So, you formed a corporation in order to protect your assets. You researched how corporations work and the liability protection they provide. After your thorough investigation, you decided that your business needed the shield provided by a corporation. Now what?
The decision to incorporate your business was a smart decision. Owning a corporation protects your personal assets from many liabilities including:
- liabilities due to employee’s actions
- liabilities incurred by your business partners
- debts solely owed by the Corporation
Nevertheless, this protection is not perfect and may be compromised if the corporation fails to maintain certain formalities. One of these small but extremely important formalities is the corporate minutes.
Under Tennessee law, corporations are required to keep minutes of all shareholders’ and board of directors’ meetings. Not only does Tennessee law require that all corporations keep minutes of the corporation’s meetings, but minutes can often be used to provide proof that corporate officers fulfilled their duty of due care to the corporation. Nonetheless, many corporations fail to keep minutes of their meetings. It is only when a major business transaction is about to occur or there is a pending lawsuit against the corporation that anyone remembers that corporate minutes should have been drafted. This often leads to panic as corporate officers try to draft minutes for meetings that may have occurred years ago. Recreating minutes that cover year’s worth of business ends up being difficult, stressful, and often incomplete.
What Should Be Recorded In the Minutes?
While the law in Tennessee requires that a corporation record the minutes of all shareholders’ meetings and all board of directors’ meetings, it does not identify what should be recorded in the minutes. Therefore, it is important to identify what information should be recorded in the minutes.
Minutes are intended to be a summary of the meeting, highlighting the important discussions and decisions, not a word-for-word record of the meeting. The following checklist is provided to help determine what information should be included in the minutes and to ensure that your corporation’s minutes are complete.
Checklist for Minutes of Board of Directors’ Meetings
Date, Time and Place That the Meeting Was Held
- The minutes should specify if it is a special or regular meeting
Who Attended Meeting
- The minutes should list who was present for the meeting
- This includes the corporation’s directors, officers, attorneys, and accountants
- The minutes should summarize what business was discussed at the meeting
- Usually old business is discussed first at the meeting. Old business is often the status of the Corporation, financial goals attained or missed, and the outcome of resolutions from previous meetings.
- After discussing old business, the discussion moves toward new business which consists of planning and setting new goals.
- All corporate actions that have been voted on and approved by the directors should be recorded in the minutes
- Resolutions are identified by the word “RESOLVED” followed by the resolution
- Because certain corporate actions require more than a simple majority to approve, it is important to include whether the action was approved by a majority, a two-thirds majority, or unanimously. (The corporation’s bylaws or state law may require more than a simple majority in certain instances)
- Common resolutions of the board or directors may be:
- Removal and appointment of new officers
- Authorizing a major contract
- Borrowing Capital
- Defending a lawsuit or bringing legal action
- Selling shares of the Corporation
- Proposing new bylaws
- Opening or closing a bank account
Signature of Corporate Secretary