This blog post is for every business thinking of incorporating or newly incorporated, including the incorporated business that needs a complete corporate record book. Often, entrepreneurs incorporate online and don’t do any of what we cover below. Should the corporate record book be incomplete, there may be no proof of who owns the corporation.
The Canada Business Corporations Act requires that the corporate record book remains in Canada and is regularly updated. There are penalties for failing to keep this up to date, including fines and jail time for directors in severe cases. The corporation’s shareholders and creditors can request necessary information from the corporate record book.
What is the Corporate Record Book?
It is the official record of what happened within the company and is vital when needed for legal reasons. It demonstrates the governance of the corporation and tracks all significant events.
What’s in a Corporate Record Book?
Articles of Incorporation
These are the founding documents of the corporation. From time to time, the corporation may have to restate or amend the articles of incorporation. These documents constitute articles of incorporation.
By-laws and their amendments govern the way the corporation is run. They cover directors and shareholders meetings; banking, contracts and other administrative and financial matters; and other legal issues.
Unanimous Shareholder Agreements
A unanimous shareholder agreement is a contract between the shareholders and the corporation concerning the company’s management. It generally sets the powers of the directors to manage or supervise the corporation’s management.
Minutes of Meetings
This is the official record of what happens at shareholders’ meetings. It may record events like appointing an accountant or lawyer, electing directors or officers, or other matters about the corporation’s conduct, management and ownership.
This is the official record of the decisions of the shareholders.
These are official documents filed with government bodies that register or change office addresses and directors. Additional documents may be included depending on the nature of the business and other regulatory requirements.
This is the official record of the ownership of the corporation. It outlines the names and addresses of shareholders as well as the details of the shares held.
The securities register is the record of the corporation’s ownership changes. It outlines the transactions between different ownerships.
What is Private
Some records cannot be immediately demanded and are private. These include the directors’ meeting minutes, resolutions of the board of directors or the committees, and the accounting records.
Keep Apprised of New Developments
An amendment to legislation governing corporations was introduced in 2016, which required all corporations in Ontario to maintain a new type of Register in their corporate records. It is estimated that thousands of small and medium-sized corporations that fall under this legislation’s requirements aren’t even aware of it.
The failure of a corporation to comply with this requirement carries stiff penalties: fines of up to $2,000 and jail time of up to one year for all officers and directors, as well as fines of up to $25,000 for the corporation itself.
Corporations which own land must include in their corporate records a “register of the Corporation’s ownership interest in lands in Ontario.” The register, which must be kept at the corporation’s registered office, must contain specific information regarding the land owned and any deeds, transfers or other similar documents related to land ownership.
While this requirement is obviously of significant importance, the message here is focused on a broader obligation of officers and directors of Ontario corporations. Other provinces and Federally incorporated entities are subject to similar requirements. You need to pay attention to corporate record keeping beyond just the accounting records and tax filings.
Keep Your Records Updated
When you incorporated your business, you may have received an impressive bound ledger or register from your lawyer separated into sections to record critical corporate events and transactions. This is the start of your corporate minute book and needs to be updated and maintained periodically by the corporation’s officers and directors.
It is easy to ignore this duty. It can be a major task to update the records after the fact. Some examples include selling the business, the corporation being sued by a shareholder or other party, a tax dispute with CRA, etc.
For many corporations, the effort to properly maintain corporate records is insignificant and can be met by the officers and directors. In more involved situations, you will likely want legal assistance to meet legal and statutory requirements and properly maintain the corporate records. Examples include inactive shareholders, significant corporate activities such as mergers and acquisitions, business expansions, new shareholders, other capital raises, etc.
Considering the relatively modest effort, time and cost to keep the records up to date versus the penalties for improper records and, potentially major effort to remedy the lack of proper records many years later, we strongly recommend that you regularly maintain the minimal required records.
Please contact us for information and advice regarding corporate record keeping, including a do-it-yourself solution for straightforward situations. You may also want to check out our affiliate partner’s solution. OWNR is Canadian and helps new businesses incorporate, assists with by-laws, official changes, etc.
Please be advised that as affiliate partners, we are compensated by OWNR for any signup using our affiliate link, and you will receive a 15% discount on OWNR’s fees. Here’s the link to see if their affordable solution is right for you. https://partners.ownr.co/kata