What is a minute book and why do I need one?
Incorporating a new company brings with it a steep learning curve. Not only do you have to run your business, but you now have all sorts of additional requirements to keep up with—ranging from bookkeeping to filing corporate taxes and a host of other annual filing requirements. And in many cases, new business owners (especially those who incorporated their company themselves) are unaware that one of the requirements of having a company is keeping a corporate records book, also known as a “minute book”.
First of all, what is a minute book?
In short, a minute book is a compilation of all the documentation that evidences the activities of a corporation. This includes the articles of the company, its certificate of incorporation, directors' and shareholders' resolutions, registers showing who the shareholders and directors of the company are, and any filings made with the BC Registry (for BC companies). Traditionally, these documents would be kept in a binder, but nowadays, they are usually stored digitally.
The requirement to keep a minute book comes from the Business Corporations Act ("BCA") in British Columbia (and similar statutes in other provinces). But beyond simply complying with the BCA, having a complete and up-to-date corporate records book becomes extremely important in a variety of scenarios—e.g., if the company applies for a loan, if you consider bringing on on a new business partner or investor, if you decide to sell the company, or in the case of an audit. In all of these situations, having a corporate records book with missing documents can lead to a host of problems for the company, often resulting in unnecessary delays and high legal fees for cleanup work.
As an example, we've dealt with a scenario where the deficiencies in a minute book caused a month-long delay in securing bank approval for a loan for a company (not to mention the additional legal fees incurred for bringing the records back up to date). When you’re eyeing the perfect piece of real estate for your new offices, such a delay could be all it takes to lose out on the deal.
A big part of keeping a minute book for your company is making sure you are making the necessary filings each year. There are two components to this: the annual report filing with the BC Registry and the annual resolutions that the shareholders and directors of company are required to pass each year.
Annual Report Filings
Each year, a company is required to file an annual report within two months after the anniversary of the date on which the company was recognized (i.e., the incorporation date). This annual report is separate and apart from the forms required to be filed by your accountant with the Canada Revenue Agency.
It is critical that the company's annual report filings be kept up to date because the BC Registry can dissolve a company and strike it from the Registry if it fails to file its annual report for two consecutive years.
In addition to the annual report filing requirement, each year a company is required to hold an Annual General Meeting (AGM) for its shareholders to approve matters such as the election of directors, the approval of financial statements of the company, and the waiver of an auditor. The directors typically have an annual meeting right after the AGM to appoint officers for the ensuing year. If any dividends are declared in your company, the directors also need to approve the issuance of those dividends in a directors' resolution.
Because these documents don't need to be filed with the BC Registry, they are often forgotten altogether. But this can lead to significant problems, not only within the company itself if there are ever disagreements among shareholders, but also with outside agencies such as the CRA in the case of an audit.
There are certain support services every company needs and, we may be biased, but we think the best solution for keeping your minute book in order is to have your lawyer assist you in keeping these filings and other supporting documents up-to-date.
Yes, it's hard to bring yourself to shell out the $350 a year your lawyer will charge you to maintain your corporate records book. But we've seen what can go wrong when minute books aren't properly maintained and, trust us, it can be much more costly to bring a company's records back up to date, especially when it needs to be done on a rush basis because it is causing a delay on another transaction.