Ensuring that your corporate records are in order is an important task. Why it is important?
-Your legal paperwork provides a record of important corporate transactions. This ” paper trail” can be important if disputes arise. You can use this paper trail to show your directors, shareholders, creditors, suppliers, Tax authorities, and the courts that you acted appropriately and in compliance with applicable laws, regulations, or other legal requirements.
-Annual corporate meetings normally are required under corporate laws. If you fail to pay at least minimal attention to these ongoing legal formalities, you may lose the limited liability protection of your corporate status.
-Prospective purchasers will seek to review your minute books to verify the ownership of your company and to ensure that signatories to the various agreements in connection with the purchase of the business have the proper corporate authority. In addition, prospective purchasers will likely seek to review stock option or stock purchase plans, the related agreements and a current list of holders of rights granted under such plans.
-Formally documenting key corporate actions is a fail-safe way of keeping shareholders informed of major corporate decisions.
-Directors of small corporations commonly approve business transactions in which they have a material financial interest. Your minutes or consent forms can help prevent legal problems by proving that these self-interested decisions were arrived at fairly, after full disclosure to the board and shareholders.
Banks, trusts, escrow and title companies, property management companies, and other institutions often ask corporations to submit a copy of a board or shareholder resolution approving the transaction that is being undertaken, such as a loan, purchase, or rental of property.