Maintain Minute Books: Save Money & Protect Yourself
Private companies can be small. They often do not maintain minute books properly. Many have one shareholder and director. Sometimes they have a husband and wife as co-owners. Why should such small private corporations pay to have lawyers keep and maintain minute books for their company? The answer is to potentially save thousands, headaches and time. The minute book lawyers at Kahane Law Office can help properly maintain your corporate minute books. Keep reading to learn why it is so important.
More than Just Changing the Date
At Kahane Law Office, when we maintain minute books, we do more than just change the date on annual resolutions. We work with your accountant, if any, and will:
- Respond on legal notices served on the corporation in a timely manner to avoid default even if you are not available:
- Properly record all annual shareholder and director minutes and resolutions;
- Properly record all special resolutions, including issuance of dividends, change of allowed business, issuance or change of shares, etc.;
- Properly maintain your shareholder and director registers;
- Update the Alberta Corporate registry of all changes required by law;
- Serve proper notice of all meetings and distribute financial statements;
- Suggest other key money-saving, liability-reducing and problem-avoiding documents. These include unanimous shareholder agreements (USAs) and enduring powers of attorney (EPAs).
Value For Your Money!! High Costs If You Do Not Maintain Minute Books
Below are some of the potential hidden costs and dangers when people do not maintain minute books properly. They range from avoiding law suits, paying more taxes, government penalties, inability to contract and more.
Avoid Violating the Law and Potential Penalties
Your corporation is legally required to maintain minute books. There are penalty provisions for failing to do so. While rare for a company to be fined, it can happen. The costs of fixing and updating corporate minute books retroactively are costly.
Avoid Paying More Tax, Tax Penalties & Fines
Failing to maintain minute book records of financial maters can be costly. Shareholder dividends may be treated as income by the Canada Customs and Revenue Agency (formerly Revenue Canada). Additionally, shareholder loan repayments (tax free to shareholder) may be treated as income to the shareholder (taxed at shareholders’ income tax rate). The reassessment may be on both the corporation and the shareholder.
Lose Legal Standing
Corporations only get legal standing because the law allows it. Corporations have the same standing as a person in front of a court. Without maintaining minute books you may lose your corporate status and your ability to sue or defend a law suit. Additionally, as corporations offer significant liability protection to shareholders, losing this status may result in personal liability. Failure to maintain minute books in compliance with provincial requirements may result in the corporation being struck.
Inability to Get Bank Loans
If a bank cannot determine that the corporation legally exists or has the right to borrow money, the corporation may have to borrow privately. A client of ours was in this situation and had to pay $90K in fees to get a loan at 19% instead of a nominal bank loan at under 5%.
Inability to Sell the Corporation
No one will buy a company that does not legally exist. If you cannot prove that your company is valid, has the right to be sold and has the necessary shareholder approval to be sold, the sale may fall through.
Inability to Own Real Estate:
Alberta Land Titles will only recognize and record real property into corporations that legally exist. If you maintain minute books you can prevents losing this.
Inability to Contract:
Your company cannot legally contract if the corporate minute books are not properly maintained. Suppliers and other companies may not do business with companies that do not have up to date maintained minute books.
Shareholder Disputes & Audits
If not recorded properly, minority shareholders can dispute corporate decisions. They can also demand a costly audit, deny a shareholder’s ownership in the company or challenge allocations of paid up capital. Proper documentation in the minute book is key to important corporate decisions.
Cost to Fix
The cost to have corporate minute book lawyers maintain minute books is nominal. The cost of have the minute books reviewed and fixed is much more expensive. Not only do the originally required documents need to be prepared, but the entire minute book needs to be reviewed to determine what is missing and, if there, if it is done properly. If a shareholder passes away or if there is a shareholder dispute, fixing the problems may not be possible without a court order, if at all. Maintaining minute books never costs more than fixing them.
Learn More From Corporate Minute Book Lawyers in Calgary
If you have any questions about creating a corporate minute book, or need help to maintain minute books, contact our Calgary law firm. We look forward to your call, and hope that we will be able to help you, as we have helped our other clients.
We can be reached toll-free at 1-877-225-8817 (or 403-225-8810 locally in Calgary, Alberta), or email us directly here.