Insights and updates
from MinuteBox
Every corporation in Canada, by law, must file annual corporate returns. Within 60 days of the corporation’s incorporation or amalgamation date, each corporation must submit the requisite filing documents to Corporations Canada. If you incorporate on September 1, 2017, your annual filing will be due on October 30, 2018. The information gathered from your filings is stored on the Corporations Canada website and adds another layer of information for consumers.
All active corporations, regardless of size or operation status, must file annual returns. Active corporations are defined as all corporations that are not dissolved, discontinued or have not previously amalgamated with another corporation. Even corporations you have forgotten about, including holding companies or subsidiaries, are required to file annual returns accordingly.
Section 133 of the Canada Business Corporations Act requires each corporation to hold at least one shareholders meeting annually. Smaller corporations may consider signing corporate resolutions in lieu of having a physical or virtual meeting with all parties present.
Of key importance, however, is the date upon which the shareholder resolutions have been signed. The annual corporate filings require the company to indicate the date of the last shareholders meeting or signed resolutions. The meeting or resolution must therefore occur prior to filing.
Minute books are collections of corporate records, including annual shareholder resolutions, which store information for future reference. Although seemingly unnecessary, these minute books need to be updated annually at minimum, in order to ensure proper compliance with Canadian and provincial business legislation. A government audit, as unlikely (and unpleasant) as it may be, will require an inspection of the updated minute book and problems (and headaches) ensue if the resolution dates do not match those on the annual filings.
The consequences for not filing an annual report can be severe, including the dissolution of the company if the filings have not been submitted over a few years. It is therefore necessary for corporations of all sizes to be conscious and cognizant of their filing and reporting obligations and ensure the appropriate shareholder meetings and resolutions are occurring in due course and are properly documented in the corporate minute book.
One of the steps in the articles of incorporation for a new company is the transfer and issuance of new shares to shareholders. The issuance of shares to shareholders documents the various owners and investors in the company, alongside the percentage of the business they can claim ownership towards. This can also be done using cap tables, which track the capitalization of the company and who owns what percentage of shares.
Documenting the transfer of shares establishes a new regime for the transfer of public securities among the listed shareholders. It’s intended to eliminate much of the expense and delay prevalent in the securities industry by establishing a central depository for all corporate securities. New rules establishing how to redeem outstanding shares can also be documented.
Since this is a vital step in the incorporation process, it’s necessary that all corporations create their own shareholder ledgers to document this information. Traditionally, it has been a time consuming and tedious process. Therefore, is there any way to more efficiently track transfers of corporate shares among shareholders?
How to create your shareholder ledger
A shareholder ledger is the best resource to keep track of all issued shares to a corporation’s various shareholders. It allows for a smooth and accurate tracking of all shares issued by the corporation to each individual shareholder, and it’s also used to monitor the transfer of shares from shareholders back to the corporation.
We’ve created a helpful guide on how to create the perfect shareholder ledger to help you create the outline of one for your own corporation. This will give you an idea of what to include in your shareholder ledger so that you correctly follow all of the requirements to incorporate your business within Canada.
5 ways to efficiently track transfers of corporate shares
Once you have your shareholder ledger firmly established, you can keep track of all share exchange transactions in a diligent manner. But what are the various ways you can go about doing this work? Here are the five most common methods with some proving to be more efficient than others. Have a review and decide what’s best for you.
Paper records and written documentation
In the old days, the only way to keep track of shareholder transactions was through a registry notebook. Companies keep their shareholder registry locked in the corporate office space to ensure it remains safe and securely under lock and key. Each time that shares are issued or transferred among shareholders, a new record is added into the registry.
The good thing about this approach is it’s very traditional, and every party involved will know exactly how to read records in the shareholder ledger. The bad news is that because it’s such an antiquated system, it’s very time consuming and tedious for legal professionals to do. Too much time is lost to administrative work that can otherwise be spent on billable hours with new or existing clients.
