KEEP YOUR RECORDS UP TO DATE

If you control a small to medium sized closely held private corporation and keep your corporate records up to date through annual minutes, declaration of dividends, waiver of audit requirements, and all required special resolutions, congratulations.

Unfortunately, at Weilers LLP, we are often retained by corporate clients to carry out a transaction only to discover that their minutes are years or sometimes even decades out of date.

Whether a sale of the business, a loan, or other major transaction, the party on the other side often requires that the minute books be updated.

A full reconstruction going back years can be difficult, and therefore expensive. It may be particularly difficult or even impossible to locate former officers, directors and shareholders to sign documents. Sometimes we can use a set of verifying resolutions which retroactively approve prior events in the corporate life, but this is not always acceptable to other parties.

And what if one shareholder officer or director refuses to sign the required documents? For instance, what if a son inherits shares in your corporation from your deceased “partner”, who never requested audited statements, but also never signed the required annual waivers?

That may be a more difficult and even more expensive proposition. In one case, the controlling shareholder was required to have auditors go back over a dozen years because the other shareholder would not waive the requirement.

Takeaways for you:

• If you want the benefits of incorporation, you must be prepared to bear the costs;

• Those costs really ought to include proper annual minutes, audit waivers and other required documents.

• You may try a “do it yourself” approach -we have a few sophisticated clients who manage this just fine- but the cost for the peace of mind in having your lawyer prepare the documents is small compared to what you can do with your focus on making money in your business.

• NOT keeping records up to date may jeopardize a sale of the business or assets; or financing.

• The cost of recreating records retroactively, if that is even possible, is more than doing it right in the first place.

• It is never good business to end up in court over poor record keeping.

If you need advice about your specific situation, my colleagues at Weilers LLP would be pleased to speak with you. We know good business.