Running a company is hard work. Day-to-day operations, workforce management, strategic planning and a host of other concerns absorb most of the owners’ available time and attention. Corporate recordkeeping may not, as a result, be high on the list of operational priorities, but the task should likewise not be ignored.
Corporate recordkeeping maintains the backbone of the corporate form, which in turn, affords the form’s hallmark liability protection to owners, management and employees alike. Corporate minutes, in essence, represent the actions of company leadership and are considered legal documents by auditors, the IRS and the courts. They provide a necessary record and structure to corporate action by evidencing how directors and shareholders arrived at particular decisions (i..e., were these decisions arrived at fairly and after full disclosure?) and who voted any particular way. This paper trail can be useful in multiple potential contexts including, for example, company disputes.
Corporate minutes also act as a measuring stick for company progress, because their chronological record of management decisions presents a historical timeline and also forms the building blocks for future corporate action. Maintained corporate records, for example, serve their purpose well in the context of a company sale. Organized and updated minutes allow potential purchasers a clearer view into the company’s operational history.
Minutes are relatively easy to prepare and normally may be drafted in-house. Key legal, tax and financial matters – essentially any deliberation and decision on an action requiring approval by the board of directors or shareholders – should be captured in formal corporate minutes. Examples include the issuance of stock to new or existing shareholders, the authorization of significant corporate debt, the pledging of corporate assets, the purchase of real property, and the adoption of stock option or retirement plans. Day-to-day business happenings like the ordering of supplies, hiring or firing of low or mid-level employees, or launching of new services or products do not typically require director or shareholder approval with accompanying corporate paperwork.
Minutes may be long and detailed or short and to the point, depending upon the nature of the meeting or deliberation. So long as they reflect the true-to-life considerations and decisions of those parties in attendance, they will serve as a simultaneous picture of the company in its real-time state and also its historical context. That quality alone places the practice of corporate recordkeeping at the foundational basis of sound company management.
For assistance with these matters, please contact a member of our Business practice.
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McConville Considine Cooman & Morin, P.C. is a full service law firm based in Rochester, New York, providing high quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
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