If you are an officer or director of a corporation or other business entity, you’ve undoubtedly been advised to maintain the corporate separateness of your business. If you haven’t, let us so advise you now (January 16, 2006 Article and October 16, 2007 Article). One necessary element of maintaining that corporate separateness is by maintaining an orderly and up-to-date minute book.
So, what is a minute book and how is it maintained? A minute book is, in short, a book or binder (or series of binders) organizing all documents related to the organization’s corporate (as opposed to business) activities for ready inspection. The minute book should include, at the minimum, the organization’s Articles of Incorporation or Organization; the Certificate of Incorporation or Organization; the By-Laws or Operating Agreement; any shareholder or other owner agreements; annual registration reports and other filings with the Secretary of State; a list of shareholders and/or members; and, of course, minutes of the meetings of the directors, shareholders, members or managers, as applicable.
Most of these documents will be prepared by the organization’s attorney and will reflect both routine and extraordinary actions. Single-owner or small-business corporations and limited liability companies often prepare written consents in lieu of annual minutes, which again are typically prepared by the organization’s attorney. Larger general business corporations and nonprofit corporations more typically will hold actual meetings which require preparation of minutes. Although the corporation’s attorney may prepare the minutes based on the secretary’s report, some secretaries will prepare the minutes by himself or herself, based on his or her attendance at the meeting, but the secretary and participants generally “adopt” the minutes to indicate they have been prepared accurately.
Under Missouri law, there is no statutory format required for the form of the corporate minutes or for the procedure of the meeting, though, of course, the format or procedure can be prescribed by the By-Laws or other internal documents of the organization, so you should be intimately familiar with those documents. When you are preparing the minutes, you should keep in mind that the primary purpose of these minutes is to reflect and evidence the content of the meeting in the event of a later dispute. Some larger organizations will use a court reporter and keep their minutes as a verbatim record, but this is seldom necessary, except in publicly traded or other very large organizations, or when a very contentious issue is debated.
The minutes should be sufficiently detailed to reflect what happened during the meeting and to make it difficult to later assert that omissions were made. The time and place of the meeting should be included. The presence of the individuals at the meeting should be noted, along with absences if the overall group participating is not large in number. Each item on the agenda should be reflected, along with the substance of any discussion, including objections (and those making the objections), along with the actual vote count on each item and if less than unanimous, the “yeas” and “nays” should be documented. If a large number of individuals are voting, written ballots may be used to avoid future disputes. If a particular system of procedural rules is used, such as Robert’s Rules of Order, each procedural act in accordance with such rules should be documented as well.
When there are complex or very particular actions to be approved, such as approval of major agreements or amendments to the By-Laws or Articles of Incorporation or Organization, the resolution should be prepared in written form before the meeting and distributed to the members beforehand within the time periods provided in the By-Laws, in the Operating Agreement and by state law. This way, the exact action being considered is clearly communicated to the individuals considering the resolution, and, once approved, the action is easy to document in the minutes.
While there is no statutory requirement to do so, it is highly recommended that the secretary sign the minutes, attesting to their accuracy, before placing them into the minute book. Without such signature, the accuracy and completeness of the minutes may be more easily contested, particularly if, as is often the case, such contest does not take place until months or even years after the meeting.
As discussed above, business organizations can also prepare written consents in lieu of minutes. Written consents are frequently used when action is taken informally. Missouri law generally authorizes written consents in lieu of meetings when there is unanimous consent by the directors, shareholders, managers or members of a general business corporation or limited liability company with respect to the item approved, and 80 percent of the voting power with respect to a nonprofit corporation.
As with minutes, the particular form of a written consent is not dictated by statute, but typically these contain any necessary recitals and the action which the individuals are approving. In consents, as contrasted to minutes, since there is no documented discussion of the corporate action, it is essential that the resolutions are drafted with sufficient detail and clarity that it is clear what action is being approved by the approving body. Lastly, of course, the consent should be signed by the required number of individuals.
Keeping proper minutes and a proper minute book is not sufficient, by itself, for a corporation, limited liability company or other organization to maintain its separateness. However, it is a necessary element — it provides documented evidence that the organization and its officers, directors, members, managers, trustees or other corporate authorities are acting appropriately. In fact, the very act of maintaining the minute book helps provide the structure to ensure that the organization is, in fact, operating in accordance with law and its internal policies and procedures. If a shareholder or member later objects that corporate action was not properly authorized, the last thing the director or officer wants to find out is that the minutes are poorly written, incomplete or ambiguous.
Other articles that may be of interest and assistance to you include the following:
Piercing the “Veil” of a Company’s “Limited Liability” or Looking Through the Entity to Hold Owners Liable for a Company’s Debts. (January 16, 2006)
Meeting Minutes and Written Consents: Sound Reasons for Complying With a Simple, Yet Necessary, Task. (October 16, 2007)