This article on corporate meeting minutes is presented for general informational purposes. The material contained herein should not be construed to be legal or tax advice. You should always consult with a licensed legal or tax advisor before you take any action that has legal or tax consequences.
Please follow the links to Part 2 and Part 3 located at near the bottom of this page.
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Corporate meeting minutes are usually required to be kept under state corporation statutes, your articles of incorporation, or your bylaws. The minutes are a record of the proceeding at shareholders', directors' or committee meetings. Minutes contain the historical account of actions taken, resolutions adopted, elections and other official orders of important corporate business. Usually the corporate secretary has the duty to record the minutes; however another officer could be delegated this responsibility. Check your corporate bylaws, articles, operating agreement or other governing instruments for the specific details in your small business corporation, limited liability company (LLC) or professional practice.
Keeping accurate minutes is a good idea aside from any official requirement to do so. The minutes are an important part of corporate governance and observing corporate formalities. They are part of the company's records and they reflect its memories, mindset, intentions and actions. They are written evidence of what actions were taken; why an action was taken, who took the action and by what authority; wether or not the action taken was proper or "legal"; and, among other things, when the action was taken.
When minutes are thorough and accurate, they can serve to avoid future conflicts, and be used as documentation in litigation, tax audits and more. They also can be a reference for clarification to shareholders and directors who may be required carry out certain duties as a result of an action set forth in the minutes. For example, if the directors adopted a resolution in the company minutes authorizing a bonus to employees who remain employed by the company for the entire year, a former employee may not be entitled to that bonus because she quit before the end of the year. Or, if a corporate asset was transferred to a shareholder for full value exchanged, a subsequent corporate creditor cannot have the transfer set aside where the minutes reflect the transaction was made for full consideration.
Corporate meeting minutes are powerful:
They are presumed to be correct. (Young v Janas, (1954) (Del. Ch.) 103 A. 2d 299);
They are prima facie evidence of the facts they recite. (Santa Fe Hills Golf and Country Club v Safelic Realty Co., (1961) S. Ct. Mo., 349 S.W. 2d 27, and other cases);
Together with the bylaws, minutes are the highest proof of the powers of the corporate officers. (Gentry-Futch Co. v Gentry, (1925) 90 Fla. 595, 106 So. 473); and
Minutes are the best evidence of the events or decisions they record. (American & British Mfg. Corp. v New Idria Quicksilver Mining Co., (1923) 293 F. 509, and other cases.)
"Correct." "Prima facie evidence." "Highest proof." "Best evidence." That's mighty strong. If corporate meeting minutes are the "best" evidence of corporate events and decisions, what evidence is better?
It is important that corporate meeting minutes and resolutions accurately reflect the intended actions of the corporation, its directors and shareholders. In the event of any future misunderstanding, allegation of misconduct or other challenge, the minutes can be referred to for documented substantiation of a claim. Generally, minutes are presumed to cover the entire subject, action, transaction or other issue they address. This can work in your favor. If the record is complete and accurate, it can protect you if your actions are later called into question. However, if the record is incomplete or ambiguous, then outside information, testimony or other sources of oral or written evidence may be used to support or otherwise explain the intentions of a motion, resolution or other information in the minutes. In such a situation, minutes might be interpreted against you. The moral here is, beware, be accurate, be complete.
Litigators Know This. You Should, Too!
If you have the duty to call, hold or preside over corporate meetings, it is also your duty to see to it that minutes are recorded in the corporate minutes book. This is not optional for you. It is your duty. It matters not that your company is a small firm, single-owner corporation, family-run business or closely held company. You are entitled to all of the same limited liability and tax benefits available to the large companies; however, you are also held to the same standards for corporate formalities as the large companies. If you neglect to keep accurate and complete corporate meeting minutes, your personal limited liability, and the corporate tax benefits, may be at risk. You must act to reinforce your corporate veil before you are involved in a lawsuit or other litigation, or receive a notice of tax audit.
One of the first things a plaintiff in a lawsuit or a Revenue Agent will request from you is your corporate records, including your corporate meeting minutes. If those records are not in good order, you can lose your corporate shield, its separate legal existence. When that happens, courts and revenuers merge you with your company. The result is that your personal income and assets can be taken to satisfy the obligations and debts of your company. This is exactly what you do not want.
Litigators and revenuers know that if they can pierce your corporate veil, they can likely collect much more from you in the form of a settlement, award, or an increase in tax that carries a fine, penalty and interest. That's their job. They know most small business owners are ignorant about corporate formalities, intimidated by the whole process, or just too busy to attend to the details. They figure you neglect to keep good records and corporate meeting minutes. They believe your company can be "set aside" as your "alter ego", "nominee", or "sham". It's the easiest thing for them to prove, so that's exactly what they target right out of the gate.
For more thorough information, please subscribe to our FREE 7-part email series entitled, "Corporate Meeting Minutes: The Complete eCourse" using the form below.
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