Businesses Should Ensure
That Their Corporate Records are Maintained and Up to Date By Jamie Dietz In accordance with state law, shareholders and board of directors of Ohio corporations are required to conduct meetings at least annually. To memorialize these meetings, corporations record “minutes” from the meeting and insert them in their corporate record book. The By-laws or Code of Regulations of the corporation dictate when these annual meetings are to be conducted. While it often seems impractical to hold a meeting when there is only one or two shareholders or directors, such a meeting is required nevertheless. The items requiring approval by the shareholders and directors at the annual meetings can simply be noted in the corporation’s minutes reflecting the date and time of the meetings. Typical approvals required at a shareholder’s meeting include the approval of the company’s financial reports, the election of directors and the ratification of the corporate activity during the past fiscal year. At the annual director’s meeting, items which are usually addressed include the election of officers and the fixing of their respective salaries. Certain other action of a corporation requires approval as well. These actions can be specifically authorized during the fiscal year through a special meeting of either the board of directors or the shareholders. The items requiring authorization may include borrowing of money, entering into leases, purchasing or selling of assets, and amending the company’s By-laws. In many instances, only board of director approval is required and therefore such authority through a special meeting should be obtained. When a corporation engages in any “significant” conduct, such as the sale of substantially all of its assets, amending the By-laws or corporate restructuring, shareholder approval is required through the similar process of the special meeting. Ohio law permits the approval of this corporate action by its shareholders or directors without a meeting, provided the corporation has unanimous consent by its shareholders or directors, as the case may be. This unanimous consent must be reduced to writing and contain an appropriate resolution reflecting the corporation’s approval and/or authority. Invariably, corporations are required to provide their corporate records to third parties requesting inspection of the corporate minute book, such as the Internal Revenue Service, Bureau of Worker’s Compensation, lending institutions and perhaps a prospective purchaser of the business. If corporate minutes are not maintained on a somewhat regular basis, items may be overlooked and not properly recorded. Very often, especially with close corporations (which consist of only a couple of shareholders), corporate records are not maintained in the normal course of business, even though certain actions are taken by the corporation with proper authority. It is very important that corporate minutes be “updated” to reflect the action required by Ohio law. For many of our clients, we assist in the process of forming a corporation, initializing the corporate records and then maintaining corporate minutes. It is certainly prudent for corporations to inspect their corporate minute book to confirm that all proper authorization and annual meetings have been duly recorded.
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