Homeowners/Residents Associations Guide to Navigating COVID-19
Field + Brook Newsletter
As non-profit companies under the Companies Act (Alberta), Brookfield Residential’s homeowners/residents associations must hold annual general meetings and submit annual returns to the Registrar of Companies (Corporate Registries) each year. A failure to file annual returns may result in a company being struck from the corporate registry and a failure to hold an annual general meeting within the appropriate time period may result in offences under the Companies Act.
What does the law state?
Section 149 of the Companies Act requires your homeowners/residents associations to host annual general meetings each calendar year. Usually this is done to review financial statements, elect directors, and address other business of the company needed to complete the annual returns. Section 162 of the Companies Act requires submission of these annual returns by the end of the month following the date of incorporation/registration of the company. For example, if you incorporated in April 2019, then you should submit your annual return to Registrar no later than May 31, 2020. For Brookfield Residential’s homeowners/residents associations, which are “public companies” under the Companies Act, these returns must include financial statements, a notice of the directors and officers, and other documents that usually require an annual general meeting to present those documents to the members and obtain approval.
The Companies Act provides that a company which fails to comply with either of these requirements is guilty of an offence (subsections 149(5) and 162(6) of the Companies Act) and this could result in a fine of up to $500 for the company itself and separate fines for each director if those directors knew of the non-compliance (subsection 313(2) of the Companies Act). Usually, however, failure to comply can result in being struck from the corporate registry, meaning your company does not technically exist for that period which it is not registered on the corporate registry.
What if our homeowners/residents association cannot meet because of government bans due to COVID-19?
Don’t worry. Due to the outbreak of COVID-19, the Registrar of Companies has issued a notice stating that they will not be enforcing certain provisions of the Companies Act. As of April 2, 2020, Corporate Registries will not be automatically striking a company from the corporate registry. If for some reason Brookfield Residential is behind on its submissions and would usually be struck after April 2nd then you have some insulation. Also, Corporate Registries advised that non-profit companies may postpone any upcoming annual general meetings until such time as provincial/local gathering restrictions have been lifted (at the time of writing this, we are limited to gatherings of no more than 15 persons). These announcements are practical and something that Field Law and our legal profession have been looking for.
What else can we do to protect our companies?
- You could file a notice with Registrar of Companies seeking relief. If your deadline to host your AGM is coming up, you could further protect yourself by providing a notice to the Registrar of Companies. The Companies Act allows you to file a request with the Registrar no later than one month before your annual general meeting deadline by submitting a statutory declaration from one of the homeowners/residents association directors. Field Law can advise of you if these provisions of the Companies Act apply in your circumstances.
- Obtain a court order for a 6 month extension to the annual general meeting deadline. This would require convincing a court that it is in the best interests of your homeowners/residents association to host the meeting later. In this writer’s opinion, given the government imposed restrictions on social gatherings due to COVID-19, obtaining such a court order is highly likely.
- For those new homeowners/residents associations, where Brookfield Residential is the only member, you can essentially host a meeting with yourselves. You can then file an annual return.
Can the directors of the homeowners/residents association meet remotely to make these decisions?
In most cases, the directors of Brookfield Residential’s homeowners/residents associations can elect to meet remotely. The Articles of Association of your homeowners/residents associations typically include provisions allowing the Directors of those associations to participate in board of directors meetings by conference call or other communications equipment that allows all of the persons at the meeting to hear each other at the same time. Please contact us if you would like assistance interpreting the articles of incorporation of a homeowners/residents association.
Times are tight, what can we do to save money?
You could save money on auditor costs. If there are five (5) or less members of an association, the association is not distributing shares (none of your associations are), and the association has assets not exceeding $500,000 and revenues not exceeding $1,000,000, then members of the association may pass a resolution dispensing with audited financial statements and balance sheets (see section 134 of the Companies Act). This is particularly relevant for newer homeowner associations. Recently, Field Law successfully assisted Brookfield Residential with convincing the Registrar of Companies that these types of resolutions should be accepted. Please do not hesitate to contact us if you have any questions.