One office computer as master of all records
If you’ve moved on from paper shareholder ledgers, that’s likely a step in the right direction. Some companies have only begun the initial stage of this journey by transitioning to digital recordkeeping on one secure office computer. In this scenario, records are maintained in an Excel spreadsheet to track the transfer and issuance of any new shares.
The good thing about this approach is that it is more secure than paper transactions, and there’s significantly less risk that documentation will be lost or misplaced. The bad thing is that it limits accessibility to the shareholder ledger. Only people who log onto that specific office computer can view the records in a convenient manner.
Spreadsheets shared with all shareholders
The next step beyond keeping files on one office computer is to pass them around with all shareholders. Spreadsheets built within Excel can be sent to all relevant parties. This way, all shareholders can view the current capitalization of the company whenever they choose.
The good thing about this approach is that it’s far more transparent as all relevant parties can receive copies of the master file and plainly see the numbers for themselves. The bad thing about this approach is that it doesn’t allow new or updated records to be viewed as conveniently. A new transaction may occur before an updated spreadsheet is passed on, leaving shareholders unaware of the exact state of the company’s capitalization.
Send all information via email
In some cases, companies may do away with a spreadsheet altogether. Any issuance or transfer of corporate shares is communicated via email in one message that highlights the most recent shareholder transaction(s).
The good thing about this approach is that information can be delivered to all shareholders, and they can store the messages in their inboxes or in one manually created file for their own records. The bad thing is that this is a very non-secure approach. Emails can be lost, forwarded, or even corrupted on the web, potentially exposing private shareholder information to the public.
Entity management software
Modern entity management software simplifies the entire process of issuing and tracking shares among all shareholders. You can use the technology to easily report share exchanges in a secure database, document all relevant information about the shareholders in notable fields, and record the value of all corporate ledgers in secure cloud-based registers.
Using entity management software to report all shareholder transactions is your best approach to modernizing your share tracking process. It’s far more efficient than all other methods and, since the platform’s are protected with advanced biometric and hardware key authentications, you have the most secure method of protecting shareholder information.
The best part is that all shareholders can have access to the digital ledger, ensuring everyone is up to speed on the latest issuance or transfer of shares. This allows decisions by the board to be made in more efficient and prudent manners. You can learn more about how to track shareholder transactions with entity management software here.
There are many business benefits derived from digitizing your company minute books and corporate records. Centralizing all company records in one convenient location makes storage, data oversight, and entity management easier for your team than ever before.
Entity management software allows you to digitize your entire roster of minute books. By scanning your recorded documents, you can upload your entire portfolio of minute books into a cloud-based platform that functions as a centralized hub for all of your legal entities.
Benefits of digitizing your minute book records
When you digitize your minute books, you demonstrate to clients and legal professionals alike that your business is a firm that embraces innovation. Not only does this create an impressionable brand identity for prospective clients, you can even leverage this commitment to help attract high quality talent to join your organization. Today’s professionals are excited by the potential of innovative solutions so use your investment wisely to attract more talent.
Your team will also benefit from the platform’s capabilities in many other ways, including:
- Cost savings on overhead office expenditures. Since you’re storing fewer physical minute book records, you can reduce the number of filing cabinets in your office space and convert the financial and space saving perks of that decision into other benefits for the firm. Plus, you have the convenience of one central hub with infinite storage space.
- Faster and convenient ways to find important records. Over three quarters of surveyed business owners say they want access to important files from remote locations. Entity management software allows all parties to access official minute book records anywhere with the ability to unearth specific files in a matter of seconds.
- Backup of important files offers failsafe protection. There’s always the risk that physical minute book records could be lost or misplaced. When you digitize minute books, the platform has built-in backup capabilities to ensure all files remain accessible, organized, and ready for use at any given moment.
