By Jayson Schwarz LLM and Evonne Finnegan LLB
Most people operating businesses reach the point where they need to incorporate for a variety of reasons. Once the corporation is incorporated whether Federally or Provincially you need to keep certain records. These are evidence of the activities of the corporation and are usually subject to Government review and audit to ensure you are in compliance. The book that this information is kept in is called a “Minute Book”. The reason is that the minutes of meetings are kept there and so the name.
What is in a Minute Book? Here is a list of what to expect on original set up: The Articles of Incorporation; Bylaws, Initial Resolutions setting out officers elected, date incorporated, approval by laws, forms of share certificates, authorization re bills of sale etc, corporate seal, registered office, Consent to Act as Directors, Consent of Officers, Resolution of Shareholders electing Directors, Resolution of Directors electing Officers, Subscription for Shares, Resolution of Director re Allotment and issuance of Shares and relating Share Certificates, Resolution of Directors re Banking and Signing Officers with attached Bank account information, Resolution of Directors re Financial Year End, Resolution of Shareholders re appointment of Accountants and Exemption from Audit Provisions. Directors, Officers and Shareholders Registers As you can see a lot of things.
After the initial set up there are certain Corporation events that should be recorded in these minute books and they include; changes of corporation directors, details of the corporation’s financial statements and filing periods, changes to the share structure or shareholder or securities changes, or any decisions to buy, sell or charge property and annual meetings to approve the corporation’s activities. Matters which are required to be recorded in the Corporation’s minute book include records of the minutes of the provincially required annual shareholders meeting. Small companies with one or two shareholders are permitted by law to sign resolutions approving the annual resolution – provided that all the shareholders of the corporation sign the resolutions. The minute books should also contain a record of special resolutions passed by the corporation’s shareholders. A similar requirement exists for keeping a record of directors meetings.
Other matters that should be recorded in a corporation’s minute book include all revenue filings, any change of address of the corporation, any change in directors of a corporation, including a list of past and present directors and the dates they become or ceased to become a director. Failure to maintain such records can result in significant fines some up to $25,000 and may prevent a corporation from maintaining proceedings in court.
So apart from record keeping and Government compliance, why are the minute books of a corporation so important?
Frequently, in corporate transactions, such as the assumption or provision of loans, the sale or purchase of property or the sale of business itself or its assets, lawyers are faced with blank stares from clients when they ask for the corporation’s up-to-date minute books in order to prepare for the closing. Business owners are more focussed on operating their business than maintaining their corporate books. Clients are often unaware of the existence of their minute book or the importance to maintain it regularly. Failure to have up-to-date records in the corporation minute books can lead to delay and increased legal costs when trying to get the deal done. The accuracy of the corporation’s minute book is vital as it is relied upon by purchasers, lenders and investors in these transactions.
In certain instances it may be difficult to update a minute book where officers or shareholders have died, are untraceable, or when previous business partners have parted ways. Regular updating of the minute book, prevents any of these costly delays.
Disclaimer:The article provided herein isfor general information purposes only and not intended as or to be relied upon for legal advice. Consult with a lawyer for your unique situation.