A Minute Book really is necessary for your business. Even if the company’s only employee is you, it’s still required by law.
In Canada, every corporation must keep an official record of documents and activities, which is referred to as a “Minute Book”. To save yourself money and aggravation, set up your minute book as soon as possible and maintain it as you go.
Why Does My Company Need a Minute Book?
Your corporation is a separate legal entity that must observe certain obligations, like properly maintaining corporate records, under the Canada Business Corporations Act (CBCA) and the Ontario Business Corporations Act (OBCA).
Without a corporate Minute Book and its Company Formation Documents, your company doesn’t actually have owners. Get that? No official owners of your business. You will be unable to issue dividends, obtain a loan, or sell the company, because in each of those instances, the Minute Book’s documents are looked at to start a transaction.
What are Minutes?
A person designated as ‘secretary’ is responsible for making sure written notes are kept at a board meeting. These notes are called “minutes” and cover all discussions, resolutions, and votes. At the next board meeting, the previous meetings minutes are reviewed and approved. The secretary then signs the minutes and they go into the Minute Book as an official record.
What Documents are kept in a Minute Book?
A Minute Book is traditionally a binder with an index and sections which contain relevant and important documents. The following documents must be included in a company’s Minute Book:
- Certificate of Incorporation (proof of the company’s business registration)
- Corporate Bylaws (set out obligations and rules for shareholders, officers and directors)
- Organizational Resolutions (decisions about the organization of the company such as financial year end, bank of choice, etc.)
- Shareholder Ledger (identifies each shareholder, how many shares they own and when they acquired them)
- Shareholder, Director & Officer Registers (a log of all of the directors, officers and shareholders of the corporation since incorporation)
- Share Certificates (certificate issued to a shareholder certifying that they are the registered owner of shares in the company)
- Shareholders’ Agreement (a contract that structures the relationship between the shareholders, as well as management)
Other documents that may be found in a company’s Minute Book:
- Minutes, Shareholders Annual Meeting
- Minutes, Regular Board Meetings
- Shares Transfer Form
- Annual Returns
- Completed income tax and GST/HST returns and notice of assessments
Situations When a Company Would Need the Minute Book
Although keeping up-to-date and accurate corporate records is probably not at the top of the to-do lists of small business owners, not being methodical about corporate record-keeping can cause major headaches in a variety of situations, including:
- Hiring an accountant to prepare tax returns? They will require your Minute Book to prepare your financial statements.
- Before agreeing to loan money, a bank might request to see the Minute Book to confirm the company structure. If you don’t have one, you will have no ability to secure funding for loans or investments.
- Want to pay yourself dividends? The CRA will ask to inspect your Minute Book and if it’s not up to date, it’s likely that the CRA will consider that those dividends income, and you pay tax on them.
- Loaned money to the corporation? The CRA will ask to see the Minute Book. If it doesn’t show the loan made and repaid, the company will not be able to deduct it as an expense, and you are most likely going to be taxed and penalized.
- Buying a company car? The government office may want to see the Minute Book before agreeing to put the car in the company’s name.
- If the company is ever audited, the government will ask to see the Minute Book and if you don’t have one, you will encounter major delays as well as government penalties
- Want to sell your company in the future? The buyer’s lawyer will probably ask to see a copy of the Minute Book.
- If a business associate leaves the company with way more capital than he brought in and there’s no Minute Book with meetings and approvals being documented properly? You will not be able to prove the shady activity.
Your company’s Minute Book may be requested for a variety of reasons by government agencies, lawyers, your accountant or any company directors and shareholders. If you don’t have one already set up, then—in addition to your stress levels—the cost of having one set up and documented increases.
Certain returns and filings have to be done in regards to a new incorporation, on an annual basis and when there are any changes in addresses, directors and officers. By law these must be documented and filed with the government.
Storing a Corporate Minute Book
Your company must keep this big bulky binder of corporate records at the office, or at your lawyer’s office (for a fee, of course). If you are comfortable with the Cloud, many law firms in Ontario now create virtual corporate Minute Books for easy client access to information. In fact, more and more law firms are beginning to operate paperless legal practices, including the management of electronic Minute Books.
Corporate Records management software’s are specifically made for law firms to share corporate records with clients. They have been specially designed to generate and maintain all minute book documents including generate all Organization documents, elect/resign Officers/Directors, issue/transfer shares, amalgamate companies, as well as form and manage Partnerships. For companies that already have a hard copy Minute Book, they will convert it to a digital file and maintain additions to the digital file as and when new corporate resolutions are passed. A cloud-based system means that you would not have to go to your lawyer’s office to sign resolutions or update your corporate minutes. You can sign resolutions online, with a digital signature, which makes managing and updating your corporate Minute Book easier and cost-effective.
In conclusion, the sooner you have a corporate Minute Book, the more money your business will save going forward. A corporate Minute Book allows the reader to understand the structure of a business and how it handles its business matters. Think of it as the history of the corporation in a binder. Keep in mind that your company’s bookkeeper can help with quality control, but they cannot create the initial records for the Minute Book. Maintaining your Minute Book doesn’t have to be a chore, simply keep it current by making sure it is updated every time there is a new document that belongs there.