I have a corporation the shares of which are held only by me and members of my immediate family. Do I really need to have annual minutes?
If your corporation is audited by the CRA and matters, such as the declaration of dividends, have not been formally documented by a written resolution of the directors or in annual minutes, the consequence can be severe. There are other risks that may be avoided by having minutes prepared annually. This is analogous to your dentist who encourages you to have good dental hygiene and periodic check-ups so that small problems do not become big problems. Practicing good corporate hygiene just makes good sense.
The minimum legal obligation of a corporation is to hold an annual meeting of shareholders to consider the financial statements, elect directors and to appoint (or dispense with the appointment of) the auditor. In practice, and as permitted by statute, narrowly held corporations often dispense with an annual meeting in favor of signed resolution of all of the shareholders. The failure to hold annual resolutions, or obtain written resolutions in lieu, can lead to legal action from disgruntled shareholders.
The practice of holding annual meetings (or resolutions in lieu) also tends to ensure that corporate matters requiring attention are addressed, such as share transfers, changes to directors, and address changes, which if left unaddressed could become significant problems.
An effective method of ensuring good “corporate hygiene” is for the corporation to instruct its accounting advisors to provide legal counsel with an annual letter of instructions to document applicable financial matters.
It is not uncommon that a new client brings us a minute book that has not been properly organized, or that has not been updated for many years. It is not a cause for embarrassment. We strongly encourage that the minute books be updated before an issue arises, such as a CRA audit.