What is a corporate minute book
WHAT IS A CORPORATE MINUTE BOOK AND ARE THERE IMPLICATIONS FOR FAILING TO KEEP IT UP-TO-DATE?
Every corporation is legally obligated to maintain certain records and a “minute book” refers to the binder or book that holds these records. The following are some
of the typical records that a minute books contains:
- Articles of Incorporation;
- Minutes of Directors’ and Shareholders’ meetings;
- Directors’ and Shareholders’ Resolutions;
- Registers of the Directors, Officers, and Shareholders;
- Share Certificates (the original or a copy);
- Copies of statutory forms filed; and
- Shareholders’ Agreements (if any).
It is extremely important to maintain accurate and up-to-date corporate records. Without proper documentation, decisions made by a company’s officers, directors, and/or shareholders do not have legal substance. For example, a Canada Revenue Agency (“CRA”) audit will include a review of the corporation’s minute book to verify, among other things, how money has been removed. If such transactions have not been documented in the minute book, from CRA’s perspective, they will view these transactions as not having had transpired. As a result, a reassessment by the CRA may occur, which in turn, may lead to the corporation paying more tax. Furthermore, corporate transactions such as borrowing money may be delayed or not completed. Lenders often require a legal opinion on the corporation and proof of authority of the individuals acting on the corporation’s behalf. Without properly maintained records, the transaction may be delayed and additional expenses incurred. Even worse, if previously involved shareholders or directors are inaccessible and the paper trail cannot be restored, the transaction could fail.
For these and a variety of other reasons, a corporation’s minute book should be kept current. Just like one would see their doctor for an annual check-up, corporations should see and work with their lawyer on an annual basis to complete corporate “annuals”.