Why is it important to create a proper minute book upon incorporation?
February 22, 2018
Posted by: ekalaw
Corporate Law, Incorporation, Minute Books
A proper minute book is a set of resolutions, consents and authorizations by which we document the steps required by law, such as authorization and issuance of shares, election of directors and officers, assignment of fiscal year end, registered office and other important corporate matters.
Often, to save costs, people incorporate on their own and do not bother with the minute book creation. This can haunt you back in the future!
Imagine two business partners who started a company with best intentions. In a couple of years, they do not get along anymore and want to split the business by sale or a buy-out (one partner buys other partner’s share). However, because there is no minute book, there is no record of what amount of shares each partner owns.
This can be rectified if the partners agree on their ownership. However, if the partners have different opinions on what each of them invested in terms of funds or time, they have a problem. Much more funds, time and effort will be required to settle the issue among the partners.