Incorporation offers some goodies, such as tax incentives, and creditor insulation, but it also creates some responsibilities. One obligation that is often overlooked is the upkeep of the corporate minute book.
Minute books usually (or should) contain the corporate by-laws, articles of incorporation, information about the share structure, director and shareholders resolutions, agreements, share certificates, financial information, annual returns, and just about anything else you can think of that relates to corporate structure or governance. Maintaining the minute book is well worthwhile. It can save many back-end fees, such as when it comes time to sell the corporation, amalgamate, or change the share structure.
The Business Corporations Act (“BCA”) requires records to be prepared and maintained by corporations. A corporation must keep these records at its registered office or at any other place in Saskatchewan designated by the directors (such as at the office of the corporate solicitor or accountant).
The records that a corporation must keep include the following:
1) Corporate Articles and Bylaws and, if applicable, all amendments;
2) Copies of all unanimous shareholder agreements (“USA’s”) and any amendments;
3) Minutes of shareholder meetings and shareholders resolutions;
4) Notices required by section 101 or 108 of the BCA. The notices referred to in these sections are the Notice of Directors and Notice of Change of Directors which are filed with the provincial Corporations Branch;
5) Securities Register (the form of which is to comply with section 46 of the BCA);
6) Financial Statements as required by subsection 149(1) of the BCA. These statements include the annual financials, report of the auditor (if any), and can include other financial information as required by the articles, bylaws, or any USA’s;
7) Statements of Disclosure made by the directors pursuant to section 115 of the BCA. (This section requires directors to disclose certain conflicts of interest).
8) Adequate accounting records (these must be maintained for 6 years after preparation); and
9) Minutes of director’s meetings (or committees of directors) and director’s resolutions.
If a corporation fails to maintain the above-referenced records, it is guilty of an offence and can feel the pinch of a fine of up to $5,000.00.
Some other miscellaneous records which should be kept with the minute book are the following:
- Notice of Registered Office, pursuant to section 19 of the BCA.
- Certificate of Incorporation;
- Annual Returns;
- Any agreements that pertain to the structure of the corporation, such as share transfer agreements, asset transfer agreements, and amalgamation agreements;
- Share certificates, or copies if the shareholders hold the originals;
- Shareholder Ledger; and
- Directors Register;
Day-to-day transactional agreements with suppliers or purchasers are usually not kept with the minute book, as these simply add clutter to what can already be a truckload of documents.
A minute book which is not up to date can cause frustration and hassle when dealing with future transactions of the corporation. For example, an outdated minute book creates obstacles when the time comes to do any restructuring of the corporation. If the filing of the annual return has been neglected, it can cause a problem if the corporation has been struck off the corporate register and you need to confirm the shareholdings to get it reinstated. As well, the company’s solicitor needs to ensure the corporate search reflects the appropriate share structure before submitting the annual return for filing.
Most importantly, keeping the minute book up to date saves money. It is far cheaper to update information as it occurs rather than pay your lawyer’s or accountant’s hourly rate to sort through conflicting information, and rebuild the minute book, when the pressure is on.
Many corporations maintain minute books on their own. Others, however, do not want the hassle, and the minute book is left with their law firm or accountant to handle upkeep. If you change accounting firms or law firms, you should also ensure that the minute book is transferred to the new firm and confirm with the previous firm that it is up to date.
Knowing what should be in the minute book and keeping it organized is important. Organization is the key to saving time, expense, and potentially your sanity.