Don’t be like FTX–Learn the Lessons of Corporate Compliance
About this Whitepaper
For legal teams, corporate secretaries and compliance officers, managing corporate records is more than a routine task. It’s the foundation of compliance, audits, successful mergers, acquisitions and business combinations.
Missing or inaccurate documents can result in serious consequences, so it’s crucial to have an efficient system in place. For example, by missing a deadline on a patent maintenance fee, Novo Nordisk lost its patent on Ozempic, leading to potential revenue losses in the billions.
In this article, we break down why corporate record management is so important and the tools you can use to help make it easy.
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What Are Corporate Records — and Why They’re Crucial for Compliance and Audits
Corporate records are official documentation that proves a company exists and is operating legally. They also demonstrate compliance with internal and external regulations.
For instance, one of the first corporate records a company will create is the articles of incorporation or certificate of incorporation. Other types of records include minute books, shareholder registers, business ledgers, tax returns and a whole lot more.
Besides being a legal requirement, corporate records are essential for audits and all annual compliance reporting.
In addition, they help maintain a clear division between the business and personal assets. Without proper documentation, that protection can fail, putting personal assets at risk during audits or lawsuits.
Well-organized records also boost a company’s value during mergers and acquisitions by providing clear evidence of its worth.
How Long Do You Need to Keep Corporate Records? (And Why Centralization Matters)
Record retention timelines vary by jurisdiction, however, a general rule of thumb is to maintain the corporate records for at least six to seven years after dissolution.
In certain jurisdictions, certain documents, such as the articles of incorporation, must be permanently retained. Other types of documents, like I-9 forms, timesheets and marketing materials, tend to have a shorter retention period.
The main challenge for businesses isn’t retention but consistent organization.
A centralized platform like MinuteBox can be a valuable asset in this case.
Instead of relying on spreadsheets, filing cabinets and shared drives, MinuteBox stores all documents in a secure, cloud-based hub tailored to jurisdictional and retention schedules.
This drastically reduces the risk of human error and regulatory non-compliance while also preventing document loss and inconsistent file formats and naming conventions.
Who Owns Corporate Records Management Responsibility in Your Organization?
Corporate records typically fall under the responsibility of:
- Corporate clerks and secretaries
- Paralegals
- General Counsel
However, these roles don’t operate in a vacuum. Many other stakeholders rely on and need to access corporate records regularly. For example:
- Corporate lawyers working on M&A deals
- Real estate lawyers working on conveyancing deals
- Accounting departments that rely on corporate data for billing purposes
- IP lawyers who reference corporate information when filing or renewing patents and trademarks
- Municipal and regulatory lawyers during licensing applications
- Estate lawyers working on estate planning matters that involve the ownership of corporations
- Even the mailroom staff may require access for mail forwarding
And when we look in-house, many departments, such as finance and tax teams, as well as corporate development, also need access.
Without a centralized system, tracking who has access to what and when becomes very hard. This is where information can get scattered and the risks of duplicated records, errors and documentation gaps increase.
Examples of Corporate Records You Should Always Keep Organized
The stored records extend well beyond corporate incorporation and organizational documents. Examples of what you should be keeping include:
- Ownership and capital records, including shareholder ledgers and share certificates
- Meeting minutes and corporate resolutions
- Director registers, company by-laws and resolutions
- Financial and tax records, including annual statements, bank statements and payment records
- All contracts and agreements, including employee contracts and NDAs
- Intellectual property and asset records
- Compliance and regulatory documents
- Payroll and personnel records
The importance of keeping all corporate legal records in a centralized entity management system cannot be underestimated.
Need to confirm the current director or officer for a business license renewal, or the registered address for a vendor contract?
MinuteBox cross-links these records for better visibility and context. Instead of searching through folders or asking multiple departments for the information, everything is accessible and logically connected in one place.
The Hidden Risks of Poor Corporate Records Management
Besides creating operational inefficiencies, poor corporate record management can have more severe consequences.
Risks include missed filings and the subsequent penalties for skipping the deadlines. Any M&A deals could be drastically delayed if records are missing or incomplete, while the business could face regulatory fines for holding inaccurate and outdated information.
Corporate records are also fundamental for maintaining transparency around Ultimate Beneficial Ownership. If this doesn’t happen, there will be hefty fines, legal liabilities and significant reputational damage on the horizon.
For instance, in the U.S., the Corporate Transparency Act (CTA) imposes fines of up to $591 per day for failing to report UBO information, with criminal penalties up to $10,000 or two years in prison. In Canada, British Columbia’s Business Corporations Act (BCBCA) requires companies to disclose UBO data, with non-compliance fines of up to $50,000 for corporations.
Without an entity management system, it’s easy for these obligations to slip through the cracks, leading to serious consequences.
Why Centralized Digital Records Are Now Essential (Not Optional)
All businesses are tightly regulated and paper binders and scattered systems are no longer sufficient to support the complexity of the corporate structure.
