Why Every Business Needs A Corporate Minute Book
Every corporation is required by law to have a corporate minute book. Whether in an official, leather-bound binder or a simple binder, a corporate minute book is absolutely essential to keeping your corporation in compliance with the law.
Too often, businesses who have incorporated online have only the articles of incorporation, which is just one of many elements required to be kept in a corporate minute book.
What records are required under legislations to be kept in a corporate minute book?
- Corporate by laws
- Organizational resolutions that organize the corporation. These elect the director and officers, and issues shareholders to the shareholders, along with other important information, such the fiscal year end and names of the corporate bank, solicitor, and corporate accountant. Without organizational resolutions, the corporation doesn’t have shareholders. Many people mistakenly believe that a corporation’s shareholders are indicated in the Articles of Incorporation, but that is not the case. The Articles of Incorporation only indicates who the first directors are, which, by law, have to be replaced with the names of the official directors, through organizational resolutions, within 15 months of incorporation.
- Ledger book and registers: This provides a listing of directors, officers, and shareholders, as well as all real property held by the corporation.
- Share certificates: Physical stock certificates that provide evidence for the shareholders’ holding of shares in the corporation, unless the corporation has resolved to have uncertificated shares.
- The Form 1 initial return and all other subsequent Form 1s.
- A shareholders agreement is electively included in a corporate minute book, this being the only document that is not required under the legislation.
- Annual resolutions, which are updated annually
Updating the Minute Book with Annual Resolutions
Along with the organizational resolutions, the corporate minute book needs to be updated with Annual Resolutions. Annual resolutions, colloquially referred to “annuals,” are resolutions by directors and shareholders that confirm that they have reviewed and approved the financial statements that were prepared by the accountant of the corporation. Annual resolutions are typically prepared by a lawyer and signed by the directors and shareholders each year. This process is referred to “updating the minute book,” which must be done on an annual basis.
If there are changes to the corporation, such as a change of directors, officers or shareholders, this also must be added to the corporate minute book with annual resolutions setting out those changes.
Why Having a Corporate Minute Book Is Important
A corporate minute book is required by law, although there is no regulatory body that ensures/polices that you are keeping a corporate minute book, it is required if you want to be in compliance with the law.
- Selling your company: Having a corporate minute book becomes important when you want to sell your company. The buyer will request the corporate minute book. If you don’t have it, this indicates that there may be other skeletons that you hiding and will likely derail the sale. Furthermore, if you want to sell the share the shares of your company and do not have a corporate minute book, you will not be able to obtain the lifetime capital gains exemption.
- CRA Audit: When the CRA conducts a general audit, the CRA will request the corporate minute book. if you don’t have it, they will draw a negative inference with regard to your company’s legal compliance in general.
I Don’t Have a Corporate Minute Book- What do I do?
If you don’t have a corporate minute book, don’t worry; there is a mechanism where a lawyer can prepare one for you with a statutory declaration that serves as evidence that one was not prepared or was lost. With the statutory declaration, a lawyer can prepare a corporate minute book and can help to keep it up to date in compliance with the law.
Contact a lawyer at Kalfa Law today if you are in need of preparing a corporate minute book or updating a delinquent one. We are here to help your business succeed!
-Shira Kalfa, BA, JD, Partner and Founder
Shira Kalfa is the founding partner of Kalfa Law. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax Foundation, Women’s Law Association of Ontario, and the Toronto Jewish Law Society.
© Kalfa Law 2021