Practical Implications

1. Many corporate manoeuvres will not be able to be accomplished as legal opinions regarding the corporation will not be able to be drafted until all of the corporate documents have been duly executed. This may cause costly delays or even the cancellation of valuable corporate opportunities.

2. Without proper documentation, decisions made by the officers/directors of the corporation will be barren of legal substance and therefore be vulnerable to scrutiny from disgruntled stakeholders, taxing authorities, and the courts.

3. To properly take advantage of the benefits of incorporation (limited liability and tax benefits), the courts may, in certain circumstances, require evidence of a duly operating corporation (i.e. with accurate and up-to-date records), rather than a corporation in form only.

Legal Penalties

According to law, a corporation that, without reasonable cause, fails to comply with the requirements to keep records is guilty of an offence and may be liable to a fine not exceeding $25,000. Further, every director or officer who, without reasonable cause, authorized, permitted or acquiesced in such offence may also be guilty of an offence and on conviction may be liable to a fine of not more than $2,000 or to imprisonment for a term of not more than one year, or to both. Reasonable cause is not defined in the law, however, it seems each situation will be judged according to the specific surrounding circumstances.

Conclusion

Apart from avoiding the troubles suffered by Mr. Chretien, there are numerous reasons why corporate minute books and annual resolutions should be vigorously maintained. When it comes to maintaining corporate records, an ounce of prevention is undoubtedly worth a pound of cure. Our firm has established a program to assist corporations to ensure the regular and proper maintenance of their corporate records.