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What Is A Minute Book And Why Do All Corporations Need One?

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What Is A Minute Book And Why Do All Corporations Need One?

A corporation is a separate legal entity from an individual, meaning that its assets and liabilities are separate. A company that is incorporated may have a lower tax rate and more flexible tax restrictions. Individuals and companies should also consult an accountant prior to setting up a corporation in Canada to ensure that it is structured to optimize for taxes.

What is a Minute Book?

There are some records of the companies that need to be maintained by law. In Canada, every corporation is legally obligated to maintain records of its activities including any meetings by the directors or shareholders of the company, change in address or change in office, shareholders or directors, as well as articles of incorporation. Sometimes a corporate lawyer is hired to maintain these records in a book or binder called the Minute Book. It serves as a vehicle for the organization and storage of all the corporation’s documents. Although it is not legally mandatory to maintain a Corporate Minute Book, it is the suggested method to maintain the records that are required by law. It can be maintained both physically or digitally.

While it is mainly for your reference, a corporate minute book is also subjected to governmental review or audit.  The Canada Revenue Agency can request to see the minute book during an audit of various tax accounts.

What is included in a Minute Book?

Typically, a minute book consists of the following records:

1. Articles of Incorporation

These are the legal documents submitted to the Provincial and or Federal Enterprise Registries that include the following:

a. The Name of the Corporation

b. Full address of the registered head office

c. The number of directors

d. Full names and addresses of the board of directors

e. Full names and addresses of the shareholders

f. Description of the share capital (share class, voting rights etc.)

g. Restrictions on the transfer of securities or shares

h. Limits on the activities of the corporation

i. Other provisions

j. Full name and signature of the founder of the business

2. General By-Law

The general by law of the corporation will put forth how it will operate and what procedure it will follow. For example, some of the procedures that are outlines are:

a. The attendance required in the board of directors and shareholders meeting for voting

b. The procedure involved in calling directors and shareholders for a meeting

c. The number of votes required to approve an item at the meeting of the board of directors or shareholders meeting

d. The director and officer authorized to sign on behalf of the corporation and who can legally bind the corporation

e. The process involved with the removal of an officer from their role

f. Replacing an officer or a director

g. Appointment of a new officer or director

h. Who can borrow money upon credit of the corporation?

Corporations are required to follow the rules put forth in their by-laws. The directors and shareholders must ensure that all the decisions made are properly documented. These by-laws explain the procedure in the decision making process of a corporation and vary from corporation to corporation.

3. Borrowing By-Law

It stipulates who has the authority to borrow in the name of the corporation.

4. First Board of directors resolutions

The board of directors in their first resolution will:

a. Accept the Articles of Incorporation

b. Adopt the Book of Records of the corporation

c. Adopt the General By-Laws

d. Confirm the head office of the corporation

e. Accept share subscriptions

f. Issue share certificates

g. Decide a financial year end

h. Decide a banking resolution

i. Appoint the officers and their positions

5. First Shareholders Resolutions

In this the shareholders will:

a. Ratify the By-laws of the corporation

b. Elect the board of directors

c. Appoint an Auditor

d. Appoint an Accountant

6. Forms filed

A copy of any form or document that is filed with a governmental authority must be included in the company minute book.

7. Directors and officer’s registers

The initial documents in the minute book will include a list of board of directors and the day they were appointed, a list of officers, their roles and positions and their appointment days.

8. Consent to Act of the Board of Directors

This ensures that a Director is not appointed or their name is not on the public record without their consent.

9. Shareholders

A list of shareholders is also included and the day they became one.

10. Shareholder register and ledgers

It points out how many shares each shareholder has and the class of those shares along with the amount paid per share.

11. Share certificates (original or copy)

Every shareholder will obtain a share certificate proving their ownership.

12. A copy of all statutory forms required to be filed

13. Shareholders’ agreement (if any)

The agreement signed unanimously by the shareholders will also be included in the Corporate Minute Book.

Why do Canadian Federal or Provincial Corporations Need a Minute Book?

Sometimes the owners or the directors think that creating or maintaining a Minute Book at the beginning of their business is a waste of time and money. But in reality having a company minute book from the beginning of the business that is regularly updated may prove crucial to the success of it.

It is legally binding for every corporation in Canada, both federally and provincially to not just maintain one but also update it on a regular basis. As a corporation is considered a separate legal entity it must fulfil certain obligations under the Ontario Business Corporations Act (OBCA) and Canada Business Corporations Act (CBCA). The OBCA requires that the records must be kept at a registered office.

As your business begins to grow several events would require an update in the Minute Book like:

  1. Hiring a Professional Accountant, Lawyer or Notary
  2. Selling You Business
  3. Joint Venture
  4. Canada Revenue Agency Audits
  5. Securing Funding

In all these instances, the person or authority you may be dealing with will ask you to see a copy of your minute book. There are consequences and complications for a corporation that fails to maintain a minute book including fines and penalties.

It helps you keep track of all your important documents in one location. It also makes it easy for you to provide all the necessary information to your directors, shareholders or any other stakeholders.

All professional corporations must also maintain a minute book in Canada and Ontario.  This refers to the following types of professional corporations:

a. Law Professional Corporation

b. Medicine Professional Corporation

c. Dentistry Professional Corporation

d. Psychology Professional Corporation

e. Chiropractic Professional Corporation

If your business is not incorporated then you do not have to worry about maintaining a Company Minute Book. But if you aren’t sure about what incorporating your business would mean or the benefits that you can reap from it.

 

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