A digital-first approach isn’t just “nice to have,” it’s essential for keeping up with modern requirements.
Plus, it will help you future-proof your records for expanding legal entities, when regulations evolve and your business scales.
MinuteBox’s cloud-based platform is a solution for real-time visibility and audit-readiness.
By storing corporate records in a centralized system, you can be assured that information is always accurate, up to date and accessible when needed.
What to Look for in a Corporate Records Management Solution
When evaluating a corporate records management solution, make sure it includes these must-have features:
- A centralized entity dashboard with real-time, custom views
- Automated compliance alerts
- Ownership and UBO tracking
- Granular access controls and user permissions
- Audit trail and change tracking
- Cross-linked entity views
- Dynamic reporting
- Cloud-based access
MinuteBox checks all these boxes, replacing manual or outdated methods with an efficient, automated solution that makes corporate record management effortless.
FAQ – Smarter Corporate Records Management for Compliance
What types of corporate records does MinuteBox help manage?
MinuteBox helps you manage a wide range of corporate records, including incorporation documents, director and shareholder registers, minute books, resolutions, share certificates, beneficial ownership data and more.
How does MinuteBox ensure corporate records stay compliant over time?
MinuteBox ensures corporate records stay compliant over time by using automated deadline reminders and keeping track of compliance requirements in one place. Compliance progress is monitored in real-time, keeping businesses better aligned with changing regulations.
Can MinuteBox help during audits or M&A due diligence?
Yes, MinuteBox can help during audits and M&A due diligence. It does this by offering a centralized place to store and maintain corporate records. All changes are tracked and added to the audit log for full transparency.
Additionally, MinuteBox offers integrated data rooms, enabling secure and efficient sharing of sensitive documents with third parties, which is critical for both audits and deal processes.
MinuteBox also makes it easy to respond to document requests quickly, minimizing disruption risk and delay.
What happens if corporate records are missing or inaccurate?
Missing or inaccurate corporate records can trigger regulatory penalties and even legal action if the issue is severe. Additionally, missing and inaccurate records will delay deals and damage the business’s reputation.
MinuteBox helps mitigate this risk by centralizing and validating corporate records, ensuring accuracy and accessibility when needed.
How secure is MinuteBox’s cloud platform for storing sensitive corporate data?
MinuteBox uses enterprise-grade encryption and access controls for end-to-end security to protect sensitive data. The platform is SOC 2 Type II, ISO 27001, 27017 and 27018 audited and compliant, which ensures all corporate documents are kept safe.
Some industries are ripe for modern technology, while others are slow to adapt to innovative solutions. Broadly speaking, the healthcare sector, hospitality sector, construction industry, and agriculture industry are some of the largest sectors of the economy with the least adoption rates of modern technology.
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You could argue that the legal community, while not quite as rudimentary as some of those other sectors, also has a general case of technophobia. Law firms have relied on traditional workflows involving pen and paper or Microsoft Office files to manage client information. To this day, many firms still adhere to the old ways, potentially placing themselves at a competitive disadvantage.
It begs the question: what lies at the root of these technophobic fears, and how can they be overcome? What do legal professionals need to understand about how technology can simplify their lives so that it increases adoption rates? Let’s look into that and outline answers to those pressing questions.
Legal teams understand legal technology is a growing trend
According to the Wolters Kluwer Future Ready Lawyer Survey, which was disseminated to 751 professionals across North America and Europe, the top three trends cited by respondents are:
- Growing importance of legal technology in legal workflows
- Managing increasingly complex information
- Adapting to new or evolving client needs
The findings show that 79% of survey participants cited these three key areas as the biggest trends impacting the legal industry. At the same time, only 36% of respondents believe their firm or organization is prepared to address these growing trends.
Growing client demand for tech-powered firms
In the same study, participants were asked how they evaluate a potential partnering firm’s use of legal technology, and what impact that has on their decision to enter into business with the firm.
- In 2022, up to 70% of respondents said that how a prospective firm uses legal technology influences whether they enter into a working relationship with that firm.
- The response rate is up from 41% in 2020 and 52% in 2021.
- By 2025, client interest in legal technology is expected to reach 97%.
This particular finding corresponds with other industry studies that show the influence of technology on business operations. Since the COVID-19 pandemic, 77% of business owners admit they want more flexible options to access important files.
These findings should serve as a wake-up call for technophobic law firms. Clients want to work with legal professionals who support their desire for flexible meetings and file access management. Failing to incorporate innovative solutions could result in lost business and missed opportunities to boost Legal Recurring Revenue.
Why are firms reluctant to embrace legal technology
Broadly speaking, companies in most industries struggle to embrace technology out of fear that it will corrupt their use of data. Data lies at the heart of any effective business strategy. However, if that data isn’t clean or organized, it makes it difficult to interpret any insights and feed a business growth strategy.
