I tend to meet new clients that have incorporated their business but are unaware of their corporate law responsibilities. Although incorporating is usually the most preferable business structure, one must remember that once you incorporate, you have entered a new domain of laws and obligations.

One such obligation is a minute book. Under Section 20 of the Canada Business Corporations Act and Section 140 of the Ontario Business Corporations Act, a corporation must keep certain corporate records at its registered office. A minute book is a binder which includes documents that are relevant to the creation, organization, and ongoing business affairs of your corporation. Upon request, a corporation’s shareholders and creditors (such as banks, lenders or suppliers) may examine the following records which must be included in your minute book when your company is incorporated:

  • Articles of Incorporation, by-laws and their amendments and any unanimous shareholder agreements;
  • minutes of meetings and resolutions of shareholders;
  • copies of certain forms that have been filed, for example Initial Registered Office Address and First Board of Directors, Change of Registered Office Address and Changes Regarding Directors; and
  • a share register showing the names and addresses of all shareholders and details of shares held.

Other parties that may request to view your minute book are the Canada Revenue Agency, your accountant, and a potential purchaser of your business.

Ongoing Maintenance:

Your obligations under corporate law do not end once your minute book has been created during the incorporation process. Yearly and ongoing maintenance of your minute book should include the following:

  • appointment and resignation of directors or officers
  • appointment of accountants and/or auditors (if applicable)
  • approval of financial statements
  • recording dividends declared and paid to shareholders
  • recording the existence of shareholder loans
  • the approval of transactional business for the past year
  • recording of share transfers and shareholders
  • changes in corporate structure, ownership, articles, by-laws, etc.

The Purchase and Sale of your business

When negotiating the sale of your business, the buyer’s lawyer will want to examine the minute book to see who the directors and officers are (to ensure that the person signing the share purchase agreement has the requisite authority to do so). The purchaser will also want to confirm who the shareholders are, what class of shares they own, and how many shares have been issued.

If the minute book has to be updated going back several years, the professional fees associated with piecing together your documents and information will most likely be more costly than if you maintain your minute book on an ongoing basis.

Consequences of not having a Minute Book

In addition to increased professional fees, although rare, government agencies may fine your corporation for not abiding by the law.

At the same time, certain transactions you make during the year can be scrutinized, questioned and even worse, amended in a manner which could have negative financial and tax implications. For example, if your corporation did not accurately record declared and paid dividends to shareholders during the year, the Canada Revenue Agency would have the ability to challenge the dividend characterization and re-assess the payment as a regular salary. This would result in negative tax implications and would require further payments such as the Canada Pension Plan. Having a board resolution in your minute book approving the dividend would help provide evidence of how the payment should be characterized.