Maintaining the minute book: Best practices in corporate record keeping

What happens if a minute book is not maintained?

If evidence is uncovered that a corporate entity’s actions are not documented in historic or active record keeping, the shareholders, members, and management could lose personal liability protection – a situation referred to as “piercing the corporate veil.”

The courts have had numerous opportunities in every state to determine standards for the issue of piercing the corporate veil.  In Nevada, the Court in Truck Ins. Exch vs. Swanson 24 Nev 629(2008) weighed a number of factors. The three issues for the court were 1.) Corp influenced/governed by the person asserted to be alter ego, 2.) Unity of interest and ownership, 3.) Facts are such that maintain such separation would sanction fraud/injustice. In this matter the fact that the parties kept separate and up-to-date record books, had unique tax ID numbers, that the officers of the entities were different and had separate bank accounts were all factors that these companies were indeed separate and distinct, and no piercing of the veil was merited. 

A critical record-keeping asset, the minute book acts as the documentation that maintains the corporate separateness of an entity and its shareholders and management.

Going paperless: Virtual recordkeeping still has its challenges

Minute books have been steadily shifting to an electronic format for some time. Many companies have converted their minute books and corporate documents into PDFs and stored them in-house online. Others have stored these documents outside of their organization possibly in a cloud based system, still making them readily available. Companies that have not acted to identify, locate and organize their corporate minute books are still struggling to capture all documents accurately.

Since the advent of the pandemic, access to documentation stored onsite had become increasingly challenging, which lead many organizations to begin looking at different options and services in which to store and access these documents. This helped to elevate the problem of documentation stored on shared servers needing access rights per user.

How did companies meet the challenge of conducting Board business during the pandemic?

As millions of Americans continue to manage Work from home via virtual meetings to communicate and stay productive, in many jurisdictions, regularly scheduled in-person Board, Shareholder and Committee meetings and annual shareholder meetings are slowly coming back in some organizations replacing those virtual substitutes. These meetings are part of the record-keeping documentation and often are approving, amending, and/or discussing topics that should be captured in the minute book. Some states, like Delaware, have long had provisions for remote meetings. Others have taken steps to allow them such as amending their corporate code (NY, CA, NJ, and TX) or have issuing gubernatorial Executive Orders.

Where permitted, transfer agents and financial solution providers can assist companies in setting up secure virtual meeting environments.

Every state may be in a different stage of the process to return to normal activities and routines and it is best to check with your local State government for any updated Executive orders. 

How hCue can help with corporate record keeping

To address the challenges of managing and accessing key legal documentation, many of our hCue subscribers are managing their minute books in their hCue platform. If you aren’t currently using the Documents section of hCue here is how some of our current subscribers are using it.

hCue allows you to easily upload new documents, resolutions, and transactions into a virtual minute book that can be made available to anyone who needs access. The hCue calendar can also be set up to incorporate meeting reminders, attendee tracking, and fee schedules. Plus, board materials can be delivered seamlessly via the Doc Portal.

hCue’s security features, such as role-based security and optional single sign-on, streamline, and help you maintain stricter control over system and document access.

hCue can also be used to generate reports and documents that support the “Inspection of the Minute Book” process. Lists of shareholders, ownership, transactions, addresses, and certificates can be managed in hCue and exported into a report upon request.

Find out more

Although you may not be using it now, please feel free to reach out to your hCue Business Consultant with any questions or to discuss some of the best practices we have seen other customers utilize.

Related services

• Entity management
• Entity managed services