The Second Opinion: Mandatory Audit Rights And The CBCA

Can a private corporation decline to provide audited financial statements to its shareholders without their unanimous consent on the ground that it is too expensive for it to do so?  The British Columbia Court of Appeal recently addressed this question in Li v. Global Chinese Press Inc, 2014 BCCA 53, and held that the answer is no, at least for companies that are incorporated under the Canada Business Corporations Act ("CBCA").  The decision in Li is an important appellate clarification of this point, and is one that private corporations should bear in mind in their dealings with shareholders.

The issue arises this way.  Under s. 155(1) of the CBCA, the directors of a corporation are required to provide its shareholders with financial statements at every annual meeting, together with the report of the auditor "if any".  These final words suggest that the provision of audited as opposed to unaudited financial statements is a matter for the company's discretion.