Bob Gauvreau explains how a company's minute book (whether updated or not) can affect business valuation timelines and the due diligence process. He states that minute books typically do not change the company’s valuation directly but can delay valuation completion if ownership, director roles, rights, or turnover aren’t well documented. For share sales, an outdated or empty minute book raises risk concerns for buyers; Gauvreau recommends keeping minute books organized and updated annually, especially before a sale.
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One question that's asked is, will a minute book, updated or not updated, impact a business valuation or the due diligence process? And the answer is, it depends. Typically, from a valuation standpoint, it won't impact the value of the company. It may delay the valuation completion because some of the valuation is going to be looking at who the shareholders are, what sort of rights restrictions and anything like that that's included in the Minutebook, who the directors are, what the authority is, has there been turnover that's been happening in there. So if you don't have that all well documented, it could delay that process. The other side of it, though, from a due diligence, if you're selling the shares of your business, which you likely want to for tax purposes, if the owner is coming in and looking to buy the shares, the Minutebook documents all of the ownership transactions and exposes any sort of risk areas. So if you don't have your minute book up to date and there's nothing documented in there, a potential buyer looks at this and says, these guys don't know what they're doing. This business isn't well organized. I don't want to assume the risk of the fact that they haven't documented anything. You know, there's potential risks related to audit and, you know, challenges that if someone's buying the shares, they're assuming all of that risk. So if you're looking to sell at all, I would highly recommend making sure that these documents are all up to date. In fact, I would highly recommend you do it every single year so you never have to worry about it. Keep it organized and keep them up to date.
