IMPORTANCE OF MAINTENANCE OF COMPANY CORPORATE RECORDS
Upon incorporation of a company, it is important to ensure the corporate records are properly maintained. The British Columbia Business Corporations Act specifically requires that all companies prepare and maintain, among other things, the following at their registered and records office:
- Certificate of Incorporation;
- Notice of Articles;
- The Articles of company;
- Incorporation Agreement;
- Central Securities Register (register of shareholders);
- Register of Directors;
- Minutes of every meeting of shareholders;
- Minutes of every meeting of directors;
- A copy of the financial statements of the company
Legislation requires corporate records to be kept in a prescribed form. The most common form of record maintenance is in a looseleaf form, or a corporate “records book”. The corporate records book serves as the official record of the company’s activities. Not only will the records book include the above documents but should also include, among other things, all relevant agreements to which the company is a party, including shareholder agreements, trust agreements, partnership agreements etc.
It is important for many reasons to keep the corporate records up to date. For instance, if records are not properly maintained, this can cause delays in responding to inquiries and requests from the Canada Revenue Agency (as part of a tax audit) resulting in possible penalties and interest. As well, improperly kept records can cause delays in proceeding with significant transactions, including the proposed sale of shares of the company, potential investments by third parties, loans from financial institutions or even the sale of the company’s business. Further, the directors may be subject to monetary penalties for failure to maintain proper corporate records and attend to required government filings in compliance with applicable law.
As a result of poorly or improperly kept records, significantly more time and legal fees will be spent on attempting to piece together and document past corporate proceedings relating to valid share issuances and transfers, dividend declarations, approval of shareholder loans, changes in directors and officers, approvals of material contracts and any other corporate actions that should be properly documented in the company’s records book. We therefore strongly suggest that you seek legal advice upon incorporation of a new company to ensure your corporate records are properly maintained from inception.
For further information or assistance in reviewing your corporate records or the incorporation of a new company, please contact our corporate records department or our corporate solicitors at Brawn Karras & Sanderson: Kim Karras or phone at 604-259-1620 or toll free at 877-470-7535 or by email at [email protected] or [email protected].