Reasons for Keeping Your Company Minute Book Up-to-Date
Under Canadian law every company incorporated in Ontario or Federally is required to hold annual meetings of directors and shareholders to approve the financial statements, appoint new officers or re-appoint existing officers, to review the financial statements, elect new directors or re-elect existing directors and, if necessary, appoint auditors. The directors must call the annual meetings not later than 18 months after the company is incorporated and after that, annual meetings must be held not later than 15 months after the last annual meeting.
The business of annual meetings may be conducted either at actual meetings that the directors and shareholders attend or, by written resolutions in lieu of an actual meeting. If resolutions are prepared, then the directors and shareholders do not actually conduct meetings, instead, written resolutions are prepared concerning all the matters that must be dealt with at the annual meetings and these are signed by all of the directors and voting shareholders. These resolutions are required even if the company has only one director or shareholder.
Here are 4 reasons why your Company minute book needs to be kept up-to-date on a yearly basis:
1. Required by Law
The law in Ontario, being the Business Corporations Act (Ontario) (the “OBCA”) or the law in Canada for federally incorporated companies, being the Canada Business Corporations Act (the “CBCA”) requires you to keep your Company minute book up-to-date.
2. Record of Corporate Events
The minute book leaves a trail that enables owners and lawyers to look back at the decisions and transactions of your Company. The minute book is an important audit backup. With it, one can determine effective dates for tax purposes and establish justification for the accrual of expenses and fixed obligations.
3. Verification of Corporate Authority
As discussed above your Company can act by passing resolutions of by the directors or the shareholders. If the acts of your Company are not properly documented and passed by drafting and signing proper resolutions then such acts may be subject to challenges. Up-to-date records can help you avoid challenges to your Company's authority to take certain actions. These challenges might come from minority shareholders, fellow directors, employees or government agencies. Your Company minutes are important records of the authority granted to the corporate officers and directors to legally act.
4. To Provide Legal Opinions
Your Company minute book establishes the background record needed by your lawyer to support certain legal opinions.
When your Company undertakes a significant transaction, such as the securing of a bank loan, or perhaps the sale of part or all of the Company’s business, or even the purchase of another business, it is often necessary to obtain a legal opinion regarding your Company’s history as well as current authority for such a transaction. Your Company minute book provides evidence that your Company has done everything it is supposed to and that the parties signing the agreements have authority to act.
Click here to proceed.