholder agreement may require something different, and rules change over time. For advice about your corporation, speak with a qualified lawyer or accountant.
Sources
- Canada Business Corporations Act, sections 155, 158 and 159
- Ontario Business Corporations Act, sections 154 and 159
- British Columbia Business Corporations Act, sections 185 and 198 to 200
- Alberta Business Corporations Act, sections 155, 158 and 159
- Quebec Business Corporations Act, sections 118 and 225 to 227
- Delaware General Corporation Law, section 220
- Model Business Corporation Act (American Bar Association), section 16.20
- Canada Revenue Agency: Guide RC4088, General Index of Financial Information (GIFI)
- Canada Revenue Agency: when to file your corporation income tax return
- IRS: Instructions for Form 1120
- IRS: Instructions for Form 1120-S