Personal Finance

Question on corporate structure (Tax/legal question)

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  • Feb 15th, 2022 4:13 pm
[OP]
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Sep 16, 2017
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Question on corporate structure (Tax/legal question)

Corporation was set up with 1 shareholder but since then reports on the t2 additional share holders without updating legal documents aside from filing of a form-1 change.

My understanding is that articles of amendment are required for adding any corporate shareholders and the form-1 change is only for rearranging the officers/directors.

The family's accountant at the time helped them set up the corporation and filed for articles of incorporation. he is not a sophisticated guy so the paperwork was minimal (i.e, no minute book, no share certificates, no regsitry - that the family can tell so far he just provides the same documents whenever they ask)

The accountant is reporting the shareholders to include shareholder 2 & 3 for the last 5 years starting in y2 on the t2 (note the business value is not really nominal after in between y1&2 but was mainly in a deficit and it had loans so there is support that by the time they were added on the t2 the shares were minimal value as net assets would not materially be a huge amount to be concerned about).

How would they go about making sure that these changes were executed properly? They are entering a potential sale for a price that is greater than the value of the assets and there is no real legal paperwork indicating that sh 2 & 3 are actually added as shareholders but are instead only directors/officers.

I am looking to discuss with a lawyer directly but thought if anyone else has some insight on whether or not the fact that they are reporting to the CRA the shareownership including 1,2, &3 has any legal weight on the corporate structure if the proper legal paperwork was not filed.

Thanks
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