Compliant minute book important in case of sale, audit
A corporate minute book should be complete and up to date in order to avoid problems further down the road, says Toronto business lawyer Anton Katz.
“A minute book is a record book kept by a corporation and contains the articles of incorporation, bylaws, organizing resolutions, annual resolutions, as well as change resolutions,” says Katz. “They also contain copies of important agreements such as shareholder agreements, as well as contain directors, officers and shareholders, ledgers and registers.
“Lastly, they may contain the share certificate themselves,” he says.
He notes, in addition to the above items, it is required to pair directors’ resolutions declaring dividend and management bonuses or salaries.
It’s crucial that minute books are kept current in the event a business is sold, Katz tells AdvocateDaily.com.
“A prospective purchaser will conduct due diligence and as part of that process, their lawyer will want to review the minute book so as to ensure that it is up to date and compliant with the provisions of either the Ontario or federal Business Corporations Act.”
He adds up-to-date and compliant minute books are also key in the event of an audit — either by the Canada Revenue Agency (CRA) or other governmental entities such as the Workplace Safety and Insurance Board (WSIB).
“It’s important for the minute book to be current and accurate and contain the documents referred to above. With respect to a CRA audit, of particular importance will be resolutions declaring dividends or bonuses. Meanwhile, in the event of a WSIB audit, they will be interested in knowing who the shareholders are and what portion they hold.”
Katz warns that while it is possible to incorporate companies online and prepare the above documents on your own, it’s not advised.
“In my experience, if it’s not done correctly or completely at the outset, the cost of undoing or rectifying the documents exceeds the cost of having them done by an experienced lawyer in the first place,” he says.