- Higher ratio of satisfied clients that help boost referrals. Word of mouth and referral business are two of the most cost effective ways to generate growth for your firm. When you give existing clients the answers they need in time efficient ways, they’re far more likely to recommend friends or fellow entities to your organization. This could be a great way to invest in the growth of your business without the expensive nature of aggressive advertising campaigns.
How to digitize minute books with entity management software
When using entity or subsidiary management software like MinuteBox, you’ve made a commitment to transform your physical minute book records into sophisticated digital legal documents. Now, you need to know how to go about completing that process.
To help with that, here is a brief overview of what that uploading process will look like for your business. By following these steps, you can digitize your minute books and start earning those previously mentioned benefits for the further growth and development of your own business.
Create an organizational hierarchy for all minute book records
Before the uploading process gets underway, create a structured outline for how to incorporate the software with your existing documentation process.
How will you share important data from the platform?
In most cases, there’s a limited number of people who require access to the pertinent legal information in your account. Your internal team of legal professionals and paralegal experts will oversee the records in the account. Additionally, your clients, specifically key points of contact, should have access at their convenience.
In what way will you store and organize minute books within the platform?
You can decide how to centralize your minute books in the cloud. In what way should information be sorted as you organize and standardize your uploading process? Are there particular records that deserve more prominent positions within your hierarchy of minute books? Decide what is the best approach to upload all of your information and stick to that process as more records are uploaded into the platform.
Which metrics will quantify the value of the software when reporting on results?
Measurement of success is always vital when evaluating the merits of a new piece of software. Decide how you’ll measure success. Is it strictly through cost savings, or will you quantify the time and resources saved by the convenience of centralizing all your minute books to calculate the value? Select those key metrics and analyze the results to report on the overall success of your venture into the cloud.
What do you hope to achieve as an organization by using the platform?
Know your goals: that’s imperative to any decision and means of defining success. How can the platform help you fulfill your goals and make you look like a hero to your superiors in the business? If you know what you’re trying to achieve before setting out to make the effort, you’ll be able to measure the effectiveness of the technology and report on it appropriately.
Are there any product features (i.e. additional security, convenient workflows, customer service) that can improve your experience with the platform?
Finally, you should know what product capabilities are most appealing to your business needs. Can the platform do everything it’s advertised to deliver, and what are the features that make your work life easier? Make sure you learn about the intricacies of the platform during the discovery process. This will make it far easier for you to quantify success.
Establish an upload checklist to inventory all existing minute books
It’s easy for physical minute book documents to be lost or misplaced. When undertaking the process to digitize minute books into your entity management account, create a checklist of accountability to ensure records are not lost during the uploading process.
Outline who will be involved in the digitization process, and at what stage their involvement will commence and/or be complete. This way, you have a formal trail that highlights where, how, and with whom each corporate record is overseen as you complete the process to digitize minute books. It keeps all parties accountable and ensures no files are lost as you complete the journey from paper to digital minute book records.
Begin the scanning process to upload minute books into the platform
The actual scanning of minute book records could be completed by your internal legal team or with the assistance of MinuteBox’s team of scanning professionals. The process can be completed on-site at your office and at your own team’s convenience.
Using MinuteBox’s smartOCR, a state of the art and secure digitization process, all minute book records are scanned into the platform and organized based on your mapped out structured requirements. This ensures your company transitions to a modern and innovative workflow that securely and efficiently manages all records with the highest quality standards.
One of the best parts about the MinuteBox process is that, yes, you do have the option to complete the uploading, sorting, and organizing process yourself. However, we have a team of experts who can take the lead on your behalf to complete the work. It’s very likely that the MinuteBox team can finish the uploads faster, more efficiently, and more accurately.
Easily review all records with MinuteBox’s entity information summary
Functioning as a built-in dashboard for all legal entities, the MinuteBox entity information summary is the most advanced overhead view into all corporate and entity records in your account. Using pre-built dynamic fields to search and sort through all of your entities, you can customize how records appear in your entity information summary to manage even the most complex corporate records with speed and convenience.
