What is Minute Book? Does my Corporation Need One?
Author: Lidia Imbrogno, BA, JD
At Lexcor Business Lawyers LLP, our trademark – Strictly Business® – means that our practice is restricted to business law. That being so, we often facilitate the incorporation of new businesses as well as other business structures such as sole proprietorships or partnerships moving to incorporation.
Frequently, when we ask a new client to see their minute book we are informed that their corporation either doesn’t have one, or that the existing minute book has not been updated since incorporation. Both situations can have adverse consequences. Below, we explain the requirement to have and maintain a minute book, and the benefits of doing so.
So, What is a Minute Book Exactly?
A corporation’s minute book operates as the formal record of the corporation’s activities. It may be in the form of a large binder, or (as we offer), a virtual minute book where you may view your documents online at any time. A properly maintained minute book should document all relevant corporate transactions that involve the corporation.
A minute book contains:
Articles of Incorporation (and any other Articles of the corporation);
By-laws of the corporation;
Minutes of the directors’ and shareholders’ meetings/resolutions (records of decisions);
Directors’ and officer’s registers;
Shareholder register and ledgers;
Share transfer register;
Share certificates or notices of uncertificated security;
A copy of all government forms filed;
Real property register (if applicable); and
Shareholders’ agreement (if applicable).
I Don’t Have a Minute Book
If you don’t have a minute book it likely means that important steps like issuing shares and enacting by-laws were never completed. In other words, the corporation was never organized. For more about what it means to organize a corporation and why it’s important for you and your business visit our post "Filing Articles of Incorporation is Just the Tip of the Iceberg... What else is in your Minute Book?".
Do I Really Need a Minute Book?
It’s a common misconception that only large corporations need to maintain corporate records. In reality, ALL provincial and federal corporations are required by law to organize and maintain a minute book pursuant to the Business Corporations Act (Ontario) (OBCA) and the Canada Business Corporations Act (CBCA). Both the OBCA and CBCA provide for the possibility of hefty fines for directors and corporations who fail to keep proper records.
Canada Revenue Agency may also require a review of a corporation’s minute book in the context of a tax audit, particularly if dividends have been declared or paid.
Selling Shares in Your Business: Not having shares issued will limit your ability to sell your business in the future and in the same vein, can impede on your accountant’s ability to assist you in taking advantage of a certain exemptions to capital gains tax in the Income Tax Act (Canada) on the sale of the business.
Due Diligence. In the context of a sale an interested purchaser will likely ask to see the corporate minute book. Not having a trail of corporate records may act as a red flag that the business itself is not being operated as smoothly as advertised.
Liability Protection: If shares were not issued there may be an argument that the business owner’s limited liability under the OBCA or CBCA is in question.
Expanding Your Business: Bringing on a new shareholder would require that the minute book be up-to-date.
If you are an entrepreneur considering incorporation for your business, it’s important to know that securing and maintaining a minute book is a legislated expectation of incorporating. For established corporations, it’s never too late to enact proper record keeping procedures.
If you require assistance with incorporating your business, organizing your corporation, updating your minute book, or any other business law matter, do not hesitate to contact a lawyer at Lexcor Business Lawyers LLP.