As long as the 'corporate formalities" are observed, the
courts will not allow creditors to "pierce the corporate veil" so as to
hold individual board members and staff personally responsible for
corporate debts. Also, dissidents will not be able to get the Court to
enjoin alleged authorized corporate actions.
Observing the "corporate formalities" means following
the bylaws and then obtaining board authority for every corporate
action. The minute book is the final word on whether the corporate
formalities had been observed.
The minutes are the official record of corporate action.
The minutes should not be a substitute for the corporation's
newsletter. Some resolutions, perhaps call for an introductory sentence
or two but you want to avoid recording too much of the discussion that
occurred at the meeting (one persons comments, for example, might later
be mistaken for 'official corporate action"). The threshold for
inclusion, perhaps, is when someone makes a motion (whether or not the
motion was "seconded"). Be sure to state whether the motion was
seconded and, upon vote, identify who voted against the motion and who
abstained. A standard item on the agenda of each and every board
meeting should be the adoption of minutes from prior meetings. A
document is not the "minutes" unless and until the board adopts
actually passes a resolution adopting it as such.
A sign-in sheet should be attached to the minutes of
each meeting so that you can later prove that a quorum was present,
WHAT IS A "CREDIBLE MINUTE BOOK
Without a credible minute book, however, there is no way
to prove that the corporate formalities had been observed. A minute
book should look like minute book. The minutes should be collected into
a three ring binder, the minute book should contain a complete paper
trail of every board meeting that was ever held from the very beginning
until the present. It is very important to be able to show that the
present board is operating with proper authority.
At least once a year the board of directors should pass
a resolution stating the identity of the incumbent board members and
stating their remaining terms. It usually a good idea to do this every
time a vacancy is filled and after each board election. Hopefully the
minute book will document the "chain of authority" running from the
present day back to the date that the articles of incorporation were