February 10, 2026

By Mark Mikulasik

Chances are if you are the chief executive officer or principal owner of a business corporation, you know whether or not you need your financial statements to be audited. Probably, your lenders or investors will tell you the answer.

THE ISSUE

But what about if you are a minority shareholder or purchaser of that corporation?

The purpose of an audit is to ensure that the statements are prepared in accordance with generally accepted accounting principles. They do not necessarily investigate for or detect fraud. But knowing that they are prepared in accordance with standards ought to give comfort in knowing that your accountant can reasonably compare them to expectations.

THE LAW

Section 149 of the Ontario business Corporations Act requires that corporations appoint an auditor, but section 148 allows an exemption from this requirement if all shareholders consent.

Section 163 of the Canada Business Corporations Act  contains similar provisions.

THE CASE

In Lagana v. 2324965 Ontario Inc., the Ontario Court of Appeal confirms the general application of this legislation. In that case, the applicant was the son of one of two founders of the corporation. The son inherited his father’s shares. When he sought to review the corporation’s financial history, he was provided with unaudited financial statements. He applied to the court for an order requiring audited financial statements going back to the corporation’s incorporation in 2013 instead.

Both the Superior court judge who heard the application and the court of appeal agreed that he normally would be entitled to the audited statements.

So, what was the problem?

The Divisional Court, and the Court of Appeal agreed with the respondent (the co-owner and directing mind of the corporation) that the application constituted a “claim” within the meaning of the Limitations Act 2002. What this means is that the applicant could only demand audited statements going back two years from the date of his application in 2021.

As the Divisional Court put it, the application was “no different in kind than a lawsuit for damages or an injunction generally”.

The Court of Appeal bolsters this view by pointing out the difficulties in going back 13 years to produce audited statements – which they describe as “highly prejudicial” if not impossible.

TAKEAWAYS

• If you are a shareholder in a corporation, be aware of your right to insist on audited financial statements
• If you are prepared to waive that requirement, make sure that this is properly documented by consent each year.
• If you are a minority or other non-management shareholder, and do not wish to consent, be aware that you must enforce your rights within the two-year limitation period that applies.

 

WHAT WEILERS LLP CAN DO TO HELP YOU

The corporate  lawyers at Weilers LLP are adept at helping clients comply with legal requirements such as audit requirements, to reduce the potential for future conflict. We have a proud tradition of over 75 years of acting on an ongoing basis as lawyers for shareholders, directors, and corporations.

If conflict is inevitable, our litigation team has the experience and skills to bring the litigation to a conclusion in the least painful and least expensive fashion possible.

So, whether you need to organize a corporation, maintain its records in compliance with the law, or need advocacy in a corporate dispute, call us. Weilers LLP might be the right lawyers for you.