Do you keep written meeting minutes?
March 22, 2018
Annual Meeting Minutes Are Very Important
During the first quarter of each year many small businesses hold their annual meeting. At the annual meeting, shareholders, limited liability company members, managers and officers reflect on the past year’s business performance and discuss strategies for the new year. Voting on new or re-nominating existing directors and officers is also key. And the most important of all? KEEP WRITTEN MINUTES OF THE MEETING!
Keeping a written record of annual or specially called meetings is a company’s most effective tool in protecting it from dangers such as litigation, both from minority shareholders or members as well as outside third-party claims. The purpose of written minutes is to prove that the board or membership made an informed decision with the best interests of the company in mind.
It is important for directors or shareholders to refrain from keeping their own separate minutes because they may have inconsistent records on a proposal, which could be used against the company during litigation. There should only be one set of official minutes created that should be approved at the beginning of the next meeting and kept in the business official records.
Piercing the Corporate Veil
The most important reason for holding annual meetings is to provide protection from any potential issues that could result in a piercing of the corporate or limited liability company veil. This is when a party is able to recover not only from the corporation or limited liability company but also the individual shareholders, directors, or members as well. Veil Piercing is the primary tool used by courts to deter misuse of the corporate form. Generally, a corporate veil can be pierced when the corporation or company is inadequately capitalized, operated for a fraudulent purpose, or serves as the alter ego of an individual with control. The easiest way to prove the company is an alter ego of the owner is to show that no written minutes were kept.
By W. Bradford Roane, Jr. and Chase Lacy 2/13/2018