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In short...

Annual maintenance includes annual resolutions approving financial statements, annual declarations (Enterprise registrar), annual returns (Industry Canada) and updates concerning the company. All of these will be carefully recorded in the Minute Book.

The importance of having updated Minute Books

Reality

Annual maintenance is often neglected for all sorts of reasons. Firstly, it is a tedious task that requires rigour and legal knowledge. Businessmen and women are often too busy with day to day operations and have other concerns! Generally, this necessary task is either done too quickly or entrusted to people without the proper knowledge to do it. Too often, books are forgotten for years and are then completed with fading memories and fragmentary or incomplete information.

Minute Books and registers: a legal obligation

The company is an entity made of paper that lives only because documents create, govern, and allow it to express itself. Therefore, the company must keep a large amount of books and records, namely:

  • A Minute Book including :
    • articles of incorporation;
    • regulations;
    • shareholders agreement;
  • A register of minutes of meetings of shareholders;
  • A register of directors;
  • A register of shares;
  • A register of minutes of meetings of directors.

Shareholders and creditors have the right to access all of these documents, except the register of minutes of meetings of directors.

Tax laws also require the keeping and preservation of documents that go beyond accounting records and invoices.

Why should the Minute Book be up to date?

History

Each corporation has a story. Minute Books in good order are essential in order to retrace decisions, events and changes that occurred during its existence. Without documentation, the history is lost inevitably.

Proof

In the case of a lawsuit against the corporation, the books and ledgers consist of the proof of any fact. The information contained on the Registry of the Registrar of Quebec Enterprises is proof against third parties as of the date inscribed.

It is simpler and less costly to produce a written document to attest a fact rather than having a witness. Various acts and decisions such as bonues, loans, dividends, contracts, agreements or authorisations have great interest in being well documented and recorded.

Risks

Directors and officers are exposed to fines if the ledgers are not well documented and updated, or in the case of false or missing information in the Minute Book.

If they refuse to give access to the Minute Book, they are exposed to judicial issues such as an action for damages and application for injunction. Here is an example :

“A thriving business generating good profits is for sale because its main shareholder suddenly passed away. The company is worth hundreds of thousands of dollars, maybe even millions. The enterprise is bound by a lot of contracts, some of which cannot be found. It also contests an important assessment from the tax authorities. Also, the company is using copyrights that are subject of dispute. The main shareholder, an excellent businessman, was very creative. However, he was a bit messy on formalities. It is normal; after all, he has been very successful, this is undeniable. But potential buyers are surrounded by professionals (accountants, lawyers, tax experts) that have specific questions and want to see resolutions, contracts, documents, etc. The disconsolate widow and children somehow try to understand everything. Minute Books must be reconstituted; the other directors are reluctant to sign documents stating anterior facts. The result is significant costs, delays, offers at lower prices than they would have been if the documents were kept tidy. The succession has much greater losses than everything the company could have paid if all had been done in time.”

Image

For shareholders, investors, banks, professionals, tax experts, a Minute Books is the image of the company, it makes the corporation tangible. Incomplete or inaccurate Minute Books could abort a sale, acquisition, investment, funding or cause fees and delays. In tax matters, absent or incomplete proof will result in fees and/or fines.

An accurate documentation will be reassuring, facilitate the conclusion of agreements and form a protection on different levels.

Modest, but profitable investment

In order to assure that the image of the corporation and its structure is accurate, that the chains of events are clean and exact, the investment of modest amounts each year will yield with time. You will have peace of mind knowing that your documentation supports you, not vice versa!

Annual maintenance of Minute Books makes it able to avoid omissions or errors that may have administrative, tax and financial serious consequences otherwise.

For more information or to benefit from our services, contact us now at 514 908-1489.