Are Annual Minutes Required?Added by Hawley Troxell in Articles & Publications, Business Law on February 28, 2013
Recently, many Idaho corporations received a very official appearing form in the mail entitled “2013 – Annual Minutes Form, Shareholders, Directors and Officers (Idaho Corporations)”. The form required payment of $125.00 to a private third party to prepare minutes for the annual shareholder meeting, and appeared to be a requirement for Idaho corporations to preserve their corporate status and avoid penalties. In response, the Idaho Secretary of State posted a notice on its website “warning businesses to beware of a scam targeting Idaho corporations” – www.sos.idaho.gov/corp/corindex.htm.
There is no legal requirement that Idaho corporations pay $125.00 to complete minutes of the annual shareholder meetings, or that the minutes of such meetings be filed with any government agency. The purpose of meetings and minutes is to increase communication and accountability, and this purpose is diminished when a third party, that is not connected with the business, completes a “fill-in-the-blank” form.
The best practice of corporations, limited liability companies, partnerships, and other business organizations is to hold regular meetings of the owners, directors, and managers, and to keep minutes of the meetings. The regular meetings facilitate communication between owners and managers, and accountability of managers to owners. By recording the substance of the meetings, minutes facilitate the communication and accountability, plus increase efficiency by permitting a later meeting to begin where the earlier meeting ended, and thus reducing duplication of effort.
While the best practice is to hold regular meetings and keep minutes, the legal requirements are much less.
- For Idaho business corporations (and consistent with the Revised Model Business Corporation Act that is adopted in whole or in part by almost all the states), the Idaho Business Corporation Act (i) requires annual meetings of shareholders and minutes of such meetings, but (ii) does not require either meetings of directors and managers or minutes of any such meetings that are held. Certain special types of business corporations, such as banks, are required to have meetings of directors and minutes of such meetings.
- For Idaho nonprofit corporations, the Idaho Nonprofit Corporation Act (i) requires annual meetings of members (if the nonprofit corporation has members) and minutes of such meetings, but (ii) while it does not require meetings of the directors, it does require minutes if such meetings are held.
- For Idaho limited liability companies, the Uniform Idaho Limited Liability Company Act does not require meetings or minutes of meetings of the members or managers. The members can, in the operating agreement, adopt their own requirements and contractually require meetings and minutes.
- For Idaho general partnerships and limited liability partnerships, the Idaho Uniform Partnership Act (1996) and the Idaho Uniform Limited Partnership Act permit these partnerships to have books and records, but do not require partnerships to have meetings or minutes of meetings of the partners or limited partners.
Even for most business entities that are required to have meetings and minutes, there is no legal penalty for failure to do so. The business can simply correct the legal omission by holding the meeting and preparing the minutes. For example, the remedy for a business corporation’s failure to hold an annual shareholder meeting is for the court to order the meeting to be held. The business may be harmed by the failure of communication and accountability, and the loss of efficiency, but there is no fine or forfeit.
The best practice is for the needs of the business owners and managers to determine the frequency of the meetings and the scope of the minutes. The sparse legal meeting and minute requirements provide considerable flexibility for the development of best practices in business communication, accountability, and efficiency among owners and managers. The focus should be on the substantive goals of communication and accountability, and not on the form of minutes or on a desire to simply paper the file.
For more information about annual meeting requirements or to contact a member of our Business Group or call 208.344.6000.
More Corporate Law Blog Posts
- 10/23/17—RESPA Section 9 & Title Company Selection
- 10/23/17—Commentary on Financing of Public School Buildings
- 10/19/17—Preserving the Liability Shield in Closely Held Corporations and LLCs
- 08/22/17—In re Spanish Peak Holdings II, LLC: Lessons for Trustees and Lessees in Bankruptcy
- 05/30/17—Plan for the Unexpected