Maintaining corporate records and observing corporate formalities is critical for a corporate entity in Utah and other jurisdiction.  Among other benefits and protections, maintaining proper records can help justify a higher value a buyer might consider paying for the business, help prevent fraud and maintain regulatory compliance, and help reduce the risk of veil piercing. The “minute book” is the complete record of corporate governance.

Corporate minutes preserve official records of all actions taken at meetings of shareholders, directors or committees.[1] As a sample of the type of documents to include in the minute book of a corporation in Utah, the book should include documentation of all governance actions and discussions, including, in part, the following records[2]:

• Articles of Incorporation (file stamped copy) and any amendments
• Corporate bylaws and any subsequent amendments
• Shareholder records
  1. Shareholder action appointing board of directors
  2. All shareholder actions by meeting
  3. All shareholder action by written consent
  4. All written communications to the shareholders
• Board of Directors records
  1. Board approval of company organizational documents and establishment of basic operations
  2. Minutes of regularly held meetings of the board of directors signed by the Secretary of the corporation for important matters, such as:
     • Approving salaries of officers and other executives
     • Appointing the officers of the corporation
     • Establishing corporate policies and procedures
     • Unanimous written consents approving actions taken between meetings by the board
• Reference Documents:
  1. Tax ID Number
  2. List of current officers and directors with their contact information
  3. List of all current shareholders with their contact information
  4. Tax filings
  5. Accounting records
  6. Financial records available for request by shareholders
  7. Copy of most recent annual report filed with the State of Utah
  8. Foreign jurisdiction authorizations and filings

Courts have found grounds for veil piercing upon a corporation’s failure to follow corporate formalities and to maintain proper records.[3] On the other side, maintaining proper corporate records generally might reduce the risk of veil piercing.[4] Courts will generally consider the totality of the facts and circumstances in considering whether to pierce a corporate veil. To reduce the risk of having the corporate veil pierced, corporations should maintain proper corporate minutes of meetings of shareholders, board of directors, and committees.

[1] Chapin v. Cullis, 299 N.W. 824 (1941).

[2] Utah Code Section 10a-16-1601.

[3] E.g., Quaglino Tobacco & Candy Co. v. Barr, 519 So. 2d 200 (La. Ct. App. 1987).  In Quaglino Tobacco & Candy Co. v. Barr, a Louisiana appellate court affirmed the piercing of the corporate veil to reach a corporation’s shareholder under the alter ego doctrine.[3]  In that case, the trial record showed that: (1) the corporation did not generate or maintain corporate minutes or documents; (2) there were no corporate resolutions authorizing the shareholder to enter into contracts on behalf of the corporation, and the shareholder regularly acted on behalf of the corporation; and (3) the shareholder operated and ran the business without proper corporate authority). Id.at 201.

[4] E.g., United States v. Fid. Capital Corp., 920 F.2d 827, 838 (11th Cir. 1991) (holding that the corporate veil should not be pierced upon fniding that the president did not commingle funds and the “corporate records and forms were scrupulously maintained.”   See also, Commercial Escrow Co. v. Rockport Rebel, Inc., 778 S.W.2d 532, 540–41 (Tex. Ct. App. 1989) (finding no alter ego where, among several other factors weighing in the defendants’ favor, there was no record evidence showing that corporate records and minutes did not exist).