Publicly traded companies are corporations that sell shares of their ownership to the public, trading on stock exchanges like the Toronto Stock Exchange (TSX) or TSX Venture Exchange (TSXV). Subject to strict regulations by authorities such as the Canadian Securities Administrators (CSA), these companies represent a significant portion of Canada’s economic engine.
Mandatory and Regular Audits of Public Companies
Unlike their small business counterparts, publicly-traded companies have to submit to an annual audit of their financial records by an independent firm. While small businesses can waive their audit requirements, public companies are mandated by law to undergo a routine and in-depth evaluation of their finances.
Impact of Audits on Management
The mandatory audit requirement calls for companies to have robust accounting systems and ready access to financial records. External auditors are common, requiring management to adapt to regular scrutiny.
The extra regulations on publicly-traded companies ensure transparency, integrity, and protection for shareholders. Hence management strategies must extend beyond their immediate business goals, being necessarily designed to meet and exceed these regulatory requirements.
Minute Books for Canadian Corporations
All Canadian corporations, whether public or private, have a legal requirement to maintain a minute book. The minute book is an official record of a corporation's operations and encompasses important documents such as articles of incorporation, by-laws, minutes of meetings, and a register of directors.
While both public and private corporations must keep their minute books updated, public corporations face a more stringent set of rules both in content and management, reflecting their larger scale of operations. Nevertheless, every company wants ease-of-access and efficient updating, so most Canadian companies maintain digital minute books now instead of the traditional physical binder.
Comparing the Compliance Requirements: Private vs Public Companies
Both small private corporations and publicly-traded companies are regulated by the Canada Business Corporations Act (CBCA). While they share some commonalities in their compliance requirements, the extent and intensity of these requirements differ significantly.
For companies of all sizes, failing to maintain a minute book can result in fines up to $25,000. Directors and officers of the company can be personally liable for the corporation’s misconduct.
Public corporations need to contact thousands of shareholders when passing shareholder resolutions. Financial records must also be publicly available and audited. In contrast, small private corporations have a handful of shareholders and the financials do not need to be audited.
Streamlining Compliance for Small Businesses with LegalDeeds
Public corporations spend thousands of dollars on routine minute book maintenance because their situation is so complex. Small businesses can write their minute book documents for cheap with LegalDeeds.
Annual Shareholder Resolutions, Annual Director Resolutions, and Director Consent Letters can all be purchased for only $5 each. A minute book needs all those documents every year, so a small business spends around $15 on legal documents every year.
The documents are written by lawyers then automated with software to streamline small businesses’ administrative responsibilities. LegalDeeds makes it easy to comply with the CBCA.
In conclusion, while public and private companies are both regulated by the CBCA, private businesses can comply more easily and save money by writing documents online.