Are you ready to digitize minute books and help your company become more legally innovative? Join the MinuteBox revolution so that you can upload all minute books and corporate records into one secure cloud-based platform for easier file storage, faster data management, and improved interpersonal client relationships.
An audit is a scary thing. The idea of government officials pouring over internal company records, micro-searching for financial incongruencies is enough to keep any business owner up at night. Fingers crossed it never happens to you. But sometimes it does…
According to the Canada Revenue Agency (CRA) website, during an audit, officers “closely examine books and records of small and medium-sized businesses to make sure they fulfill their obligations, apply tax laws correctly, and receive any amounts to which they are entitled.” An audit is a stressful process, often involving accountants, lawyers and frantic searches through old records. Ultimately, the goal of any audited party is to resolve the matter quickly and painlessly.
But quickly solving the problem requires corporate records to have been safely stored and updated accordingly. Naturally, the larger and busier a company, the easier it is to push these seemingly minute priorities down the list. Big mistake.
The CRA may ask to see the following records:
- information available to the CRA (such as tax returns previously filed, credit bureau searches, or property database information);
- your business records** (such as ledgers, journals, invoices, receipts, contracts, and bank statements);
- your personal records (such as bank statements, mortgage documents, and credit card statements);
- the personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust); and
- adjustments made by your bookkeeper or accountant to arrive at income for tax purposes.
Corporate record books, commonly referred to as “minute books,” contain pertinent information as it relates to the status and well-being of the company. More often than not, minute books are physical binders that sit idly on law firm shelves.
The binders contain the articles of incorporation, amendments, by-laws, original copies of share certificates, corporate ledgers, and other nondescript records.
The minute book should be updated as necessary, but at the very least once a year. What often happens, however, is that because minute books rarely need immediate updating, they are pervasively out of date.
Certain company resolutions can include the authorization to issue bonuses or dividends to employees or shareholders. For obvious reasons, this is of interest to the CRA. Dividends and income are taxed at different rates. So if an individual declares a dividend payment on their personal taxes, yet the resolution authorizing the corporate dividend payment is missing (because the minute book was not updated), the CRA may issue a tax reassessment.
The truth is that while law firms may charge a nominal amount to regularly update a company’s minute book, it costs thousands less than what a law firm will charge to overhaul and update a minute book in the case CRA audit. To avoid problems later on, here are a few important steps companies can take to alleviate the minute book concern before the Canada Revenue Agency comes calling:
- Make sure you know the location of your minute book. The vast majority of all corporate minute books are kept at the office of the company’s law firm. If it’s not there, try and locate it quickly.
- Ask your law firm whether the minute book is up to date. If necessary, remind them of recent transactions, issued dividends and other corporate matters.
- If possible, use a digital or virtual minute book. Minute books are kept in physical format for no other reason than that’s how they have been traditionally stored. A virtual minute book (whether a scanned version of a physical binder or a series of PDF documents stored on an external server) is equally as valid as the traditional physical minute book under Canadian law. Signatures need not be in pen and ink to be legally binding. New tools allow law firms to store and update minute books on the cloud, so clients can access their up-to-date records and share them instantly. Ensure your law firm uses these new solutions for your minute books.
The truth is that no one plans to be audited by the CRA. But that doesn’t mean you can’t be organized if and when the time comes. Taking a few small steps today with your minute book can bring a little sanity and clarity to an otherwise hectic ordeal.
An audit is a scary thing. The idea of government officials pouring over internal company records, micro-searching for financial incongruencies is enough to keep any business owner up at night. Fingers crossed it never happens to you. But sometimes it does…
According to the Canada Revenue Agency (CRA) website, during an audit, officers “closely examine books and records of small and medium-sized businesses to make sure they fulfill their obligations, apply tax laws correctly, and receive any amounts to which they are entitled.” An audit is a stressful process, often involving accountants, lawyers and frantic searches through old records. Ultimately, the goal of any audited party is to resolve the matter quickly and painlessly.
