Every corporation is required to keep and carefully preserve certain books and records at its principal office, both for good governance and to enable stockholders and the government to monitor its affairs. These generally include: the minutes of all meetings of stockholders (or members) and of the board of directors (or trustees), recording the time and place, how the meeting was called, the notice given, the presence of a quorum, the matters taken up, and the votes cast; the record of all business transactions; and the stock and transfer book, which records all stocks issued and transferred, the names of stockholders, the amounts paid, and the dates of transfers (for a stock corporation). Corporations must also maintain proper financial records and prepare financial statements. These records must be open to inspection by any director, trustee, stockholder, or member at reasonable hours on business days, and copies may be demanded at the requester's expense. Failure to keep the required records, or refusal of a valid inspection, can subject the responsible officers to liability and penalties. The stock and transfer book in particular is important because a transfer of shares is generally not valid against the corporation and third parties until recorded in it.
Books Every Corporation Must Keep
- Minutes of all stockholder/member and board meetings;
- The record of all business transactions; and
- The stock and transfer book (stocks issued/transferred, stockholders, amounts paid, dates).
Financial Records
Corporations must maintain proper financial records and prepare financial statements.
Inspection and the Stock Book
These records are open to inspection by directors, stockholders, or members at reasonable hours, with copies at the requester's expense. Failure to keep them, or refusal of a valid inspection, carries liability. A transfer of shares is generally not valid against the corporation or third parties until recorded in the stock and transfer book.
Practical Takeaways
- Keep minutes, transaction records, and the stock and transfer book;
- Maintain proper financial statements;
- Share transfers must be recorded to bind the corporation and third parties.
Frequently Asked Questions
What books must a corporation keep? Minutes of all stockholder and board meetings, the record of all business transactions, and the stock and transfer book, plus proper financial records and statements.
What does the stock and transfer book record? All stocks issued and transferred, the names of the stockholders, the amounts paid, and the dates of transfers, for a stock corporation.
Can stockholders inspect the corporate books? Yes. The records must be open to inspection by any director, trustee, stockholder, or member at reasonable hours on business days, with copies available at the requester's expense.
Why is recording a share transfer important? Because a transfer of shares is generally not valid against the corporation and third parties until it is recorded in the stock and transfer book.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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