The year 2008 is upon us and many of us have made resolutions about our lives such as losing weight, quitting smoking, or being nicer to our relatives.
But one resolution that business people need to set their minds to, which many do not, is properly documenting their corporate records.
These take the form of annual resolutions that are usually prepared by your lawyer.
Under section 129 of the Ontario Business Corporations Act, companies are required to document all decisions that have been made by the directors of the company.
Even for small, one-person companies, this record keeping is compulsory.
Usually, these are kept in the minute book of the company and can be subject to the scrutiny of shareholders and creditors.
Typically, annual resolutions will address “housekeeping” issues such as the appointment of officers (president, secretary, treasurer), appointment of accountants, the number of directors and any dividend declarations.
They take the form of shareholders’ resolutions (who are the owners of the corporation) and directors’ resolutions (who are the elected individuals to run the company).
Even if you are the sole shareholder, sole officer and sole director, these resolutions still need to be documented in order to comply with good corporate governance.
A direct consequence of not drafting and executing annual resolutions comes to light if you are interested in selling your company.
The first question I would ask as the corporate lawyer acting on behalf of a purchaser would be this: Can I examine the corporate minute book? Vendors are often left scrambling to put together a minute book that has not been kept up to date.
This also applies to not-for-profit corporations, although the resolution requirements are somewhat different.
So, while getting your house in order with respect to your personal new year’s resolutions, businesses should direct their attention to corporate record keeping and giving their lawyer a call to prompt the documentation process.
Jeffrey D. Cowan is the principal of Cowan & Taylor, Barristers & Solicitors that practice in the areas of business and real estate law. Email
jeff@cowanandtaylor.com
. The information contained in this article should not be relied upon as legal advice.
