Spotlight On: Maintaining Your Corporate Minute Book

Keeping your minute book up to date is a legal requirement and will set you up for success down the road

As a business owner, your daily priorities may be centred around operations, customer service, and growth. But amid the hustle of entrepreneurship, one important aspect often gets overlooked: maintaining your corporate minute book.

The Importance of Good Records

Corporations are required by law to maintain accurate and current records. Failure to keep your minute book up to date can result in penalties, fines, or even the dissolution of your company. In the event of a legal audit or dispute, an outdated or incomplete minute book may expose your business – and its directors – to unnecessary risk.

Corporations can have an electronic minute book, a physical minute book, or both. Having an online version makes it easy to share the records with interested parties, including your accountant and other stakeholders, but sometimes maintaining physical records is important, for example, when physical share certificates have been issued.

During the onboarding of a client, our first step is to review the corporate minute book. Any deficiencies we find can usually be rectified by having all of the directors and shareholders sign a rectification resolution. The corporate records should also be reviewed to confirm that they align with the public record and the company’s tax filings.

Annual Resolutions

Each of the Canada Business Corporations Act (the “CBCA”) and the Business Corporations Act (Ontario) (the “OBCA”) set out certain annual requirements for directors and shareholders. Other jurisdictions in Canada have similar requirements. Where a corporation has more than 50 shareholders or it is a public company, additional corporate and securities requirements apply.

Annual General Meetings

Corporations are required by law to hold at least one annual general meeting of the shareholders (commonly referred to as an “AGM”). This can be done by holding a physical meeting or, where it is a closely held corporation, by having all of the directors and shareholders sign written resolutions.

The corporate statutes provide for a deadline for holding the AGM. Under the CBCA and the OBCA, the AGM (or written resolutions in lieu) generally must be held within six months of the corporation’s fiscal year end.

Election of Directors

Directors are elected by the shareholders. Directors typically serve for a term that ends at the next AGM (at which point they may be re-elected). Any time a new director wants to join the board, a shareholder resolution is required, although it is possible for the board to fill a vacancy between AGMs.

Being a director is a serious commitment; see our blog “So You Want to be a Director”.

Appointment of Officers

In your annual resolutions you may also wish to confirm the identity of the officers and any authorized signatories of the corporation.

Presentation of Financial Statements

Annual financial statements must be provided to each shareholder. Typically, these statements are provided along with the notice of meeting for an AGM. The board of directors must approve the financial statements; the shareholders receive the financial statements but do not actually vote on them.

Audited Financial Statements

The CBCA and OBCA require that a corporation’s financial statements be audited. Preparing audited financial statements can be costly and resource intensive.

The corporate statutes provide that the shareholders may waive the requirement for the audit (the corporation would therefore provide “reviewed” financial statements rather than “audited” financial statements to the shareholders). All shareholders, including non-voting shareholders, must agree to this waiver in respect of each year.

Public Filings

Most corporations are required to file corporate annual returns each year. The requirements vary based on jurisdiction but these filings typically capture the most up to date information for a corporation including the identity of the directors, and they also serve to notify the governing agency that a corporation is still active.

In most jurisdictions, failure to file a corporate annual filing could result in financial penalties or even dissolution. For example, federal corporations who fail to file their corporate annual return and information relating to individuals with significant control with Corporations Canada for two consecutive years can face involuntary dissolution.

In order to avoid these penalties, you should be sure to file the corporate annual return each year within the prescribed time period.

Ledgers and Registers

Standard Registers

The registers and ledgers of the minute book should always be up to date.  They can provide, at a quick glance, information as to who the directors, officers and shareholders of the corporation are. The ledgers also record the dates for a variety of key transactions (including share redemptions, transfers, and issuances).

Additional Registers

Certain statutes, including the OBCA and CBCA, require private corporations to maintain a register that identifies “individuals with significant control” in addition to the standard registers and ledgers.

At least once every financial year, reasonable steps must be taken to ensure that a privately held corporation has identified all individuals with significant control, and that the register is accurate and complete.

Ontario corporations are also required to prepare and maintain at their registered offices a register of their ownership interests in land in Ontario. In addition, they are required to keep with such register a copy of the deeds, transfers or similar documents that contain the prescribed details.

Key Take-Aways

• Keeping your minute book up to date is not only good governance, but it also prepares you in the event of inquiries from regulators such as the Canada Revenue Agency. It may also facilitate the work of your accountants each year.
• Even a holding corporation with a single shareholder should keep accurate minute book records to avoid the risk of dissolution and penalties, and to simplify matters if the shareholder unexpectedly passes away.
• An accurate and up to date minute book is necessary before bringing on new investors or selling the business.

Our Corporate Services

We are dedicated to providing premium corporate and entity management services to our clients. We work with companies of all sizes and at all stages of their life cycle, assisting with incorporations, business name registrations, maintenance of the minute books and more.

We keep and maintain minute books and records for over 1,000 corporations and partnerships. All records are fully scanned and made available to our clients through our online portal.

Feel free to contact our team and we would be delighted to assist.