The Importance of Updating your Minute Book
Whether you are a large corporation, a medicine professional corporation, a dentistry professional corporation, a holding corporation or any other type of corporation in Ontario you must have a minute
book. We are constantly seeing new clients who have incorporated but have never received a minute book from their lawyer (or if incorporated by their accountant, from their accountant). If you are reading this and this sounds like your situation you are probably thinking “does it matter that i don’t have one?” The simple answer is yes and if you don’t have one you should be asking whoever incorporated you why not.
Minute Book Overview
So what is a minute book? A minute book is a bound book that contains all the pertinent documents for your corporation. It is the handbook or bible of your corporation. It contains many documents including, certificate of incorporation, articles of amendment, articles of amalgamation, share certificates, corporate resolutions, your certificate of authorization from either the RCDSO or CPSO (If you are a dentist or doctor), shareholder agreements, rollover agreements, retainer/employment agreements, by laws…..the list goes on. You can imagine how difficult and time consuming this is to recreate years after you have incorporated. Many of the items that go into your minute book are required by law (under the Ontario Business Corporations Act) to be kept by the corporation. So if you aren’t keeping your minute book up to date you may be offside of your legal requirements.
If your minute book is not up to date or you don’t have a minute book at all it could cause some serious issues. Firstly, it is going to cost you money to get your lawyer to update many years of your minute book or prepare all of the documentation that is required and has not been prepared for you by your lawyer. It is much easier (and cheaper) to keep it up to date on a yearly basis. Secondly, it could cause delays when you are looking to sell your corporation, borrow money from the bank or purchase a business (including a dental practice). Most importantly the Canada Revenue Agency may ask to see your minute book to review the business that has been conducted. For example, the Canada Revenue Agency may want to see the dividends that have been distributed from your corporation (especially any capital dividends) and if the dividends haven’t been properly authorized the Canada Revenue Agency could challenge the dividend.
Updating your Minute Book
Your lawyer should be holding onto your minute book which we do for our clients at no cost. When transactions occur the minute book should be updated to reflect this. It should also be updated on an annual basis. The lawyer should receive solicitor instructions annually from your accountant advising of what needs to be updated. If your accountant doesn’t provide instructions your minute book will not get updated. So please make sure to remind your accountant to send those instructions to your lawyer. Once your lawyer receives the instructions he will update the minute book for a small fee.
If you’ve incorporated your corporation and you do not have a minute book the incorporation was not done completely nor was it done correctly and could lead to problems for you down the road, so make sure the minute book is set up correctly at the start. Also make sure that your minute book is kept up to date so you can avoid the issues mentioned above. This blog is for informational purposes only and should not be construed as legal advice.