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When a corporation in British Columbia changes its registered and records office to that of a non-lawyer such as an accounting firm, or to the director's address, a number of significant risks arise. This article outlines key areas of risk exposure to the corporation's directors and shareholders and why they matter.
These risks generally apply to all corporations and applying for incorporation without the assistance of a lawyer in BC.
1. Loss of Legal Oversight
Maintaining your records office at a law firm ensures ongoing legal oversight of corporate and regulatory obligations. If the registered/records office is transferred to a non-lawyer, important governance and compliance functions may not receive legal oversight. Under several BC statutes, corporations must meet strict governance, ownership, and filing duties. Non-lawyers such as accountants are not authorized or trained to provide legal advice or draft legal documents.
2. Invalid, Incomplete or Missed Corporate Records
Keeping your own corporate records or having a non-lawyer keep your corporate records increases the risk of gaps or omissions in the corporation’s official records, including annual reports, resolutions, and filings. Errors or omissions can result in the corporation becoming non-compliant, which can create tax/audit issues, expensive complications when winding down or selling the business, or causing the corporation to be dissolved under the BCA for non-filing of required reports.
3. Missed Legal Notices or Lawsuits
The registered office is the address for service of legal documents. If a non-lawyer fails to recognize or deliver court or regulatory documents promptly, the corporation risks default judgments or compliance penalties, and typically these are expensive consequences.
4. Loss of Solicitor-Client Privilege
When corporate records are held by a law firm, some non-public communications and documents benefit from solicitor-client privilege. Moving records to a non-lawyer removes that protection and may expose confidential legal materials to production in audits or litigation.
5. Added Costs and Reconstruction
Reconstructing corporate record safter errors are discovered can be time-consuming and expensive. Missing or invalid resolutions, share ledgers, and filings often require extensive legal work to restore compliance. Lawyers may charge more for having to collect your records to draft tax-planning transactions like dividends and rollovers.
6. Reduced Sale or Retirement Value
Deficient or uncertified record scan reduce the corporation’s value upon sale. Buyers’ lawyers demand fully compliant, lawyer-certified records; any gaps can delay closing or reduce the purchase price.
Additional Risks for Medical Corporations and Other Professional Corporations
In British Columbia, professionals may incorporate as specialized entities such as medical, dental, chiropractic, optometric, pharmacy, physiotherapy, naturopathic, massage therapy, law, accounting, professional real estate (PREC), veterinary, architectural, engineering, geoscience, land surveying, forestry, agrology, biology, and applied science technology corporations, each governed by its own regulatory college or authority under provincial legislation. I will discuss some of the specific risks to a medical corporation, consult with your lawyer as to the specific risks to your professional corporation.
1. Medical Corporations’ Strict Ownership and Article Requirements
Medical corporations are subject to strict share-ownership and governance requirements imposed by the College of Physicians and Surgeons of BC (CPSBC). Improper share issuances or article changes performed without legal review can invalidate the CPSBC corporate permit or cause tax issues.
2. CPSBC Compliance Risk
The CPSBC requires that professional medical corporations maintain lawful governance structures under the HPA and its bylaws. Changes to corporate records or registered offices without legal review can lead to suspension or cancellation of the corporate permit.
3. Loss of the Solicitor’s Certificate
The CPSBC requires a Solicitor’s Certificate confirming that a practicing lawyer acts as the registered and records office, that the articles comply with CPSBC rules, and that the lawyer will report changes. Once the office is moved, that certificate becomes invalid, and the lawyer must withdraw.
4. Permit Renewal and Future Corporate Changes
The CPSBC relies on the solicitor’s certificate for compliance validation. Without it, future permit renewals or corporate amendments may be delayed or refused until a new lawyer certifies the corporation.
In summary, moving a corporation’s registered and records away from a law firm can lead to regulatory non-compliance, loss of legal privilege, and significant expense or value loss. Corporations, especially in this day and age of considerable and complex regulation, should strongly consider whether their corporate records should remain under a practicing lawyer’s supervision to protect compliance, continuity, and value.
References
1.Business Corporations Act (British Columbia)
The Business Corporations Act requires every company to keep at its records office core constitutional and governance records — including its certificates of incorporation and name changes, court and registrar orders, central securities register, registers of directors and shareholders, minutes and resolutions of directors and shareholders, and current articles — ensuring these are available for inspection and legal compliance.
Business Corporations Act, [SBC 2002] c.57, s. 42. Available at:https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/02057_02#section42
2. Health Professions Act and Medical Practitioners Regulation
The Health Professions Act authorizes each health-profession board, including the College of Physicians and Surgeons of British Columbia (CPSBC), to make and enforce bylaws governing the issuance, renewal, and revocation of permits for health-profession corporations.
Health Professions Act, [RSBC 1996] c. 183,and Medical Practitioners Regulation, B.C. Reg. 416/2008. Available at:https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/00_96183_01#section49
3. College of Physicians and Surgeons of British Columbia Bylaws
Section 6-6(3) — Renewal of Medical-Corporation Permit:
“A medical corporation applying for or granted a renewal of a permit undersection 6-6(1) must promptly inform the board in writing of any change to the information provided to complete its permit application.”
CPSBC Bylaws, s. 6-6(3). Available at:https://www.cpsbc.ca/files/pdf/HPA-Bylaws.pdf
4. College of Physicians and Surgeons of British Columbia – Medical Incorporation Application
The CPSBC’s medical-corporation application form requires a Certificate of Solicitor, under which the lawyer must certify prior to the initial issuance of a permit that:
“I/We will report to the College any changes to the information contained herein, attached or subsequently provided to complete this application, or while I/we am/are retained to act for the Corporation.”
CPSBC Medical Incorporation Application Package, Form 'Certificate of Solicitor'. Available at:https://www.cpsbc.ca/files/pdf/PMC-Application-1.pdf
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