Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Ljubica Durlovska), David Mayzel or Michael Carabash.
So you’ve done the smart thing and formed a dentistry professional corporation to reap the tax benefits (and certain limitation of liability benefits). Your lawyer is telling you that your newly formed corporation needs a “Minute Book” and you’re wondering what it is and why you need one…
The minute book is literally a book, a binder, or an attache case which houses all of your corporation’s key documents. It serves as the official record of the corporation’s activities and documents all material transactions which involve the corporation. The minute book holds, among other things, the following documents:
The Ontario Business Corporations Act (the “OBCA“), which is the key legislation governing Ontario corporations, specifically requires that certain documents be prepared and kept by the corporation, including:
A “minute book” itself is not required by the legislation, but if all of the above documents must be kept by the corporation, then they should be kept together in an organized and legible manner.
Significant Costs – If your corporation does not have a minute book or its minute book is not organized and up to date, then you will most likely incur a significant cost for organizing or updating it. This is because it takes much more time and effort to piece together and document past corporate proceedings and actions than it does to maintain your minute book annually.
Banking Delays – not having a minute book or having an out-of-date minute book can result in delays, including delays in responding to bankers who may need to see your minute book in order to authorize a corporate banking transaction such as borrowing money.
Penalties – the OBCA provides for certain penalties for failing to maintain proper corporate records and attend required government filings.
Delays on Sale of the Corporation – if you are selling your business, the buying dentist’s lawyer will ask for the corporation’s minute book in order to ensure that all of the corporation’s documents are in order. If the minute book is not in order, you will incur extra costs for updating your minute book and such updating endeavour may delay your transaction.
Cancellation of Certificate of Incorporation – if the corporation is in default of mandatory government notice filings (such as an initial notice of directors/officers) the government will, after giving notice, cancel the corporation’s certificate of incorporation which means that the corporation will no longer be legally allowed to operate and additional fees must be paid to revive the corporation.
Government Audits & Discrepancies – from time to time, the Canada Revenue Agency may perform audits of your corporate tax returns. In order to ascertain the business of the corporation, the CRA usually asks for the minute book of the corporation. If the minute book does not reflect accurately the business of the corporation, you might incur undue expenses. For example, say you receive a dividend from the corporation (dividends being taxed at a lower rate than salary or bonus income) but you cannot prove it to the CRA through the production of directors’ minutes declaring a dividend. It is open to the CRA to challenge your characterization of the money you received from the corporation and you may end up being required to pay a higher tax rate.
Some choose to keep their own minute book and do their own annual updates and organization. A step by step tutorial on how to go about maintaining your own minute book is beyond the scope of this blog, but I will say that all major corporate events should be reduced to writing and placed in the minute book right away. Even if there are no major events to be recorded, annual minutes of directors/shareholders must be held and recorded in the minute book.
In my experience, most people prefer to leave their minute book with their lawyer and, for a fee, have their minute books updated annually, eliminating the stress and headache of having to update their own minute book. Beyond saving your sanity, having a lawyer keep and update your minute book is also beneficial because:
If you wish to discuss having your minute book kept and updated annually by our office, you can contact DMC LLP by clicking here.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice, contact me (Michael Carabash) or David Mayzel.
A corporation is created by having the initial directors file articles of incorporation in the jurisdiction in which the corporation is going to have its head office (provincial licenses will also be required to operate the corporation in particularly provinces). After this, the directors have got a few things to do to get the corporation organized and up and running. For example, they will need to pass a By-Law (which gives the corporation’s directors power-making authority), pass director resolutions, issue shares to shareholders (and have the shareholders subscribe to shares), have the shareholders ratify the by-law, have the shareholders vote in the new directors, etc. Without these essential steps and documents, a corporation is not a legally operational entity.
For their part, shareholders are the owners of the corporation and have the power to vote in the directors of the corporation. If there is only one sole shareholder holding all of the shares of the corporation then that person could vote in all of the directors. It is possible to have only one shareholder and one director of a corporation.
The board of directors is comprised of individuals and typically a chairperson who oversee the affairs of the corporation , but not typically on a day-to-day basis. The directors are sometimes paid to sit on the board, but it’s not a lot of money because they don’t meet that often and are not responsible for the day-to-day affairs of the corporation. The directors themselves may have expertise in various areas and sit on a number of corporate boards. They offer their insight and are accountable to the shareholders who vote them in.
Finally, officers of a corporation are appointed by the board of directors in order to oversee the day-to-day management of the corporation’s affairs. The titles of officers are not that important, although traditionally most people have come to know officers as one of the following: President, Chief Executive Officer, Treasurer, Chief Financial Officer, Secretary, Vice-President, etc. It does not really matter what these individuals are called. Often, their titles, roles, and responsibilities will be outlined in a corporate by-law, which establishes their position and sets out their qualifications, powers, duties, etc. Officers can be replaced by the board of directors, to whom they are accountable.
So to summarize: shareholders with voting power will vote in the directors on an annual basis (or sooner in certain circumstances), directors have the power to manage the corporation and they meet only a few times a year, and officers (e.g. CEO, VP, CFO, Treasurer, President, etc.) are the people who run the corporation on a daily basis and who are appointed (not elected) by the directors on an annual (or sooner in certain circumstances) basis.
David Mayzel is your legal risk manager. He is a trained courtroom lawyer and has spent many years resolving disputes both in and out of court. He knows how to prepare documents and execute transactions in a way that avoids or mitigates legal risks. He can be reached at 416.528.5280. or firstname.lastname@example.org.
Michael Carabash is your business law adviser. He is an entrepreneur at heart who helps you see the big legal picture. He drafts clear and effective agreements that protect your rights while promoting your interests. He can be reached at 647.680.9530. or email@example.com.
Ljubica Durlovska is your transition lawyer. She helps you with staff and associates, maintaining your corporation, and other business matters. She can be reached at 416.443.9280, extension 206 or firstname.lastname@example.org.
Jonathan Borrelli is your employment lawyer. He helps you with staff and associates matters, including hirings, terminations, switching staff to written contracts and resolving disputes. He can be reached at 416.443.9280, extension 204 or email@example.com.
Benjamin Kong is an experienced business law clerk. He assists David and Michael with corporate matters and purchase / sale transactions. He can be reached at 416.443.9280, extension 207 or firstname.lastname@example.org.
Julie Whitehouse is an experienced business law clerk. She assists David and Michael with corporate matters and purchase / sale transactions. She can be reached at 416.443.9280, extension 203 or email@example.com.
David, Michael, Ljubica, Jonathan, Ben and Julie are a truly dynamic team. Their diverse knowledge, skills, and experiences will help you get the best deal possible while promoting your interests and protecting your rights. You can read dentist testimonials here.