But quickly solving the problem requires corporate records to have been safely stored and updated accordingly. Naturally, the larger and busier a company, the easier it is to push these seemingly minute priorities down the list. Big mistake.
The CRA may ask to see the following records:
- information available to the CRA (such as tax returns previously filed, credit bureau searches, or property database information);
- your business records** (such as ledgers, journals, invoices, receipts, contracts, and bank statements);
- your personal records (such as bank statements, mortgage documents, and credit card statements);
- the personal or business records of other individuals or entities not being audited (for example, a spouse, family members, corporations, partnerships, or a trust); and
- adjustments made by your bookkeeper or accountant to arrive at income for tax purposes.
Corporate record books, commonly referred to as “minute books,” contain pertinent information as it relates to the status and well-being of the company. More often than not, minute books are physical binders that sit idly on law firm shelves. The binders contain the articles of incorporation, amendments, by-laws, original copies of share certificates share certificates, corporate ledgers, and other nondescript records.
process your request
The minute book should be updated as necessary, but at the very least once a year. What often happens, however, is that because minute books rarely need immediate updating, they are pervasively out of date.
Certain company resolutions can include the authorization to issue bonuses or dividends to employees or shareholders. For obvious reasons, this is of interest to the CRA. Dividends and income are taxed at different rates. So if an individual declares a dividend payment on their personal taxes, yet the resolution authorizing the corporate dividend payment is missing (because the minute book was not updated), the CRA may issue a tax reassessment.
The truth is that while law firms may charge a nominal amount to regularly update a company’s minute book, it costs thousands less than what a law firm will charge to overhaul and update a minute book in the case CRA audit. To avoid problems later on, here are a few important steps companies can take to alleviate the minute book concern before the Canada Revenue Agency comes calling:
- Make sure you know the location of your minute book. The vast majority of all corporate minute books are kept at the office of the company’s law firm. If it’s not there, try and locate it quickly.
- Ask your law firm whether the minute book is up to date. If necessary, remind them of recent transactions, issued dividends and other corporate matters.
- If possible, use a digital or virtual minute book. Minute books are kept in physical format for no other reason than that’s how they have been traditionally stored. A virtual minute book (whether a scanned version of a physical binder or a series of PDF documents stored on an external server) is equally as valid as the traditional physical minute book under Canadian law. Signatures need not be in pen and ink to be legally binding. New tools allow law firms to store and update minute books on the cloud, so clients can access their up-to-date records and share them instantly. Ensure your law firm uses these new solutions for your minute books.
The truth is that no one plans to be audited by the CRA. But that doesn’t mean you can’t be organized if and when the time comes. Taking a few small steps today with your minute book can bring a little sanity and clarity to an otherwise hectic ordeal.
Corporate compliance is a fluid concept. Lawmakers enact regular changes to corporate compliance protocols, requiring business entities to adapt their compliance programs accordingly. However, there’s a difference between proactive and reactive compliance that impacts business operations, financial costs, and legal matters for qualifying entities.
In this guide, let’s define the differences between a proactive and reactive compliance program. You’ll also learn about recommended tools and workflows to create a more proactive approach to corporate compliance. All these guidelines will help you keep your organization in the good graces of lawmakers and regulators.
What is a corporate compliance program?
First, you must define a corporate compliance program that you can implement in your organization. A corporate compliance program is a series of internal policies and procedures to detect and prevent violations of federal or jurisdictional regulatory laws.
Non-compliance can result in significant financial penalties and even legal charges for extreme violations. A corporate compliance program is an example of a proactive approach to compliance that protects your organization, executive managers, and shareholders from the consequences of non-compliance.
Do you need a corporate compliance program or fresh ideas to update your established compliance protocols? Read this guide on the seven legal elements of an effective corporate compliance program for inspiration.
process your request
What’s the difference between proactive and reactive compliance?
