What is a Minute Book and Why Should Every Corporation Have One?
By Alex Koch, Insight Legal
Every corporation in Canada is required to maintain an official record of its activities including records of any annual meetings conducted by the directors and shareholders of the company as well as any change within the corporation such as any change of address, changes in directors, shareholders and/or officers, etc. Such record is normally kept in a book called a “Minute Book”. A Minute Book is typically one of the first documents reviewed when a corporation is seeking to partake in various business transactions, such as selling the company or getting a loan, making it one of the most important books of every corporation.
The following documents are customarily included in a company’s Minute Book:
- Articles of Incorporation;
- by-Laws;
- resolutions of directors and shareholders and meeting minutes;
- registers of directors, officers and shareholders;
- shareholders’ ledger;
- forms filed;
- share certificates; and
- shareholders’ agreement(s) (if any).
Below is a brief description of the above documents:
Articles of Incorporation
When a company seeks to incorporate (federally or provincially), it must file its Articles of Incorporation with the government. The Articles of Incorporation outline the company’s name, registered address, number of directors, name and address of the company’s directors, object/purpose of the corporation, number of shares, voting rights, restrictions on transfer of shares, etc. The Articles of Incorporation act as proof of the company’s business registration.
By-Laws
Corporate by-laws are used by companies to organize their internal management. The by-laws set out obligations and rules pertaining to the company’s shareholders, officers and directors. It is important for any corporation to verify that any business it purports to conduct is consistent with its by-laws, otherwise, the by-laws must be amended before the company can proceed with such business.
Resolutions of Directors and Shareholders and Meeting Minutes
Upon incorporation of a company, the company’s directors and shareholders must make key decisions pertaining to the initial organization of the company such as the company’s financial year end, the company’s bank, auditor, etc. These key decisions are typically memorialized in resolutions. In order to pass such resolutions, directors and shareholders normally hold annual meetings; however, some companies choose to pass written resolutions in lieu of a meeting. Directors and shareholders must also pass certain resolutions at the end of each financial year of the corporation. Annual resolutions generally deal with the adoption of financial statements, appointment of directors and auditors as well as recording any other change in the company that may have taken place prior to the end of the company’s financial year.
If a company conducts any special business between annual meetings, special resolutions must be passed by the shareholders and/or directors to approve such special business.
Registers of Directors, Officers and Shareholders
A Minute Book is required to contain a register of directors, officers and shareholders of the corporation. These registers maintain a log of all of the directors, officers and shareholders of the corporation since incorporation.
Shareholders’ Ledger
A shareholders’ ledger is a document that identifies each shareholder of the corporation and indicates how many shares such shareholder owns. The ledger also documents when a shareholder took ownership of the company’s shares and includes any information relating to any sales or transfers of such shares.
Forms Filed
Copies of any documents or forms filed with governmental authorities such as corporate initial and annual filings, trademark applications, tax reliefs, etc. must be kept in the Minute Book.
Share Certificates
A share certificate is a certificate issued by a corporation to every shareholder certifying that such shareholder is the registered owner of shares in the company.
Shareholders’ Agreement
A shareholders’ agreement is a contract between all (or some) of the shareholders of a company that structures the relationship between the shareholders. The agreement is an invaluable resource for all companies because it provides the foundation for how the shareholders interact with one another as well as the upper management of the corporation.
There are many reasons why the above documents are maintained including:
- to ensure compliance with legal obligations;
- to be reviewed by accountants for audit purposes;
- to satisfy inspection requirements by the Canada Revenue Agency or any other government authority;
- to be reviewed by bankers when seeking loans or when raising capital;
- to be reviewed by prospective purchasers of the company or any shares; and
- to be inspected during any litigation proceeding.
It is important to maintain a Minute Book regularly because it sometimes becomes costly (and may even become impossible) to update a Minute Book retroactively, for example in a scenario where a shareholder is not recorded in the Minute Book and such shareholder becomes medically unfit or is no longer alive. For this reason, an up-to-date Minute Book can act as a guiding force for a corporation from incorporation to dissolution and thus should be given its due importance.
Alex Koch, Insight legal can be found mentoring startups as part of TorontoStarts community events and workshops. Contact Insight Legal at info@insightlawyers.com and they will help your businesses legal needs.
