What is a minute book?
If you have incorporated or are preparing to do so, you have probably heard that you will need to maintain and keep all your corporate documents, but what does that actually mean and why is it important?
As a corporate lawyer, I often get asked by my clients why I always recommend they maintain their minute book. In many instances, I contact them to advise that their annual resolutions are not up to date. It is not a matter of creating paperwork for the sake of it but ensuring that my client is in compliance with the law. Furthermore, updated records mean less risk and increased efficiency should you decide to sell your business or the Canada Revenue Agency (CRA) decides to audit.
Whether you are an Ontario corporation or a federal corporation, both the Business Corporations Act (Ontario) (the OBCA) and Canada Business Corporations Act (the CBCA) require that a corporation maintain their corporate records.
Corporate records include articles of incorporation, bylaws, organizing resolutions, annual resolutions, change resolutions, agreements, master business licences, forms filed with the government, debt obligations, the ledgers and registers of directors, officers and shareholders and even share certificates.
For Ontario corporations, the OBCA was recently amended to include a register of real property owned in Ontario as a corporate record. That is right. If your corporation owns any real property, you need to keep a record of it in the minute book.
Corporate records also refer to accounting records and the minutes of meetings. With regard to meetings, the OBCA and CBCA specifically state that meetings should be held within 15 months of the previous meeting and not more than six months after the fiscal year-end.
And in the event the CRA should audit, an officer will want to see all accounting records and resolutions authorizing dividends and management bonuses to ensure the corporation, directors and shareholders are being taxed accordingly.
Seems like a lot doesn’t it? Imagine the work and related cost that goes into updating a minute book untouched for over 10 or even 15 years. A poorly maintained minute book means more time and expense to you as a business owner.
While it is not necessary to keep everything, it is important to consult with your lawyer to know that you have the necessary records in your minute book. A common oversight on the part of many business owners is not to update the minute book when the following change events occur, among others:
- Change in the registered head office address;
- Change in the address for service of a director or officer;
- Resigning directors or officers; and
- New directors or officers.
After all is said and done, an updated minute book means you are compliant and have saved yourself the expense of a significant update on your minute book in preparation for a sale or audit.