Why Do You Need a Minute Book?
Whether you have organized your corporation in Delaware, California or any other state, your existence as a corporate entity begins with the filing of your organizational “Certificate of Incorporation” or “Articles of Incorporation” (states differ on what they call this document; Delaware uses “Certificate of Incorporation”). After this initial document is filed, the company can only act through its Board of Directors, usually initially appointed by the Sole Incorporator. Election of officers, approval of stock issuances and option grants, credit arrangements, changes in authorized shares, and certain other matters must be documented to evidence proper authorization by the Board pursuant to the Company’s charter and Bylaws. For more details, see our article What Decisions Need Approval from Your Board of Directors?
It is extremely important to keep excellent paper records. Over the life of your company, you will be asked on any number of occasions to provide evidence of Board approval of certain actions, whether in connection with the opening of an additional credit line, a seed round financing or on the eve of your initial public offering, when underwriters’ counsel really does want proof that the company was “duly incorporated” or backup supporting all those option grants over the years. Company counsel will also rely on these corporate records to back up a legal opinion or respond to due diligence requests from potential investors’ counsel or perhaps a company interested in acquiring your assets. Having up-to-date, clear and concise records of all Board actions will make those processes less painful. The alternative is not only painful but can become expensive in terms of legal fees if it’s necessary to reinvent the wheel by recreating and ratifying all past actions.
What are “Minutes” and When Are They Produced?
At each Board meeting, one individual will be designated secretary of the meeting who will be responsible for preparing written notes (a.k.a. “minutes”) memorializing the discussions by the Board and setting forth any formal resolutions adopted at the meeting. These minutes will then be reviewed and approved by the Board at a subsequent meeting, signed by the secretary of the meeting and placed in the Minute Book. Once shares are issued, certain actions will also require stockholder approval, and those approvals will also need to be documented and included in the Minute Book.
How Do You Maintain a Minute Book?
A well organized Minute Book might be divided into the following sections, each containing the documents listed and with an accompanying index:
- Certificate of Incorporation: A file-stamped copy of the Certificate/Articles of Incorporation and all subsequent amendments as filed in the state of incorporation.
- Bylaws: Your Bylaws and any amendments.
- Board of Directors:
- If initial directors are not identified in the Certificate/Articles, an executed action by sole incorporator appointing these individuals.
- An executed organizational consent or signed minutes of an organizational meeting in which the basic operations of the company are set forth.
- Minutes of all meetings signed by the secretary of the meeting.
- All written consents approving actions between meetings, executed by all Board members.
- Stockholders: All actions by stockholders executed by the requisite majority or percentage of holders to authorize the actions detailed in the document.
In addition, for ease of reference, you might want to include a list of current officers and directors as well as any foreign qualification documents and the company’s tax I.D. and employer identification numbers.
Your lawyer can keep the original minute book materials. Many companies will keep an electronic minute book, using a cloud-based service to store and share materials. If your company does that, you can use a file structure organized as described above.
If you get in the habit of papering meetings right away and keeping your corporate records up to date, it really will not be as onerous as you might think.
Last reviewed: June 5, 2014