Bob Gauvreau explains why corporate minute books matter legally and practically. Most companies either don't have one or let it lapse, but you need it for audits, due diligence, and sales. Keep records of resolutions, director appointments, share issuances, and AGM minutes updated annually.
Chapters
One of the questions I get asked is around Minutebooks and what are some of the greatest risks and errors associated with Minutebooks and what can we do as a business owner to avoid those mistakes? And the biggest mistake that happens is either one, the minute book doesn't exist at all, it was never created, or two, it's not up to date, it doesn't have all of the updated resolutions that are necessary. And I'll talk about that in one second. But typically, what happens if individuals go and incorporate their own business? And they might do so because they want to save cost to get this established and ready to roll, which is totally fine. That's one part of making sure that the incorporation is set up properly. The second is there has to be an initial return done, there has to be a minute book set up, and there have to be resolutions that show who the board of directors are, the shares that are issued, the owners of the corporation, and if there's multiple shareholders that are involved, you'll likely need a shareholders agreement as well, which we would strongly recommend, because a shareholders agreement really establishes the rules and parameters in which multiple people work together and share in the growth and income of the business. So if you have a partner or another shareholder, getting that sort of partner shareholder agreement in place is very, very important. So back to the minutebooks. If you don't have one established, it's actually a requirement under the corporations, the Business Corporations act of Canada and in your province to make sure that these are up to date. If the government is doing any sort of audit, it's going to be one of the first things that they ask for is an up to date minute book. And it becomes really difficult to retroactively come back and recreate everything that happens. It can be done, but it becomes a lot of work at that point. I highly recommend as part of this that you get one, you get your minute book established, all your resolutions are up to date from all of the historical past. And then you update your minutebook every single year. So some things that need to be included, you know, your dividends that happen when your annual general meetings have happened, when bonuses have taken place, any minutes of the board of directors, reappointment of directors that are in there, any sort of change in share ownership, any sort of acquisitions or major capital contributions, all of these things should be documented within your Minutebook. So you should do these every single year so that if anyone comes looking for it, even if you go to sell or if someone is buying, the buyer and seller want to have access to these as well to make sure that there's no legal issues. It's part of the due diligence process. So make sure these are up to date so that you're always ready, should a government agency or you wish to sell your entity, that everything is always up to speed. Because if it's not, it really pulls into question the validity of your business entity. It pulls into question your integrity to a certain extent as well, and your legitimacy as a business owner. So let's get them done. It's not expensive to keep them up to date. Certainly our team can help with that. But making sure that they're done is one of the biggest problems that we see with managing many business owners.
