It’s the law, plain and simple. All Ohio corporations are required to conduct annual Board of Directors and Shareholders meetings and keep a record of the minutes.
Besides being required by law to perform this annual task, there are benefits. One of the reasons you established a separate entity to conduct your business may have been to shield your personal assets from the debts and liabilities of your corporation and to limit your personal liability associated with the business. If proper corporate records and minutes are not maintained, an adverse party may attempt to pierce the corporate veil of protection and seek to reach the owners for personal liability. Although your corporation may have been properly formed initially, if you aren’t updating your minute book, a claim can be made that your corporation isn’t actually conducting business as a corporation. Failure to maintain proper corporate records is one way an adverse party may seek to prove that your corporation does not legally exist, and, if successful, remove the protection afforded by doing business as a validly existing corporation.
There are other reasons why your corporate minutes should be properly prepared and maintained. These include tax audits, workers’ compensation investigations and financing requests in which lenders require a review or your corporate minute books. A potential buyer of your business, performing due diligence, will want to see proper documentation of your corporation’s legal existence by reviewing a well kept and up-to-date corporate record book.
Consideration should be given to document and approve certain actions taken throughout the year or anticipated to be taken in the coming year, such as acquisition of credit lines or applications for loans, execution of a lease or lease renewal, and exercising options to extend employment or other contracts.
Finally, while limited liability companies (“LLCs”) are not required to follow the strict requirements imposed upon corporations, it is strongly recommended that LLCs hold annual meetings and maintain minutes of its members and managers to guard against the attack of “piercing the LLC veil” claims in an attempt to hold individual members liable for the business debts, liabilities or other obligations of the LLC.
In an effort to save your company time and money by not making these essential updates, you could cost yourself a great deal more. Should you need to update your corporate minute book, contact Craig S. Marshall, or your Stark & Knoll attorney.