Your PREC articles failed the check. Now what?

First, know exactly what is wrong

A rating tells you there is a problem; it does not tell you what to say to your lawyer. Start by getting the defects named. The free Health Check lists which requirements were found, absent, or contradicted in your wording. Where the result is red, the paid PREC Deep Dive, $100 CAD plus HST, gives the full clause-by-clause written analysis: every requirement, worst first, what is wrong with each one, why it matters, and what to raise with your lawyer about it. Walking into a legal meeting with the defects already named is usually the cheapest hour of the whole exercise.

Second, settle the reorganization question

This is the step people skip, and it is the one that bites. Amending the articles narrows what the corporation is authorized to do. The regulation does not expressly prohibit a PREC from holding investments, but buying and selling property as a business could be trading in real estate, and holding investments inside the corporation has tax consequences: once passive investment income (counting any associated corporation’s) passes $50,000 in a year, the next year’s federal small business deduction is reduced, and it is gone at $150,000 (ITA s. 125(5.1)(b); Ontario does not follow that reduction). So if the corporation currently holds anything or earns anything outside providing your services to your brokerage, a rental property, a management business, an interest in another company, decide with your advisors whether it stays or moves before you amend. If it moves, narrowing the articles first is doing things in the wrong order: the receiving structure has to exist, the transfer has to complete, and the articles get amended last. Whether a reorganization is needed, and how to do one and what tax it costs, is squarely a question for your CPA and your lawyer together, and it is why our own amendment engagement begins with a short screening rather than a payment button.

Third, prepare the amendment

The fix itself is a set of articles of amendment: the corrected share provisions, restrictions, and other clauses that bring the document in line with the conditions in O. Reg. 536/20 and the tax considerations under the Income Tax Act. Two ways to get there:

• Your own corporate lawyer drafts. Take the Deep Dive’s clause-by-clause findings to your lawyer and have them draft and file the amendment. For many realtors this is the whole path.
• Capital Toolkit prepares the articles. Capital Toolkit’s amendment package is $500 CAD plus HST, paid on the redraft page: your amended articles and a roadmap of corrections, built from your answers. Your own lawyer reviews them, and you file them with the Province yourself. Ontario’s own filing fee is separate and is paid to the Province.

Fourth, file, and then keep it current

The amendment takes effect when it is filed with Ontario and the certificate of amendment issues. Within five days after any change that affects the corporation’s eligibility for the exemption, such as a share transfer or a director or officer resigning, and within five days after a change to its legal name or address for service (for a name change, that is the date on the certificate of amendment), notify RECO’s registrar in writing (O. Reg. 536/20 s. 6(2)). RECO publishes PREC@reco.on.ca for PREC notices; confirm with RECO that it accepts change notices there. Give your brokerage the amended articles so it can confirm the conditions in writing (s. 4(c)). After that, the same discipline that caught the problem is worth keeping: rules change, and a document that was right when filed can drift out of date. Run the free check again whenever the corporation’s circumstances change, and before anything that will make someone else read your articles closely, such as a financing or a sale.

What this page is not

The Health Check and the Deep Dive rate how articles are drafted and give you a starting point for a qualified lawyer and CPA; they do not certify that your corporation is compliant, and they do not decide whether a reorganization is right for you.