Should I worry if a seller cannot produce basic corporate records?

Corporate records are how a buyer confirms who owns a corporation and who has authority to sell it, so a seller who cannot produce them has not yet shown that the deal can be done properly. Missing records need an explanation before a buyer relies on what the seller says about ownership.

What the statutes require

The Canada Business Corporations Act requires a corporation to keep records that include its articles and by-laws, any unanimous shareholder agreement, minutes and resolutions of shareholder meetings, and a securities register. It also requires accounting records and minutes of directors’ meetings and, unless subsection 21.1(7) excludes the corporation (for example, a reporting issuer), a register of individuals with significant control. Ontario’s Business Corporations Act has its own books-and-records provisions, including a securities register. Other provinces have their own statutes, so the one that governs the corporation sets the list.

Why a share purchase raises the stakes

In a share purchase the buyer takes the corporation as it stands, so the securities register is the first place to confirm who holds the shares. Ontario’s Act treats an entry in a corporation’s securities register as proof, in the absence of evidence to the contrary, that the person named is the owner of the securities described. If the register is missing or out of date, the buyer has no such entry to rely on when the seller says they hold what they are selling. In an asset sale the gap can still matter, because a sale of substantially all of a corporation’s property needs shareholder approval, and shareholder minutes and resolutions are the records the federal Act requires.

How a buyer can respond

A buyer can ask the seller’s lawyer to explain each gap and prepare the missing records before closing. Corporations Canada says every federal corporation must file an annual return every year, that filing avoids potential administrative dissolution, and that a public search shows whether a return is due. Provincial corporations are searched in their own province’s registry. The CRA publishes separate record-keeping requirements for corporations, so tax and financial records are a second set to ask for. Our answer on what to check before buying a business puts this in context.