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Minute Books & Business Valuation: Why Organization Matters! #shorts

31 Dec 2024 · 1 min

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Bob Gauvreau explains how a company's minute book (whether updated or not) can affect business valuation timing and the due diligence process. He argues that while an outdated or missing minute book typically doesn't change the intrinsic value, it can delay valuation work and raise red flags for buyers by exposing organizational and ownership risks.

Chapters

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 restriction. Has there been turnover that's been happening in there. 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 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. 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. There's potential risk related to audit and challenges that if someone's buying the shares.