The Importance of a Minute Book
It does not have a fancy name or a romantic description, but it is the most important part of record maintenance that any corporation must have. If you are familiar with accounting, then you already know that we are talking about the minute book. The minute book is a record that includes important information about the corporation including, but not limited to: Articles of Incorporations, by-laws, minutes of meetings, names and addresses of all shareholders, government filings, legal documents, significant transactions, and account records.
Basically, any significant information about the corporation should be included in the minute book. So, is it necessary for all corporations to maintain a minute book? The answer is a clear ‘Yes’, if for no other reason then It’s The Law!
To be clear; the Canada Business Corporations Act (CBCA) does not require corporations to maintain updated minute books. However, they do compel companies to keep easily accessed information about the corporation at the company’s headquarters or somewhere else in Canada. These records include the same type of information that would be included in a minute book. To sum up, while minute books are not legally mandated to be kept, the information that they normally contain is required by the CBCA. Furthermore, the Quebec Companies Act requires that a company keep a Corporate Minutes Book. This information must be easily accessed by shareholders.
A minute book is a good way to keep a company out of legal hot water. However, a corporation should not view a minute book simply as a requirement by law. Keeping a more detailed record of the company’s activities beyond what is mandated by the CBCA can have advantages for a corporation. Consider these points:
Keeping Your Books Straight- Your bookkeeper will ask to see your minute book when they are doing your books. A record of all activities, including major transactions, will make it easier for your accountant to balance the books and give you an accurate picture of the financial state of the corporation. If all of the information is in once place, it makes it easier for the bookkeeper. Going to different people and sources for the financial records, increases the odds of something being missed.
Selling the Corporation- You may have no plans on selling the corporation in the near future. Maybe, it will never be sold. But, it is always a good idea to keep a company in a state where it could be sold if needed. A potential buyer will want to take a look at the minute book to help assess the health of the corporation. A poorly kept minute book may hurt your ability to negotiate a good price. It could even kill the sale if the buyer is uneasy about the records.
Solving Disputes with Shareholders- If there is a disagreement amongst the shareholders regarding a transaction or a decision, a minute book can help shed light on the issue. Being able to look back at the transaction or meeting minutes can help resolve some disputes or settle confusion on matters.
Raising Capital- The Corporation may decide to raise more capital through investors or even a bank loan. Any organization or individual will want to see a minute book to help determine if it is safe to put their money in the company. A minute book that is scant of details may prevent a corporation from making the capital it needs, to grow.
A minute book goes beyond legal requirements. It is also good business. If you want to talk more about minute books or any bookkeeping topic, please contact us at Simply Bookkeeping. Working with companies of all sizes, Simply Bookkeeping provides bookkeeping services to business in Milton, Mississauga, and the Greater Toronto Area. Speak to us and find out how we can help you with all of your bookkeeping needs.