What is a minute book?
Why is it important to maintain a corporate book or business records?
What is included in a minute book and what are the consequences of the minute book is not kept up-to-date?
In this article, we will break down all you need to know about minute books.
Are you ready?
Let’s get started…
What is a minute book
A minute book, corporate minute book or corporate book is an official record of the company’s internal activities and decisions.
Merriam-Webster defines a minute book as “the official written record of the transaction of the stockholders and directors of a corporation”.
The minute book is essentially a corporate binder containing the company’s resolutions, shareholder ledger, articles of incorporation, list of directors, by-laws and all internal corporate documents of the company.
When you first incorporate a company, you must immediately organize all your corporate documents in the minute book to ensure that you maintain clear records of the company.
The minute book will provide details on the company’s history.
Since the company is a legal person acting through its board of directors, it must keep track of the important activities and events in its life and its document its decision-making process.
A physical person can keep a diary of important events in his or her life.
A corporation must keep records of important decisions in its life and demonstrate that those decisions were made in compliance with the corporate governing rules and the law.
The minute book essentially contains the company’s diary.
What are “minutes”
Minutes or meeting minutes represent the documented account of a meeting or a decision.
For example, the company’s board of directors are accountable to make important and strategic decision for the company.
They will generally meet several times a year to discuss the company’s affairs, governance, evaluate how things are going and what should be done next.
The company secretary is in charge of preparing a written account of what was discussed during these meetings and the decisions made.
That’s what we call the meeting “minutes”.
The minutes represent a detailed note of what was discussed and what decisions were made by whom.
Once the meeting minutes are prepared, they are subsequently submitted to each member of the board present at the meeting to approve and confirm its content.
Ultimately, the approved meeting minutes will be placed in the company minute book to keep an account of the company’s decision and decision-making process.
What goes in a minute book
What goes in a minute book and its content is generally standard.
There are some essential documents and information found in the minute book for corporations:
- Articles of incorporation
- Resolution of the board of directors
- Resolution of the shareholders
- Register of directors
- Register of officers
- Register of shareholders
- Shareholder ledger
- Stock transfer ledger
- Subscription agreements
- Corporate registry documents
- Share certificates
- Shareholder agreement
- Option grants
- Credit arrangements
- Changes to company articles or by-laws
The minute book gives you information as to the legal structure of the company, the decisions that were made in the past by the directors and the shareholders, how the company can adopt new important decisions and who are the company stakeholders.
When do you need to show your corporate book
There are many instances when you need to produce your company history and minute book.
Here are some examples of events requiring you to show the minute book for your corporation:
- Due diligence process
- Sale of your company
- Transfer of your business to another person
- Bank financing
- Real estate transaction
- Vehicle purchase
- Seed round financing
- Investor financing
- Initial public offering
- Opening credit line facilities
- For tax accounting purposes
- Company audit
- Dealing with the governmental authorities
In any of the above circumstances, you may be required to show that your company’s history is well-documented and that the investor or financing company is transacting with you based on complete knowledge of your company’s corporate status and history.
If your corporate records book is incomplete or not documented, that can delay your transaction or even compromise it.
So make sure you keep your records up-to-date.
Do I need a minute book
The short answer is yes!
What is the importance of a minute book?
You need a minute book to account for the history of the company.
In a sense, it’s not the actual minute book that is important but all the content that you are required to maintain in it.
In the life of your company, in many instances, you will need to go back to your corporate minutes to provide evidence of past decisions or actions of the company.
For instance, if your company had taken an important line of credit at the bank, it had issued shares in the context of corporate financing or seed round financing or may have bought shares back from certain stockholders, you will need to provide the records in your company minutes to demonstrate that such decisions were made in compliance with the company governing rules and the laws.
If a company neglects its corporate book and fails to keep company minutes relating to its important decisions, it can end up paying a lot of legal fees to recreate the history of the company.
The company may need to pay to document important past decisions and produce evidence that its past decisions were duly approved by the board of directors and company shareholders.
How do you organize a minute book
Organizing a minute book is fundamentally not a complicated process.
Of course, there may be significant differences between the handling of the minute book for a large multi-national versus a local small shop.
So how do you maintain a minute book?
Your minute book should minimally contain:
- Your articles of incorporation or certificate of incorporation along with all its amendments
- Your company bylaws along with all its amendments
- The register of your board of directors
- The resolution and minutes of the initial organizational meeting
- Minutes of all board of director meetings
- Shareholder resolutions showing all shareholder approvals
- Company’s stockholders and the share register
Every company can decide what information to keep in their minute book.
Often, any information that can potentially affect the corporation as an entity should be kept in the corporate book.
What happens if my minute book is not up-to-date
You may be faced with important consequences if your company does not have an up-to-date and well-documented book of records.
Often, companies see an important transaction delayed or even derailed as a result of the inadequacy of their minute book.
For example, you’ve worked hard to find an investor to invest in your company.
You need the investment funds badly.
Oops, there is a problem!
The investor does not want to invest until your company can properly show and document past decisions.
The investor wants to make sure that the company has not violated anyone’s rights in the past, its decisions complied with the law and the company regulations.
Without comfort that the company’s operations were regular, the investor sees risk.
Here is a short list of instances when a company can face potential consequences of failing to maintain its minute book:
- Default in mandatory regulatory filings
- Exposure to legal penalties for regulatory non-compliance
- More extensive audit in the context of a sale transaction
- Board of directors subject to a lawsuit depending on the nature of the undocumented decision
- Possible shareholder lawsuit for undocumented decisions impacting stockholder rights
- Former directors becoming accountable for the actions of new directors if the change was not documented
- Impossibility to recreate the history of the company to the satisfaction of an important investor
The intensity of the consequences can vary depending on the nature of the decision, size of the company, possible violations of the law and the number of stakeholders potentially affected by the company’s decisions.
It’s best to consult with a corporate lawyer to ensure you maintain your company minute book properly to avoid any unnecessary risk.
The company minute book is the official record of the company’s history since it was incorporated.
Companies are required to keep a detailed record of corporate documents, decisions and transactions.
Typically, the corporate book at the company minutes is held at the company’s head office.
The company book of minutes includes:
- Articles of incorporation
- Register of directors and officers
- Resolutions of the board of direction
- Resolution of the shareholders
- Board minutes
- Register of shareholders
- Register of share transfers
- Regulatory filing documents
If you properly maintain your company’s minute book and ensure that its content is up-to-date, you will effectively minimize risk to the company and the directors running the company.
The board of directors will have the comfort that their decisions were well-documented and kept in the company records.
The shareholders have the assurance that they approved any resolution of the board of directors as it was needed by law.
Third-parties like banks, investors, governments, auditors or lawyers can quickly see a detailed history of the company and have the comfort that the company’s past decisions and activities were compliant with its internal rules and the law.
The proper maintenance of the minute is crucial for a company to document its history.
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