Legal Question in Business Law in California

Re: What is required in terms of recordkeeping?

You colleague may be referring to California Corporations Code Section 300(e) which reads as follows:

"(e) The failure of a close corporation to observe corporate

formalities relating to meetings of directors or shareholders in

connection with the management of its affairs, pursuant to an

agreement authorized by subdivision (b), shall not be considered a

factor tending to establish that the shareholders have personal

liability for corporate obligations."

Personally, I think this is a bad policy. When I form a new corporation for a client, I conduct an organizational meeting at my office and provide them with a minute book as part of my fees. It helps underscore the fact that they should really treat the corporation as a separate entity to provide maximum asset protection for the shareholders.

Re: What is required in terms of recordkeeping?

What has not and never will change are the officers' and directors' fiduciary obligations to run the company and document major decisions, whether publicly traded or close family held company. Minute book required? Absolutely, from a practical standpoint and legal, for corporate filings, elections and appointments, notices, purchases or sales of assets, etc, etc. Any advice to the contrary risks malpractice.

Re: What is required in terms of recordkeeping?

Your starting point is California Corporations Code Section 1500, which requires the maintenance of adequate and correct books and records of account, minutes of proceedings of directors and shareholders, and maintenance of stock registers and transfers. Your colleague probably is referring loosely to a recent change in California which dispenses with the necessity for a 'paper' set of records/minutes if such are kept in a form capable of being converted into legible tangible records/minutes. This all applies to large or small or public or closely held corporations. I'd be happy to work with you to ensure that your client's needs are met.