There are Mistakes and There are Mistakes
October 28th, 2013
By Nathan Green
As I have been writing over the past several weeks there are many good reasons to have a minute book updated. One of the most critical however is because of errors that may be recorded in it.
Lawyers, accountants, and others who might do work on a minute book are people and can make mistakes. Many use pre-made forms as a starting point when drafting documents. This is great for the client because they don’t have to pay to reinvent the wheel and it allows lawyers to make a slightly better wheel each time we touch the document. However if care is not taken provisions meant for one file can be left in the document when it is used in another file. The old rule “fast, cheap, or good. Pick two.” generally holds true even in the world of corporate minutes.
I recently reviewed a minute book, and while I do not know who prepared the past minutes, a controlling interest in the company was distributed in error to a stranger to the company. I only caught it because I took the time to review past transactions. While it is not standard practice to review all past transactions, and is not part of the services a normal minute book update includes, I do examine key agreements to understand how a company got from incorporation to my desk. In this case, because it was spotted early, the mistake was easy to correct.
If however a shareholder had died, or the corporation was being sold, it could have been too late. The erroneous shareholder may have to be contacted to correct the records and if they are a less than honourable person they might demand a significant payment or fee from the company.
Every set of minute books is different. However annual updates, performed by a professional, are an investment worth making.
Any information or opinions expressed on this blog is for information purposes only. It is not, and should not be taken as, legal advice or a legal opinion. You should not rely on it, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this blog.