Pawlina Law

Rectifying Resolutions

Pawlina Law has the expertise to bring your corporate minute book up to date; an important task when seeking potential investors. A minute book is a physical binder or an electronic folder that acts as a place to store minutes and resolutions in writing of the board of directors and shareholders, the certificate and articles of incorporation, by-laws, unanimous shareholder agreement, and various other important corporate documents.

Thanks to the long hard hours of work you put in, your company has grown. Thanks to this growth, another company is hoping to acquire your company, or a venture capitalist is hoping to invest in your company to help it grow and scale. A corporate minute book review will be one of the first actions undertaken by counsel of a prospective acquiror or investor. However, most businesses have deficient corporate minute books with some businesses not even having a minute book. Fortunately, it is possible to cure these deficiencies.

What is a Corporate Minute book?

A minute book is a loose-leaf binder used to store all important corporate documents such as the articles of incorporation, the minutes of shareholders and directors’ meetings, stock certificates, tax filings, by-laws and other legal documents. More information on what should be in a corporate minute book can be found here for Canada Corporations and here for Ontario Corporations.

A minute book is used to fulfill the record keeping requirements of the Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”) and the Canada Business Corporations Act (R.S.C., 1985, c. C-44) (CBCA). These records are usually stored in a physical binder. Although the CBCA does not preclude it, the OBCA specifically states that these records can be electronic.

How to fix a Corporate Minute book?

Collecting all documents at your disposal is the first thing the Corporation’s Directors can do when attempting to fix a minute book. Typically, Minute books will have the following deficiencies:

  • Documents will be missing signatures
  • Organizational proceedings and Annual shareholder and/or director proceedings not up to date
  • Missing resignations for previous directors and officers
  • Filings of notices and annual returns are not up to date
  • Missing authorizing resolutions for entering into agreements and transactions
  • Share certificates were not issued or were not properly issued
  • Shareholders ledgers are not up to date
  • Registers of directors, officers, shareholders, share transfers are not up to date

Missing Signatures

Documents missing signatures will need to be signed. In the interests of honestly and transparency, documents should not be backdated. Rather, documents should be signed with two dates listed: an Effective Date and a Signed Date. This could be accomplished in the following manner:

  • Effective March 31st, 2018. Signed February, 15th, 2019.

Missing Organizational Proceedings and Annual Proceedings – Rectifying Resolution

Upon incorporation, an incorporator or a director will need to call an “organizational meeting”. Organizational resolutions that may be adopted by unanimous consent as an alternative to adoption through an organizational meeting. An Organizational resolution for Directors will typically deal with the following:

  • Appointment of Officers;
  • Enactment of By-Law;
  • Fixing the number of Directors within a range contained in the Articles of Incorporation;
  • Setting a Form of Share Certificate;
  • Authorizing the Issuance of Shares;
  • Appointing an interim auditor to hold office until the first meeting of shareholders;
  • Making banking arrangements; and
  • Taking care of any other business.

The directors of your corporation must call the first shareholders’ meeting within 18 months of the corporation’s date of incorporation. In addition to subscribing for shares, shareholders will also need to complete an organizing resolution at the organizing shareholders’ meeting. Alternatively, the CBCA and OBCA permit the use of a written resolutions in lieu of a meeting when the resolution is signed by all the shareholders. An Organizational resolution for Shareholders typically includes:

  • Election of Directors;
  • Confirmation of By-laws;
  • Confirming the number of Directors;
  • Appointing Auditors or Exempting the Corporation from Audit Provisions; and
  • Fixing the number of directors within a range provided in the Articles.

For every year thereafter the corporation will need to hold a meeting or complete the following:

  • Unanimous Directors resolution approving the financial statements
  • Unanimous Shareholders resolution acknowledging receipt of financial statements
  • Shareholders resolution electing the directors for the ensuing year, unless the directors were originally on a go forward basis.
  • Consents to Act as a Director
  • Directors resolution appointing officers for ensuing year, unless the directors were originally on a go forward basis.
  • Appointment of Accountant or Auditor or Audit exemption exempting the corporation from having to perform an audit

If these were not complete a rectifying resolution will need to be completed. A rectifying resolution (also know a Remedial Resolution) is a joint resolution signed by all the Directors and Shareholders of a Corporation that seeks to complete and correct the corporate records of the Corporation and bring them up to date. A rectifying resolution would use language resolving for corporate deficiencies and outstanding corporate matters to be rectified and ratified, to the fullest extent possible and, for greater certainty, for the corporate structure of the Corporation to be approved, ratified and confirmed, for all purposes. Such a resolution would also address any missing authorizing resolutions for entering into agreements and transactions.

Share certificates were not issued or were not properly issued

Share certificates were not issued or were not properly issued will need to be issued in accordance with the By-laws of the new By-laws. If contradictory documentation exists as to a shareholder’s holdings, a release and statutory delectation regarding the incorrect holdings should be completed.

As a corporation is a separate legal entity, specific documents must exist to document the corporation’s decisions and workings. Often entrepreneurs will incorporate their company themselves to save money in the beginning of their corporation’s existence. At times, there corporations lack some or all of the supporting documents that are required for the proper existence of a corporation. Over time the company grows and is looking for investors, however, potential investors are hesitant to invest with the questionable current state of the minute book. Common deficiencies include:

  • Documents will be missing signatures
  • Annual resolutions and proceedings have not been completed
  • There are missing resolutions and resignations of directors
  • Shareholder Ledgers and registers of directors, officers, shareholders, share transfers are not up to date or missing completely
  • Missing authorizing resolutions for entering into agreements and transactions

Provided the corporation has not been dissolved by the government, then all that is needed to bring the corporation’s document back to order is ratifying and rectifying resolutions which would include omnibus annual resolutions of the directors and shareholders. Corporate law is our focus. Pawlina Law can review your corporate minute book and quickly develop a plan for resolving any deficiencies. Please do not hesitate to contact us.