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What is a Minute Book and Why Do I Need One?

By December 18, 2013January 27th, 2021Corporate

So you’ve done the smart thing and formed a dentistry professional corporation to reap the tax benefits (and certain limitations of liability benefits).  Your lawyer is telling you that your newly formed corporation needs a “Minute Book” and you’re wondering what it is and why you need one…

What is a Minute Book?

The minute book is literally a book, a binder, or an attache case that houses all of your corporation’s key documents.  It serves as the official record of the corporation’s activities and documents all material transactions which involve the corporation.  The minute book holds, among other things, the following documents:

  • certificate of incorporation;
  • articles of incorporation;
  • by-laws;
  • minutes of meetings of directors and shareholders;
  • resolutions of directors/shareholders;
  • director/officer ledgers and registers;
  • shareholder ledgers and registers;
  • share certificates;
  • certificate of authorization from the Royal College of Dental Surgeons of Ontario;
  • shareholders agreements;
  • forms filed;
  • etc.

Why Do I Need a Minute Book?

The Ontario Business Corporations Act (the “OBCA”), which is the key legislation governing Ontario corporations, specifically requires that certain documents be prepared and kept by the corporation, including:

  • the articles and by-laws and all amendments thereto;
  • a copy of any unanimous shareholders’ agreement;
  • minutes of meetings and resolutions of shareholders;
  • a securities register;
  • a transfer register;
  • adequate accounting records;
  • records containing minutes of meetings and resolutions of directors; and
  • copies of all notices.

A minute book itself is not required by the legislation, but if all of the above documents must be kept by the corporation, then they should be kept together in an organized and legible manner.

What happens if I don’t have a minute book or my minute book is not in order?

Significant Costs

If your corporation does not have a minute book or its minute book is not organized and up to date, then you will most likely incur a significant cost for organizing or updating it.  This is because it takes much more time and effort to piece together and document past corporate proceedings and actions than it does to maintain your minute book annually.

Banking Delays

Not having a minute book or having an out-of-date minute book can result in delays, including delays in responding to bankers who may need to see your minute book in order to authorize a corporate banking transaction such as borrowing money.

Penalties

The OBCA provides for certain penalties for failing to maintain proper corporate records and attend required government filings.

Delays on Sale of the Corporation

If you are selling your practice or dentistry professional corporation, the purchasing dentist’s lawyer will ask for the corporation’s minute book in order to ensure that all of the corporation’s documents are in order.  If the minute book is not in order, you will incur extra costs for updating your minute book and such updating endeavour may delay your transaction.

Cancellation of Certificate of Incorporation

If the corporation is in default of mandatory government notice filings (such as an initial notice of directors/officers) the government will, after giving notice, cancel the corporation’s certificate of incorporation.  This means that the corporation will no longer be legally allowed to operate and additional fees must be paid to revive the corporation.

Government Audits & Discrepancies

From time to time, the Canada Revenue Agency may perform audits of your corporate tax returns.  In order to ascertain the business of the corporation, the CRA usually asks for the minute book of the corporation.  If the minute book does not reflect accurately the business of the corporation, you might incur undue expenses.  For example, say you receive a dividend from the corporation (dividends being taxed at a lower rate than salary or bonus income) but you cannot prove it to the CRA through the production of directors’ minutes declaring a dividend.  It is open to the CRA to challenge your characterization of the money you received from the corporation and you may end up being required to pay a higher tax rate.

Minute Book Maintenance

Some choose to keep their own minute book and do their own annual updates and organization.  A step by step tutorial on how to go about maintaining your own minute book is beyond the scope of this blog. But I will say that all major corporate events should be reduced to writing and placed in the minute book right away. Even if there are no major events to be recorded, annual minutes of directors/shareholders must be held and recorded in the minute book.

In our experience, most people prefer to leave their minute book with their lawyer and, for a fee, have their minute books updated annually, eliminating the stress and headache of having to update their own minute book.  Beyond saving your sanity, having a lawyer keep and update your minute book is also beneficial because:

  • the minute book will be stored safely so it does not get lost or destroyed;
  • it will be out of reach and away from the prying eyes of employees/patients/family members;
  • all documents will be accurate and compliant with the law; and
  • updates will be done in a timely fashion and will not be overlooked.

If you wish to discuss having your minute book kept and updated annually by our office, you can email DMC here or call us at 1-844-443-9280.

DMC