Why every corporation should have a minute book.
We are often asked by clients, who may be incorporating a holding company or a corporation for the family farm, if they actually do need a minute book. The short answer is yes, and here’s why:
Legislation governing corporations in Saskatchewan, The Business Corporations Act (the “Act”), specifically requires that certain records be kept by a corporation for the entirety of its existence. Such documents include articles of incorporation, bylaws, any unanimous shareholder agreement, and any amendments to these documents. Among other documents, minute books must also include minutes of meetings and resolutions of shareholders and directors. Every act that a corporation takes must be properly authorized by the directors or shareholders, as the case may be, and failure to create those minutes or resolutions and save them to the minute book, could raise concern that the acts of the corporation were not, in fact, properly authorized.
Where a corporation fails to maintain the records as required by the Act (see Section 20 of the Act at BCA (Sask) on Canlii for an extensive list), it is subject to a fine of up to $5,000.
Another important reason to keep a current minute book is that the Act gives shareholders and directors and their respective agents and legal representatives the right to access the records listed in Section 20(1) of the Act and certain other records, including shareholder lists. There is an expectation that those records be available and if a corporation cannot produce them when required, this could raise suspicions on the part of a corporation’s shareholders and further penalties could be incurred, up to $5,000.
Beyond compliance with the Act, there are other benefits to maintaining a thorough and up-to-date minute book for a corporation. For example, if an accountant is recommending a tax-based corporate reorganization, a well-organized and current minute book is invaluable. It saves the advisors time (and therefore saves the client money) by minimizing the need for the lawyer or accountant to comb through scattered records to piece together a corporate history and current shareholdings. Similarly, if a corporation or shareholders are ever in a position to sell the business, a disorganized set of records could be seen as a red flag in the eyes of a potential purchaser. A corporation will, without fail, be expected to provide a potential purchaser with its minute book and if it has to take the time to recreate the past, the delay could jeopardize the sale itself or additional fees may need to be incurred for a lawyer to compile or recreate essential records.
While the number of documents required to be retained can lead to concern on the part of a business owner as to where to store them and keep them organized, a minute book need not be paper-based. Electronic minute books and electronic signatures on documents are becoming the norm, and since many documents need never be printed, taking up space in filing cabinets is a thing of the past – a business owner only needs folder on a computer or cloud drive.
Lastly, while businesses typically have good intentions about keeping accurate records, many business owners are simply too busy with day-to-day operations and maintenance of corporate records falls down the list. An attractive option to avoid this from happening is for the corporation to have someone store and manage its minute book on its behalf. Law offices offer the service of acting as corporations’ registered office and in doing so, will save your documents for you and be able to produce an up-to-date and organized minute book when requested.
If you have questions about maintenance of your minute book, or any other corporate needs, we invite you to contact Lakefield LLP’s corporate law group.
The information in this article does not constitute legal advice. The law may have changed since this article was first published. You should consult with your lawyer to confirm the current state of the law and obtain advice specific to your situation.