Frequently, charities and non-profit organizations that are structured as non-share capital corporations face challenges arising out of deficiencies in their required corporate records. These records may be incomplete or missing altogether. This is not an entirely unusual situation for non-share capital corporations. Operational focus is on the organization’s activities and finances, and not necessarily on keeping up the paperwork. So, quite typically, the enthusiasm for the continuing corporate paperwork varies inversely with the very few volunteers (who may have limited time and/or expertise) stepping forward to do the necessary tasks. Often, the older the corporation, the greater the record-keeping deficiencies.
Such corporations must therefore determine how to deal with deficiencies in their corporate records. This series of articles will address what should be done when:
- there are incomplete corporate records
- the corporation has not maintained its membership list
- the directors have not been elected properly
- the corporation has not held annual meetings or filed corporate returns
- the corporation has never passed a by-law or has not followed it in many years
- the corporation has never been organized
This is the first in a series of articles on how these issues can be addressed in a practical way. While there is no perfect solution, the remedial steps outlined will generally suffice for practical purposes and allow the corporation to continue operating with reasonable security that it has been properly organized and that its actions have been properly undertaken. Most of what follows is simply common sense, because there are no definitive answers, no readily ascertainable statutory provisions and little or no relevant jurisprudence.
This issue is particularly relevant for federal non-share capital corporations, all of which must apply for continuance under the Canada Not-for-Profit Corporations Act on or before October 17, 2014. If they do not, they will be dissolved – that is, they will cease to exist as corporations. In order to complete the continuance process, it is necessary to hold meetings of the directors and members to approve Articles of Continuance and new Bylaws. Without proper records, it may be difficult or impossible for a corporation to be assured that these meetings have been properly conducted and the continuance duly sanctioned by the membership. The continuance process is therefore a good (and in some cases an essential) opportunity for corporations to review and update their corporate records.
The bottom line in each of the situations above is this: the organization has to find, on paper if possible, otherwise in the personal recollections of those who have been involved over time, whatever historical information can be gleaned. From this information, the corporation (with assistance from qualified counsel) must try to reconstruct a written record of what relevant corporate actions have taken place. For those interested in family roots, the process will be similar to a current search for ancestors and the reconstruction of a family history.
The focus here is upon four broadly described types of records: minutes of meetings; bylaws; lists of directors and members; and forms required to be filed with government.
The Most Important Step: The Searches
This is the most important step that must be completed. There is little to distinguish between, on the one hand, the complete absence of records, and, on the other hand, missing pieces of needed records. Experience suggests that although it does happen, it is rare to encounter circumstances in which there is a complete absence of records. It is much more likely that there will be missing pieces — individual meeting minutes or, more likely, one or more records-free years.
The first task for the organization is finding out and examining what records do actually exist. What the organization needs to undertake is a high stakes scavenger hunt, ferreting out the history of the organization. The collection of the necessary information typically lies in the hands of the organization members, not the lawyers (though previous counsel for an organization may have some corporate records, and it is a good idea to check).
It is sometimes quite amazing how the obvious may initially be “hidden” from the eyes of the organization. Over time, the files, folders and books that could contain relevant records might very well have been passed hand-to-hand to successors in the offices of the then current president or secretary and stored in the homes or offices of such successors. It is often the case that the information necessary to reconstruct events will be found in personal files and folders, attic and locker storage boxes, as well as in the personal recollections of current and past members, directors and officers.
On the practical level, the following steps are recommended when searching for corporate records and the organizational history:
- Find and examine whatever official binders or folders may have been formally maintained; often, these will be found in the hands (most likely in a desk drawer, the attic or the garage) of a past president or secretary.
- Even where there are no official binders or folders or minute books, experience suggests that, despite denials of existence, there are likely to be some records that were created around the time of individual events, whether meetings in the formal sense or activities more of a social or historic nature.
- Every organization has its share of “pack-rats” who keep everything that passes through their hands: official announcements, newsletters, bulletin board notices, regular and special event programs, correspondence, etc.
- The search may need to extend to past members and directors, and particularly to all past presidents and secretaries. Telephone calls to the “old-timers” can often yield relevant historical information gleaned from personal diaries and journals, all assisting in the reconstruction of the relevant events that can solve the problem of missing minutes.
- Don’t forget that there may be lawyers who have previously acted for the corporation; in such a case, the organization should be asked to sign a direction and consent to permit access to such relevant information as might be found in their files.
If searches disclose approved minute books and records, they should be placed in a safe place with more than one current officer being aware of the location. Where records do not disclose that they have been approved, the client should be asked to obtain signatures from the persons who were chair and/or secretary at the time of the events.
Subsequent chapters of “The Case of the Missing Records” will examine specific remedial steps, which may depend upon the precise nature of the missing records.