Why and How Do You Maintain a Corporate Minute Book?

What is a minute book?

A company’s minute book is meant to capture and record the entirety of the company’s corporate governance history, starting with its original filings and under whose authority it was formed, adding in the various governing documents and agreements (including as those are amended over time), and reflecting the definitive record of all the actions taken and approved by the entity’s board of directors and its stockholders. Although every company is unique, the vast majority of private companies that go on to raise venture capital financing will likely have minute books whose early governance actions largely resemble one another.

Why do you need a minute book?

Whether you have organized your corporation in Delaware, California or any other state, your existence as a corporate entity begins with the filing of your organizational certificate of incorporation, or articles of incorporation. (States differ on what they call this document; Delaware uses certificate of incorporation for corporations, but these also are often informally referred to as “charters”). After this initial document is filed, the company can only act through its board of directors, and the act of appointing the initial members of the board of directors usually occurs by an action taken by the company’s sole incorporator (usually the same person who signs the company’s certificate of incorporation). Subsequent elections of officers, approvals of stock issuances and option grants, credit arrangements, changes in authorized share counts and certain other matters must be appropriately documented to prove that these actions were duly authorized by the board of directors pursuant to the company’s charter and bylaws. For more details, see our article, “What Decisions Need Approval From Your Board of Directors?”

It is extremely important to keep excellent paper records. Over the life of your company, you will be asked on a number of occasions to provide evidence of the board’s approval of certain actions – whether in connection with the opening of an additional credit line or a round of financing, or on the eve of your initial public offering, when underwriters’ counsel requires absolute proof that the company was, in fact, “duly incorporated” or record-based backup supporting all of those option grants over the years. Company counsel also will rely on these corporate records to back up a legal opinion or respond to due diligence requests from potential investors’ counsel, or perhaps a company interested in acquiring your business or a subset of your assets. Having up-to-date, clear and concise records of all board and stockholder actions will make these processes less painful to comply with and respond to. The alternative is not only painful, but also can quickly become expensive in terms of legal fees if it’s necessary to reinvent the wheel by recreating, reconfirming and ratifying all past actions. A company that finds itself on the precipice of any of these material transactions cannot afford to be disorganized.

What are ‘minutes,’ when are they produced and how much detail should they contain?

At each board meeting, one individual will be designated secretary of that meeting, and they will be responsible for preparing written notes (also known as “minutes”) memorializing the discussions among and decisions made by the board and setting forth any formal resolutions adopted at the meeting. These minutes will then be reviewed and approved by the board at a subsequent meeting, signed by the secretary of the meeting (often your counsel, if they are attending) and placed in the minute book. Remember that actions approved by the board “live” at a meeting are valid from the time of that approval, even if they are recorded in a draft of the written minutes from that meeting – and which minutes are submitted to the board for formal approval and signature at a later date (most likely, at the next board meeting).

Once shares are initially issued, certain actions also will require stockholder approval, and those actions evidencing the stockholders’ approval also will need to be documented and included in the minute book.

It is helpful to remember that while effective minutes need to be detailed enough to properly memorialize the general topics discussed and – most crucially – the decisions ultimately reached as part of those discussions, the minutes should be understood as high-level summaries, which typically do not reflect verbatim quotes from meeting attendees or play-by-play accounts of what each attendee said. If you have questions about the thoroughness of the summary being offered for any material transactions that were discussed or approved at a meeting, be sure to promptly raise those with your counsel when drafting and reviewing the minutes following the meeting. Part of the art of minute drafting is that you need to satisfy the company’s internal record keeping needs while also providing enough detail to satisfy the scrutiny of investors, lenders, or buyers and their counsel, as they review the corporate record.

How do you maintain a minute book? 

A well-organized minute book might be divided into the following sections, each containing the documents listed along with an accompanying index (all of whose steps and sections will be subject to periodic updates):

1. Certificate of incorporation: A file-stamped copy of the certificate/articles of incorporation and all subsequent amendments as filed in the state of incorporation.
2. Bylaws: Your bylaws and any amendments.
3. Board of directors: 
   • If initial directors are not identified in the certificate/articles, an executed action by the sole incorporator appointing these individuals.
   • An executed organizational consent or signed minutes of an organizational meeting in which the basic operations of the company are set forth.
   • Minutes of all meetings signed by the secretary of the meeting.
   • All written consents approving actions between meetings, executed by all board members.
4. Stockholders: All actions by stockholders executed by the requisite majority or a percentage of holders to authorize the actions detailed in the document.

In addition, for ease of reference, you might want to include a list of current officers and directors (including whether they serve as the designee for a given class or series of capital stock), as well as any foreign qualification documents and the company’s tax ID and employer identification numbers.

Your lawyer can keep the original minute book materials (though most of the materials will be digital files). Many companies will keep an electronic minute book using a cloud-based service to store and share materials. If your company does that, you can use a file structure organized as described above, which will be leveraged as part of any data room that you create for material transactions (financings or liquidation events).

Minute books also should be maintained for every subsidiary of the company, though the ultimate materials to include may vary slightly, depending on the jurisdiction in which the entity was formed and operates, particularly if that happens to be overseas.

Some board and stockholder actions will likely reflect approvals for material transactions (loans, leases, etc.), and final drafts of those transaction documents will typically be attached to those actions as exhibits. Despite that overlap, minute books should not be thought of (and typically aren’t used as) a repository for all of the company’s material commercial and governing agreements.

Getting into the habit of drafting (also referred to as “papering”) the minutes of meetings right away and keeping those corporate records up to date doesn’t have to be onerous – the key is settling on an efficient process and regular cadence that you (and your counsel) can easily adhere to. It is particularly helpful if both you and your counsel aim to keep any backlog of meeting minutes to a minimum. It also is often beneficial to work closely with your counsel as you approach upcoming meetings, to use them as an opportunity to promptly approve the prior meeting’s minutes (to keep any backlog from cropping up) and to align on the language for any resolutions required to approve the actions you expect will be adopted at the next meeting.