Starting a corporation involves more than simply registering a business and filing taxes. Corporations are subject to ongoing legal record keeping requirements, which are typically maintained in a corporate minute book. Keeping a minute book is an annual obligation that is often overlooked by corporations. Business owners are usually concerned with day-to-day tasks involved in running a business, rather than corporate obligations. Despite often being overlooked, the practice of updating minute books is a crucial part of business ownership.
What is a Minute Book?
A corporate minute book is a collection of documents that record any legal changes a corporation has undergone since its creation. This document may include changes such as financing changes, the opening of a new location, or changes in shareholders. In short, the document serves as the official record of the corporation’s structure by organizing all important documents and records of company decisions in one place. Both the Canada Business Corporations Act (CBCA) and the Ontario Business Corporations Act (OBCA) mandate the accurate and timely maintenance of these records.
Why Should I Have a Minute Book?
Keeping an up-to-date minute book helps demonstrate that a corporation is operating in accordance with local corporate laws.
A properly maintained minute book may be necessary when:
- Selling a business
- Applying for financing
- Bringing on investors
- Completing corporate transactions
In many cases, third parties such as lawyers, lenders, and potential purchasers may request access to corporate records before moving forward with a transaction.
What Happens if a Minute Book is Not Maintained?
Depending on the circumstances, failing to maintain an updated minute book may create administrative or legal challenges for a corporation. For example, outdated records may make it difficult to:
- Reorganize your corporation
- Obtain financing
- Complete the sale of a business
- Confirm ownership of shares
Failing to produce an updated minute book may also lead to
- Fines and penalties
- Legal disputes
- Tax audits
- Director liability
How Often Should a Minute Book Be Updated?
A corporate minute book should generally be updated as significant changes take place within the corporation. Regular meetings with a corporate lawyer can help ensure that the corporation’s records remain accurate and complete
As every corporation is different, seeking legal advice can help business owners better understand their obligations and ensure that their records remain accurate and up to date. A corporate lawyer can help you record changes to your business and ensure that your records comply with legal requirements.