Below is an detailed explanation of what goes in a minute book.  When a new company is incorporated there is a three step process:  (1) obtaining a Certificate of Incorporation, (2) setting up a minute book and, in some cases, (3) filing an Initial Return.

Many new business owners do not want to pay to set up a minute book for their company.  Since they are able to open up a bank account without showing a minute book they will forego having a book prepared.  This can be problematic in the future. For more information refer to Why a Company Needs a Minute Book.

 

Setting Up Your Minute Book

The very first documents that are included in the minute book are called the “organizational documents of the company”.  The documents that will be prepared and inserted in the minute book will be:

General Operating By-law – A by-law is a list of rules.  Some of the things that you will find in a by-law are:

1. How many people must attend at directors and shareholders meetings for the meeting to be validly called
2. What the procedure is for calling directors and shareholders meetings to ensure it is a valid legal meeting
3. How many votes are required to approve an item of business at a directors or shareholders meeting
4. Which directors and officers can sign agreements on behalf of the company and obligate and bind the company under those agreements
5. What is the procedure for removing a director or officer of a company
6. How is an officer or director replaced or new officers and directors appointed
7. Who can borrow money upon the credit of the company

A general operating by-law in most cases sets out the provisions of the statute governing the company but some of those provisions can be varied for the particular circumstances.

All companies must have a general operating by-law which is enacted by the directors and confirmed by the shareholders.   If you obtain a general operating by-law for your company you will be able to determine how to conduct business properly.

If meetings are held that violate the legal requirements for a meeting you could have issues with this in the future and in particular, in the case where a director or shareholder is objecting to an approval that was put through.  If the approval at a meeting was not documented or documented incorrectly it could invalidate that approval and you may be forced to set aside that resolution.

In some provinces the general operating by-law provisions are included as part of the Articles of the company in a document called a Memorandum of Association.

 

Borrowing By-law – This by-law provides who has authority to borrow on behalf of the company and normally provides for the directors and officers to have this right.  Banks frequently wish to see this by-law if the company wishes to borrow money.

Need a By-law?  Purchase a Microsoft Word Version of By-law.

First Directors Resolutions – The individuals who agreed to be the first directors on the articles of incorporation have a legal obligation to approve certain things right after incorporation including:

1. Appointing the officers
2. Allotting shares and confirming the amount paid for those shares
3. Enacting the general operating by-law

Once the first director has approved these matters he can then resign if he wishes or he can continue as a director of the company.

First Shareholders Meetings – There cannot be a first shareholders meeting until the shares have been allotted.  As indicated above the first directors allot the shares to the shareholders.  A shareholder (owner of a company) does not have to be a director and a director does not have to be a shareholder, however, frequently the owners of a company also wish to manage the company so they will be both a shareholder and a director.  Some of the items approved at the first shareholders meeting are:

1. Determine how many directors there will be
2. Appoint the Auditor or the Accountant
3. Accept any resignations of the first directors and confirms the appointment of all directors

Consent to Act of directors – Directors need to consent to act as directors and this consent must be signed and inserted into the minute book of the company.  This ensures that a director is not elected to the board of directors and his name is not put on the public record without his or her consent.

Exemption from Appointment of an Auditor – Most private companies are not required to have audited books.  However, in many cases the statute governing the Canadian company will require that the shareholders approve an audit not being performed.

Registers – All statutes have a requirement that registers be prepared for a company.  The registers you will find in a minute book are:

1. Directors Register – lists the dates of appointment and resignation of each of the directors and their addresses
2. Officer Register – lists the dates of appointment and resignation of each of the officers, the positions they hold in the company (i.e. President, Secretary, Vice-President) and their addresses
3. Shareholder Register – lists all of the individuals or companies that hold shares in the company, the number of shares they own and the date they received those shares.  It also records when shares are returned to the company or transferred to other individuals or companies
4. Shareholder Ledgers – Each shareholder will have a ledger showing the date upon which he or it received shares, how many shares were allotted and the reason why those shares were allotted.  It will also show when those shares are transferred to others, if applicable.

Forms – All companies must file returns with the particular Canadian government under which they are incorporated.  When changes to directors and officers occur the government will expect you to provide them with an amended form showing all current addresses.  This section of the minute book contains a record of all filings made to the government.  It does not typically contain tax returns but you can store any documents you wish in a minute book.

Share Certificates – Every shareholder has a right to a share certificate.  This certificate evidences ownership.  If you have not set up a minute book for your company you will not have any proof of ownership.

 

Maintaining a Minute Book for a Company

After the initial “organization of the company” there may be circumstances where there may have to be changes to the structure.  Some of the circumstances where changes may occur are:

1. A new by-law may need to be enacted such as a by-law to vary the borrowing rights of the company
2. New investors may be needed to move the company forward and those investors may wish to hold shares in the company
3. A director may resign and a replacement may need to be elected or new directors may be brought on because a new shareholder wants to be a director as well
4. The company may wish to enter into a major transaction and the directors may need to approve the form of agreement respecting same
5. A shareholder may wish to leave the company and will want to transfer his shares back to treasury or transfer the shares to the other shareholders on a prorated basis
6. The company may wish to conduct business in other jurisdictions in Canada or countries outside of Canada and those governments may request the directors to approve the registration

 

For information on directors meetings refer to How to Conduct a Proper and Legal Directors Meeting.

 Buyer Beware – Blank Minute Book

We all like bargains.   There are services on the market which claim to provide you with a completed minute book for a reduced price.  What you are given is a book with a number of blank resolutions, blank registers and blank share certificates.

In some cases you will be provided with the resolutions and the by-law but they will not be filled out and you will be left with trying to figure out how to complete them properly.  In many cases there will be no instructions for this.

When you purchase a minute book be sure to ask what you are getting.  The organization and set up of a company does cost a bit of money because it takes a number of hours to put together.  The questions you should ask are:

1. Will there be a by-law?
2. Are there resolutions in the package which will show the actual names of the directors or officers or do the resolutions have blanks in them for insertion of the names?
3. Are you provided with a questionnaire which asks (1) who will the officers be, (2) who will the shareholders be and how many shares will be held which would indicate the company is setting up the company properly?
4. Will the registers be filled in with the proper individuals’ names?
5. If the resolutions will have blanks for names and numbers of shares will there be an instruction sheet included?

Depending on what you feel confident about doing, price shopping should be considered to ensure that the product you are receiving warrants the price paid in comparison to the different types of packages you can buy. i.e. the price of a blank minute book should be much lower than the price of a personally completed minute book.

 

If you are provided with no by-law and no resolution templates then you will need to understand how to complete the documents from scratch.

If you are provided with a by-law and resolutions with blank spaces for names, then you will need to be confident enough to fill in those blanks.

In the long run it is easier to have someone skilled at completing the documents for you.

 

If