The Minute Book Police

What is a corporate records book and why do you need it?
Woodbridge corporate and securities lawyer, Joseph Chiummiento, of Core Lawyers, provides insight on the purpose of a corporate minute book, and why it is important to maintain it.

As of June 2016 is was reported that Canada has 1,143,630 small to medium sized businesses with 407,175 of them calling Ontario their home. (source: SME Research and Statistics). What percentage of those companies have a minute book or a corporate records book? What percentage of those are up-to-date? – My guess is less than 50% are updated annually. And why should they, you might think.

Do I Need a Minute Book?

Yes you need a minute book, and yes it should be updated annually. Here is why:
In Ontario, the main legislation governing businesses is the Business Corporations Act (Ontario), and if you have a federally incorporated company the governing legislation is the Canada Business Corporations Act. The Ontario legislation includes section 140 which says:

“Records, duties of corporation
140. (1) A corporation shall prepare and maintain, at its registered office or at such other place in Ontario designated by the directors,

(a) the articles and the by-laws and all amendments thereto, and a copy of any unanimous shareholder agreement known to the directors;
(b) minutes of meetings and resolutions of shareholders;
(c) a register of directors in which are set out the names and residence addresses, while directors, including the street and number, if any, of all persons who are or have been directors of the corporation with the several dates on which each became or ceased to be a director; and
(d) a securities register complying with section 141. R.S.O. 1990, c. B.16, s. 140 (1).”

Section 141 of the Ontario legislation deals with recording the shareholders and all shares issued by the corporation:

“Securities register
141. (1) A corporation shall prepare and maintain at its registered office, or at any other place in Ontario designated by the directors, a securities register in which it records the securities issued by it in registered form, showing with respect to each class or series of securities,

(a) the names, alphabetically arranged of persons who,
(i) are or have been within six years registered as shareholders of the corporation, the address including the street and number, if any, of every such person while a holder, and the number and class of shares registered in the name of such holder,
(ii) are or have been within six years registered as holders of debt obligations of the corporation, the address including the street and number, if any, of every such person while a holder, and the class or series and principal amount of the debt obligations registered in the name of such holder, or
(iii) are or have been within six years registered as holders of warrants of the corporation, other than warrants exercisable within one year from the date of issue, the address including the street and number, if any, of every such person while a registered holder, and the class or series and number of warrants registered in the name of such holder; and
(b) the date and particulars of the issue of each security and warrant. R.S.O. 1990, c. B.16, s. 141 (1).
Register of transfers
(2) A corporation shall cause to be kept a register of transfers in which all transfers of securities issued by the corporation in registered form and the date and other particulars of each transfer shall be set out. R.S.O. 1990, c. B.16, s. 141 (2).”

Similar provisions exist under section 20 of the Canada Business Corporations Act relating to the records of a federal corporation.

How do I Update My Minute Book?

Now that we know the “why” you need to maintain accurate records, the question is what is normally done to update the minute book every year.

Your lawyer should help you prepare:

1. Shareholder Annual Resolutions (approving financial statements, exempting the company from audit requirements, electing directors and re-affirming various acts of the past year)
2. Directors Annual Resolutions (approving financial statements, appointing officers, declaring management bonuses or confirming dividend details).

Are There Minute Book Police?

There are no minute police out there writing tickets for companies that don’t have their minute books up to date, however, the Ministry of Consumer and Business Services is able to issue a fine for failing to have up to date records. That said, anyone who has undergone a CRA Audit for HST, Payroll, or Corporate Tax will know the auditor normally asks to see your minute book, as do WSIB auditors in Ontario.

Further in the event of death or divorce, the minute book becomes key to determining ownership, valuations and in arranging affairs properly in both those situations. To “fix” your minute book in a rush, without the ability to have a signature (ie. from a deceased person or divorced spouse) or in reaction to some event will always cost more than keeping it up to date annually.

If you want find out more about how to get your company’s minute book updated annually, please feel free to contact me. Keeping a minute book is a small task, but it will give you peace of mind.

Direct Line: 905.851.8180 ext. 2

Email: joseph@corelawyers.ca