Entrepreneurship & Small Business

Bank accounts and articles of incorporation

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  • Apr 14th, 2013 1:00 pm
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Deal Fanatic
Aug 21, 2007
6055 posts
853 upvotes
Markham

Bank accounts and articles of incorporation

Second question:

A common issue clients seem to run into is that in order to open accounts (and subsequent lines of credit and loans and what not), banks require to see the articles of incorporation.

In some cases, the registered head office is no longer at all valid due to moves (as compared to current mailing/business address) that the bank has on file.

To change this, for Ontario corps, would they simply file the form1 and attach that to the articles, or do they actually have to amend the articles of incorporation (at a cost of $125?)?

(Any insight from the bankers here? Maybe I should cross-post in personal finance?)
5 replies
Deal Addict
Aug 28, 2007
2167 posts
539 upvotes
Calgary
No, they don't have to amend the Articles. You can now enroll online through CRA's website for a "My Business Account" or some such name. You may have noticed the announcement on your recent correspondence with them. Effective tomorrow, the CRA is discontinuing a lot of the monthly paper reports and forcing business owners to go online themselves to get a current status of their accounts. The set up process is free, although it is a bit convoluted; it requires waiting for a letter in the mail to complete it! However, once registered, you can then update the "Registered Office" address through the online CRA portal. This update applies to provincially incorporated companies, although you still have to call the provincial treasury branch to update it with them too. However, for this exercise the federal update is all you need. All businesses are now tagged to your SIN, so it will actually allow you to see and update all your businesses from one location. Up until now there has never been a clear way to update this info. In the past, I had actually re-filed an RC-1 to change simple things like an address!

In your client's case, he can now simply take a print-out from the CRA website to the bank showing the newly modified address. Be sure to tell him/her to "give the banker hell"... for not having up-to-date information in their bank system! Chances are... the person in the bank branch will not even understand what the Articles mean, so a "strong offence" here is usually enough to accomplish what they need in one visit. You have to be firm with these low-level clerks, loans officers and branch managers. Remind them that they work for you; not the other way around. Asking a polite question, like "How long have you worked for this bank?" works well. A silent, condescending frown when they answer "less that a year or two" is usually enough to make your point.

A number of years ago they used to get you to sign an amendment to the Articles on their own form in the branch. It was basically an override on your limited liability with respect to banking. They had a signed copy so they didn't care if you officially changed the Articles or not. But now they just put all that in the Banking Agreement that you sign. Some banks don't even ask for a copy the Articles any more - they just want the Incorporation Certificate. Either way your client is at their mercy - we all are! BOHICA!
Newbie
Aug 17, 2012
57 posts
8 upvotes
Markham
I don't think CRA transmit the change in registered office address to the Ontario Ministry of Government Services. Regardless, under the Corporations Information Act (Ontario), you are required to file a Notice of Change within 15 days of any changes to your directors, officers, registered office address and etc.

I think bringing all of your charter documents and the last filed form 1 notice of change should be sufficient for the banker. Alternatively, assuming that you have been diligently updating your information with the ministry, you can order a corporate profile report and bring that to the bank. A corporate profile report shows the current information that a corporations has reported to the government.

You can also file Form 1 electronically through service providers, electronic filing is instanteous
Deal Addict
Aug 28, 2007
2167 posts
539 upvotes
Calgary
lllumina wrote: I don't think CRA transmit the change in registered office address to the Ontario Ministry of Government Services. Regardless, under the Corporations Information Act (Ontario), you are required to file a Notice of Change within 15 days of any changes to your directors, officers, registered office address and etc.

I think bringing all of your charter documents and the last filed form 1 notice of change should be sufficient for the banker. Alternatively, assuming that you have been diligently updating your information with the ministry, you can order a corporate profile report and bring that to the bank. A corporate profile report shows the current information that a corporations has reported to the government.

You can also file Form 1 electronically through service providers, electronic filing is instanteous
You are correct. The various levels of government do not effectively communicate with each other. CRA does share some financial information with the provinces, but the registered office address is not one of them. The same thing is true with banks, they only have access to certain pieces of information and it is often not updated. That is why they are complaining to the client in Adeel's second paragraph. I suspect the bank gets access to the corporate information initially or perhaps if they make a subsequent request (perhaps at a cost??) so the bank's data is often out-of-date. That is why the "strong offence" trick works so reliably. I am just trying to save Adeel's client from spending $125 when a bit of theatrics gets the job done. However, your suggestion will also work. Take a copy of the latest Ontario or CRA documentation to the bank and they "should" accept it.

As far as provincial updates go, we, in Alberta, have a similar requirement to notify the provincial government of a change of address. For a corporate registered office, director, shareholders etc. that will cost me $50 if I change it now, so I prefer to wait until I receive my next Annual Information Filing. Since I have to pay $50 for the annual filing I simply change the address at that time and only pay the fee once. Of course, I don't recommend that sort of "cheating" for more important things like your driver's licence etc.
Newbie
Aug 17, 2012
57 posts
8 upvotes
Markham
Just Confused wrote: You are correct. The various levels of government do not effectively communicate with each other. CRA does share some financial information with the provinces, but the registered office address is not one of them. The same thing is true with banks, they only have access to certain pieces of information and it is often not updated. That is why they are complaining to the client in Adeel's second paragraph. I suspect the bank gets access to the corporate information initially or perhaps if they make a subsequent request (perhaps at a cost??) so the bank's data is often out-of-date. That is why the "strong offence" trick works so reliably. I am just trying to save Adeel's client from spending $125 when a bit of theatrics gets the job done. However, your suggestion will also work. Take a copy of the latest Ontario or CRA documentation to the bank and they "should" accept it.

As far as provincial updates go, we, in Alberta, have a similar requirement to notify the provincial government of a change of address. For a corporate registered office, director, shareholders etc. that will cost me $50 if I change it now, so I prefer to wait until I receive my next Annual Information Filing. Since I have to pay $50 for the annual filing I simply change the address at that time and only pay the fee once. Of course, I don't recommend that sort of "cheating" for more important things like your driver's licence etc.
well actually in Ontario, if you file the Notice of Change in paper format (not electronic), its free.

one problem with paper filing is that system might not match the name up, resulting in duplicate entries for the same name (that's why electronic filing is better).
Deal Addict
Aug 28, 2007
2167 posts
539 upvotes
Calgary
adamtheman wrote: While on this topic, does anyone have any advice/suggestions for steps you should take when you initially set up a corporation, specifically if you plan to ask a bank for a LOC eventually and/or obtain other loans?
Well not much I can say on that. In my experience, the banks won't really give any credit to a corporation of a small business person. They actually just get us to sign as a guarantor for the corporations loans, in effect using our personal creditworthiness. If you are a good credit risk they will give the corporation a LOC (nominally) knowing that if the corporation goes under they can simply switch horses and come after you. For those of us achieving low taxes through complicated corporate structures, we will appear as terrible credit risks so we get locked out of the traditional bank credit game.

In one memorable instance, after a number of meetings with a banker, my partners and I found it quicker & easier to set up a new corporation with simple ownership structure just so the banker could understand it. Subesequently, he "approved" it based on our collective credit scores. It was for a paltry sum at that!

So I don't think there is anything you can do when inially setting up the corporation that will influence a later LOC application.

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