Traditionally, businesses have been very reactive in how they approach compliance. But today’s leaders recognize that proactive investments in compliance and corporate governance create fewer headaches and actually save costs over the long term.
What is an example of reactive compliance?
Reactive compliance describes how companies respond after a breach in compliance occurs. For example, regulators flag errors in reported legal entity management data that violate compliance protocols.
In response, the violating company must commit days, weeks, or even months towards rectifying the matter. Legal and compliance teams must conduct thorough audits, surveillance, and investigations to determine what caused the breach in compliance. These are very costly and time-consuming workflows that handicap and stunt the growth of your business.
What is an example of proactive compliance?
Proactive compliance, as the term implies, describes the actions taken by a company before a potential act of non-compliance occurs. Unlike reactive compliance, proactive compliance addresses potential risks in advance by installing a culture of compliance throughout the entire organization.
A diligent corporate compliance program is an example of a proactive investment in corporate compliance protocols. It establishes rules and procedures that all employees must follow to maintain corporate compliance.
These programs are especially helpful for large organizations with multiple entities and subsidiaries stationed in diverse global locations. Leaders of each entity or subsidiary can refer to the master compliance guidelines and ensure each corporate division abides by regulatory laws and mandates.
Business benefits of proactive vs. reactive compliance
Sometimes, laws are enacted that force most businesses to adopt more stringent compliance protocols. A recent example is the enactment of the Corporate Transparency Act and the new rules for beneficial ownership information (BOI). Qualifying entities operating within the United States must submit BOI reports to the Treasury Department’s FinCEN unit or incur penalties for non-compliance.
Proactive compliance gathers and organizes all legal entity data.
A proactive compliance program prepares businesses for these kinds of sweeping regulatory changes. A Chief Compliance Officer’s responsibilities include monitoring, auditing, and enforcing compliance protocols. Those protocols include the inputting and reporting of all legal entity management data — along with all information on beneficial owners and shareholders.
Ready access to all legal entity data saves valuable working time.
When filing deadlines are approaching on the calendar, companies can be in one of two positions — scrambling to gather all reporting data or fully prepared to submit compliance data.
Your legal and compliance teams can avoid a hectic scramble near filing deadlines by maintaining proactive approaches to corporate compliance. They’ll save valuable working time because they’ve gathered all the necessary filing data ahead of time. All that’s required is to organize that data into reports ready to be filed and submitted to the appropriate authorities.
Eliminate the financial costs of reactive compliance.
Perhaps the greatest benefit of proactive compliance is that it eliminates the costs of reactive compliance.
If you wait until after a breach of compliance occurs, you have to go through the legal process of correcting the breach. That process is very costly as last-minute legal fees, filing charges, and any fines issued against your business will eat into your operating budget.
Adopting a proactive approach to corporate compliance should eliminate the risk of a breach. As a result, you won’t need to carve out a significant portion of your budget to cover the legal consequences of non-compliance.
How to create a proactive corporate compliance program
The best way to create a corporate compliance program and adopt a proactive approach to compliance is with a structured entity management system. Proactively compliant companies use entity management software as single sources of truth for all reporting compliance data.
Additionally, entity management platforms like MinuteBox have a built-in corporate transparency register. Companies that are required to submit BOI reports — as per the Corporate Transparency Act — can use MinuteBox’s corporate transparency register to gather, file, and submit BOI data and maintain compliance.
The register uses a guided wizard to help you keep track of beneficial owners with significant control. Using these guided templates will help you comply with transparency obligations and maintain an accurate database of all shareholders, including those with significant control. It’s a fast, easy, and proactive way to maintain compliance and protect your corporate interests.
Ready to adopt a more proactive approach to corporate compliance? Join the MinuteBox revolution today and introduce a more proactive corporate compliance workflow to your organization.