When looking specifically at the adoption of legal technology, here are the three main reasons law firms are resistant to modern technology.
Mistaken idea that managing legal technology is very time consuming
In the legal community, time really does equate to money. Legal professionals are always looking for ways to increase billable hours so they can boost inbound Legal Recurring Revenue for the firm. As a consequence, many legal minds are under the misguided belief that every minute not used for billable hours is a sunk cost.
Unfortunately, legal teams that fall into this line of thinking risk leaving their operations less efficient and productive than they otherwise could be with legal technology. The amount of time spent on administrative or clerical tasks remains stubbornly high without an innovative solution to streamline all these laborious tasks.
Legal technology is costly and deemed too expensive for the budget
This is the biggest reason why firms refuse to adopt modern legal technology. Without a tangible economic benefit from investing in legal technology, firms don’t see the value in carving out portions of their budget for such investments.
When legal teams fall into this line of thinking, they forget one of the fundamental rules of any business: the cost of doing business. Any company must invest in certain expenditures to maintain and improve operations. Legal technology is one of those expenditures that pays off in the form of time savings and efficient workflows.
Concerns that legal technology will slow things down and create lags
Similar to the time efficiency argument, some law firms believe that legal technology will slow down their rate of operations. They worry that there will be lags in productivity, diminishing the firm’s potential for growth.
The counterargument here is that legal technology is designed to introduce efficiencies to established workflows. Rather than slow things down, legal technology actually speeds things up by reducing the time professionals spend on non-revenue generating tasks.
Why entity management software is the secret to overcoming legal technophobia
Having debunked misguided beliefs about legal technology, what is the optimal solution to improve legal workflows and overcome skeptical feelings towards legal technology? The answer is entity management software, which is designed by legal minds for legal minds.
Entity management software is a form of legal technology developed by legal professionals who represent law firms, legal departments, general counsel, and compliance professionals. It simplifies the complex aspects of entity management and streamlines operations into a workflow that’s efficient, relatable, and even fun.
Entity management software enables legal teams to create one centralized location for all client minute book records. The process of inputting, filing, sorting, and tagging minute book data is complete in a matter of minutes. This is in stark contrast to the time consuming administrative tasks conducted outside of an entity management system. Investing in entity management solutions will help your legal team, particularly your paralegals avoid feelings of burnout.
Teams that use entity management software save invaluable hours on clerical duties that can be reallocated to growing the interests of the firm. It also helps with talent acquisition as many rising legal professionals understand the value of entity management technology. Use your firm’s adoption of entity management systems in your HR strategy. This will encourage the brightest legal minds to join your team and increase Legal Recurring Revenue for your firm.
On December 13, 2018, Bill C-86 received Royal Assent, thereby amending certain provisions of the Canada Business Corporations Act (“CBCA”).
The updated provisions include new record keeping requirements for private companies incorporated under the CBCA. As of June 13, 2019. The updates affect those with “significant control” of a company defined as:
Section 2.1(1)
- (a) an individual who has any of the following interests or rights, or any combination of them, in respect of a significant number of shares of the corporation:
- (i) the individual is the registered holder of them,
- (ii) the individual is the beneficial owner of them, or
- (iii) the individual has direct or indirect control or direction over them;
- (b) an individual who has any direct or indirect influence that, if exercised, would result in control in fact of the corporation; or
- (c) an individual to whom prescribed circumstances apply.
A “significant number of shares” is further defined as:
Section 2.1(3)
- (a) any number of shares that carry 25% or more of the voting rights attached to all of the corporation’s outstanding voting shares; or
- (b) any number of shares that is equal to 25% or more of all of the corporation’s outstanding shares measured by fair market value.
Summary
Private CBCA corporations must now maintain a register of all individuals who fit the above description, and include in the register the names, birth dates, residence (for tax purposes) and other required data.
Shareholders are now obligated to provide true and accurate information when requested by the corporation.
At least once per financial year, the corporation must review and update this information. Once the corporation is aware of any changes, it has 15 days in order to amend the register accordingly. Failure to properly update the information can result in fines of up to $5,000. However, directors or shareholders knowingly providing false information can result in fines of up to $200,000 and/or six months of imprisonment.
The CBCA requirements ensure that corporations (or the law firms that manage the records for those corporations) must undertake a greater number of tasks each year to ensure the corporate records’ compliance.
The process of updating minute book records will be daunting and tedious, especially if the information is stored in physical minute books binders. Document generation tools and clearly organized cloud-based data and databases can make compliance with the new requirements more manageable.
While the new requirements apply only to privately held CBCA corporations, it is certainly possible that the provincial legislatures will debate and perhaps adopt similar requirements.
At MinuteBox, we have already begun internally testing some new features (to be released in 2019) built specifically to support lawyers and clerks through this process.