Imagine a society with no rules, no strategies for governance, no elected officials, and no laws. It sounds chaotic because it is, and while it may not seem like an evenhanded analogy, not having a properly organized corporation with a Minute Book could result in the same chaos.
Fostering innovation and entrepreneurship is important and should be celebrated. However, hastily incorporating a business without actually organizing it should not be. That is the purpose of a Minute Book.
A Minute Book stores all of a corporation’s records, including its articles and certificate of incorporation, by-laws, resolutions, officer and director registers and share certificates. If by-laws are not drafted and resolutions are not passed, a corporation ends up existing without any rules. By-laws dictate the day-to-day operations of a corporation, while resolutions give effect to these rules and any changes to them. Further, if shares are not distributed and a government in the form of a board of directors is not elected, ownership and management over a business may appear uncertain. Failing to keep up to date records and not informing the government on an annual basis of a corporation’s status could result in a corporation being involuntary dissolved by the government. Like a well-run country has clear crafted laws and heads of state to run the show, so too should a corporation.
When a business owner is looking for a prospective purchaser or investor, that entity will ask to review the business’ Minute Book as part of the due diligence process. If the business does not have a Minute Book, and has not passed any rules on an annual basis, a deal could fall through. The risk of losing out on a great opportunity is not worth the limited investment a business owner should make in hiring a lawyer to fashion corporate records, elect administrators and assemble a Minute Book.
Eric Gossin is business and real estate lawyer, mediator and arbitrator, and managing partner of Stancer, Gossin, Rose LLP. He can be reached at and (416)224-1996 ext. 210.
This newsletter is for educational purposes and is not legal advice.