For most small business owners, maintaining good corporate records, often referred to as the corporation’s ‘minute books’, is a lot like going to the dentist: no one enjoys doing it but if you put it off, the result is much more painful.
Business owners and managers want to spend money on business growth and development and often procrastinate when it comes to investing in the maintenance of good corporate records, ensuring that they reflect the business’ current state of affairs.
So why spend the money? Here are 3 great reasons:
1. It’s the law.
Whether you are incorporated under federal or provincial laws, you are required to record certain events in your corporate records including changes to officers and directors, share issuances, changes to the corporation’s registered address or place of business. In some cases, these events must not only be recorded but reported to the appropriate level of government.
2. You may want to raise money.
Or sell your business. Or get a loan from the bank. In each of these scenarios, before the transaction can proceed, the other party will likely want to conduct a thorough and detailed review of your company’s minute books. If the minute books are not up to date, it may delay the transaction until such time as any deficiencies can be remedied. In some cases, such as where a shareholder has died or become disconnected from the business, remedying the deficiencies in the corporate record may be difficult or impossible, resulting in further delay or derailment of the proposed transaction.
3. To avoid future litigation.
The corporation’s minute books serve as a record of the decisions taken by the corporation’s management. The minute books will contain a record of what was discussed during the meetings of the corporation’s board of directors and the meetings of its shareholders – indeed, the ‘minutes’ of the meetings. The minute books will also contain copies of the written and oral resolutions taken by the directors and the shareholders, noting who was present when the decision was taken and who held a dissenting view. This type of careful record keeping will go a long way towards settling disputes that may arise subsequently if relations between shareholders become frayed, for example. No director or shareholder can claim a decision was taken without her or his knowledge, where such a detailed record exists.
If any of these reasons resonate with you – and we hope they do! – and you have a sneaking suspicion your company’s corporate records may not be what they ought to be, contact us at firstname.lastname@example.org to discuss how we can assist.