What is a minute book and why do you need one?
In our Business Structures series, we discussed Corporations and the numerous advantages this business structure offers to both new businesses and established businesses. A Corporation is a separate legal entity that can perform many independent functions, such as entering contracts, owning property and suing for legal performance.
Due to the complexity of this business structure, it is very important to keep track of business activities, business ownership through shares, and confirming the approval of various key business decisions, through an important document known as the minute book. In our post today, we would examine the minute book and why it is important for every business corporation to have one.
What is a minute book?
A minute book can simply be defined as a record of a corporation’s activities or transactions. By virtue of Ontario's Business Corporations Act and the Canada Business Corporations Act, it is a legal obligation for every corporation to maintain corporate records through a minute book.
What is contained in the minute book?
The minute book is a very important record and contains, at a minimum, the following documents:
By-laws and amendments that guide the corporation
A register of Directors
A shares and securities register
Minutes of meetings
Copies of all notices
Resolutions of shareholders and shareholder agreements
The minute book is also important in keeping track of any changes in the corporation, which may include:
Change in the registered office address
Changes regarding directors and other officers
Changes in the number of shares
Loans and mortgages obtained
Details on financial statements and other financial transactions
Why is it important to keep a minute book?
Apart from the fact that it is a legal obligation, it is beneficial for corporations to keep a minute book because it makes it easy to provide updated records to whoever may need it at that point in time. This could include new or existing shareholders, creditors, buyers or even banks, when trying to obtain a loan.
Consequences of not having a minute book.
Failure to comply with the requirement of keeping a minute book can incur several consequences for a company, including:
Refusal of loans from banks
More time and higher legal fees to update past transactions
Disruption of the corporation’s business.
Where can a minute book be kept?
Generally, a minute book should be kept at a corporation’s registered office or some other location as agreed by the Directors. Due to the sensitive information contained in a minute book, it is advisable to let a lawyer prepare and keep your corporation’s minute book. This is to ensure that the information contained in it is protected from third parties, and ensure it is adequately updated, in accordance with the law.
For any questions or advice on the specific documents needed for your business structure, kindly book a free consultation with Northview Law by following this link, or contact us at 416-639-7639. We look forward to hearing from you soon.