What You Need to Know About Corporate Minutes & The Role of the Corporate Secretary
Among the long list of things you have to do at your business, taking corporate minutes might not be the top item on your to-do list. But did you know that your company is legally obligated to record them if you’re a stock corporation company, limited liability company, or function in certain ways according to state law? Probably not.
Before you break out into a sweat, here is what you need to know about taking corporate minutes and how a Corporate Secretary is necessary to do so properly and legally.
An Overview of Corporate Minute Recording
Taking and maintaining corporate minutes is far more than a ministerial function. Once adopted, corporate minutes have a special legal status. They provide an irrefutable record of the steps taken in the corporate decision process; including what the corporation’s owners and directors considered, and the corporate actions were approved, adopted, and rejected.
All stock corporations and limited liability companies regardless of size or function are required by applicable state law to prepare and maintain corporate minutes. Unfortunately, many companies fail to keep adequate minutes. Companies without good up to date corporate minutes fail to follow required corporate formalities. These corporations are less valuable as (a) they fail to protect corporate representatives, officers, shareholders, directors, managers, and members; and (b) prospective buyers will discount the company’s value as a history of prior corporate acts doesn’t exist.
Corporate minutes are an invaluable tool for litigators. Minutes are proof of corporate compliance with applicable laws and regulations. Minutes can help extinguish claims for alter ego liability, piercing the corporate veil, and demonstrate compliance with fiduciary obligations, and the business judgment rule.
Conversely, if not done right, or not at all, the lack of good minutes will help make individual directors, managers, members and shareholders personally liable for actions taken by the company.
Every stock corporation, limited liability company and non-profit corporation, regardless of size, should create, record and maintain excellent corporate minutes as part of its routine records practices.
The Role of the Corporate Secretary
In most companies, writing and maintaining corporate minutes is the responsibility of the Corporate Secretary. Don’t let the name fool you, the corporate Secretary’s job is neither clerical nor secretarial. It is managerial.
The Corporate Secretary is the company’s historian, librarian, and communication hub. The Corporate Secretary drafts (or oversees the drafting of) official communications between the corporation, its owners, managers and directors. The Secretary gives formal notice of Directors, Shareholders, Manager and Members meetings.
The Corporate Secretary maintains the company’s official records, including the list Directors, Shareholders or Members and Managers, special and annual minutes, holds the company seal, and acts to ensure that the company stays in compliance with applicable company law.
Typically, the Corporate Secretary attends all company Directors, Shareholders or Managers and Members meetings to take notes and advise on procedure. For example, the Corporate Secretary may remind the Chairperson that a formal vote is require. After a meeting is over, the Corporate Secretary will prepare draft minutes which he circulates to all the Directors, Shareholders, Managers or Members for their review and comment.
Typically, the Chairperson of the next meeting will ask that a motion to be brought to formally adopt the minutes of the previous meeting. Upon a motion being brought, seconded, and a vote of the majority in attendance, the Corporate Secretary is instructed to formally adopt the minutes by signing the minutes, affixing the corporate seal, and placing the signed original company’s Minute Book, the official records of the corporation.
It is noteworthy that if the Corporate Secretary cannot attend a meeting, anyone can take notes. The Corporate Secretary can also send someone else to attend on his/her behalf.
In many corporations, the notes are taken by someone other than the Corporate Secretary, who often will not even prepare minutes. Instead, the Corporate Secretary will oversee the notetaking and/or minute drafting process. However, it is the Secretary’s contractual and legal responsibility to ensure that adequate minutes are created for each meeting.
While complex, recording corporate minutes and having a Corporate Secretary is critical to the health and function of your business. When done correctly, your corporate minutes can save you time and money fighting off legal battles and other unnecessary challenges. Fortunately, there is an easier way to handle your corporate minutes.
Minute Creator can help. This simple software tool can help your corporate secretary stay on top of requests for notice, minutes, and so much You can now use MinuteCreatorTM to draft, store, upload, and retrieve your minutes right from your office or home. Click here to learn more.
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