In March, 2016, I wrote a blog about the importance of corporate principals making sure annual meetings of shareholders and directors were held. Alternatively, shareholders and directors can prepare and sign consents in lieu of annual meetings.
Why do I stress this so emphatically? Let’s look at recent situations that happened to our corporate clients, just two of several similar events.
Two of our corporate clients received that frightening notification from the Internal Revenue Service (IRS) that the corporations were being audited. You can imagine the consternation and worry that caused the principals. The big question: What do we do to make sure the shareholders are protected by the corporate veil and that all standards imposed by the IRS are met?
First and foremost, the corporation’s attorneys should review the corporate minute book to make certain:
1. all incorporating documents are in place (Articles of Incorporation and any amendments, bylaws, organizational consent, S Election filing, if any);
2. all government filings are up to date, i.e. corporate income taxes; annual reports and fees due the domestic state and foreign states, if any; state licensing requirements, and so on; and
3. minutes of all annual meetings of shareholders and directors since incorporation (or consents in lieu of meetings’) are up to date.
The IRS will want to review all the above basic documents.
The point here is that a simple matter, in case of an audit, could be satisfied right away just by having the shareholders and directors hold annual meetings to conduct usual business (or prepare consents in lieu thereof). Falling behind will result in large attorneys’ fees to get caught up or possible piercing of the corporate veil, resulting in liability for shareholders.
If you are one of our corporate clients we urge you to call us as soon as possible to request updating the corporation’s annual minutes. If you are not our client, but would like our assistance to update your corporation’s annual minutes, we would be happy to discuss this matter with you.
Darlene Lundy, Certified Paralegal
Disclaimer: This blog is for information purposes only. Legal advice is provided only through a formal, written attorney/client agreement.