By Anna Cook, Cox & Palmer
Incorporating a company in Newfoundland and Labrador is a fairly easy and painless process: three simple online forms and a filing fee will get you an official certificate of incorporation issued from the Registry of Companies. In an effort to be cost-conscious, many new business owners take care of this requirement themselves, not realizing (until it’s too late) that this is only one small step in the corporate set-up and organization process. Experience as a business lawyer has shown me that, most of the time, “do-it-yourself ” incorporation is penny-wise but pound foolish.
The proper incorporation and organization process is dictated by the province’s Corporations Act, and it entails such additional steps as
managing subscriptions for shares by the shareholders and issuing the corresponding share certificates
creating and maintaining registers and ledgers of all directors, officers, shareholders, and share transactions
passing of resolutions by the directors - to confirm the Articles of Incorporation as filed with the registry - to confirm the shareholders - to appoint the officers - to establish the fiscal year - to establish the registered office and to enact the corporate by laws
passing of resolutions by the shareholders - to establish the board of directors - to affirm the corporate by-laws and - to appoint the corporate auditor
All these steps require careful planning and, once signed, the documents should be organized in the corporate minute book. This is also an opportunity to consider the benefits of negotiating a unanimous shareholders’ agreement.
A good corporate minute book starts the business off on the right foot. It is maintained and updated annually or as changes in the business occur. It records the history of the company: the people involved (shareholders, directors and officers) and the decisions the company has made and actions it has taken since the date of incorporation. It provides the evidence of valid, legal, and authorized corporate decision making.
But this is not just about good corporate bookkeeping: a well-maintained and up-to-date minute book is essential for many corporate transactions. Businesses will be called upon to produce a minute book for inspection in a variety of situations:
when they take in new shareholders
when they seek equity investors
when they undertake restructuring, reorganization, or amalgamation
when they deal with banks and bank financing
if they are involved in selling the business
if they apply for government grants and programs
if a shareholder dispute occurs
Not having an up-to-date corporate minute book in these types of situations means one will need to be updated or retroactively built in order for the transaction to proceed. Such an undertaking rarely leads to an accurate result, since it entails trying to piece together the corporate history, locating or recreating several years of corporate records, and tracking down former stakeholders to gather signatures.
Though not impossible to do, this can represent a significant delay and unnecessary expense—not to mention an unwanted distraction for the corporate executives—in the middle of an important transaction. Moreover, poor record keeping can create a negative impression about management and operations, thereby damaging confidence in the corporate image and reputation.
All of this can be so easily avoided with one small piece of advice: “begin as you mean to go on.” Start with good corporate records and take the time to keep good corporate records. It will save you time and money in the end.
Anna Cook, Cox & Palmer
Anna Cook is a partner at Cox & Palmer, St. John’s, where her practice focuses primarily on corporate and commercial, employment and labour, and privacy law. She handles matters including commercial financings, commercial real estate purchases, financing and leasing, share sales, asset sales, mergers and acquisitions, and joint ventures. She has extensive experience acting for clients ranging from small-business start-ups to large multinational and international corporations and has advised businesses at every stage of the business cycle. A strong supporter of women in business, Anna is an active NLOWE member and a presenter for the NLOWE Entrepreneur of the Year Awards.