In Ontario, a corporation is required by law to keep accurate and up-to-date corporate minute books. A corporate minute book is a record of important corporate documents, including the corporation's articles of incorporation, bylaws, shareholder and director resolutions, and other legal documents.
Here are some reasons why it's important to keep your corporate minute book updated:
Legal Compliance: Failure to keep your corporate minute book up to date can result in legal and financial consequences and potential liability for the corporation's officers and directors. Failure can result in the cancellation of the corporate charter, an audit by the Canada Revenue Agency, fines for directors and fines or penalties for the corporation itself. Section 256 of the Ontario Business Corporations Act details how corporations, directors and others could be penalized for breaching the Act and making misrepresentations. It states that misrepresentation means:
1. an untrue statement of material fact, or;
2. an omission to state a material fact that is required to be stated or that is necessary to make a
statement not misleading in the light of the circumstances in which it was made. R.S.O. 1990, c
B.16, s.256(1).
Every person who is found guilty of an offence could be fined up to $2,000 and a term of up to one year in prison. If the guilty person is a corporation, the fine could be as much as $25,000.
Clarity and Transparency: A well-maintained corporate minute book provides clarity and transparency to the corporation's ownership structure, decision-making processes, and business operations, making it easier for future sales of the business to potential buyers.
Corporate Record Keeping: Keeping an accurate and up-to-date corporate minute book ensures that the corporation's legal documents, resolutions, and other important information are easily accessible and organized in one place.
Due Diligence: Investors, lenders, and other stakeholders may require access to a corporation's minute book as part of their due diligence process. Having an up-to-date minute book can help establish credibility and professionalism with these stakeholders. It could also help in the event that parties become unwilling or unable to execute documents requiring their signature.
In summary, maintaining an accurate and up-to-date corporate minute book is essential for legal compliance, transparency, and efficient record-keeping. It is important for corporations in Ontario, to prioritize the maintenance of their minute book to avoid potential legal and financial consequences.