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Rebuilding Corporate Records When They Don't Exist

Cliff Ennico on

"Two partners and I formed a media company in the 1990s that has turned out to be extremely successful.

"So successful, in fact, that we have received an offer from a large public company to buy us out at an astronomical price.

"We signed a letter with the company last week to move the deal forward, and the next thing we know, their attorneys have hit us with a list of about 100 things they want to look at: virtually every contract we've signed, every financial statement and tax return, you name it.

"Most of it we can handle, but there's one problem: the company attorneys are asking us for 'minutes of all director and shareholder meetings' for the last five years. We hold partner meetings religiously every quarter, but we've never really documented them in any way.

"We do have a corporate minute book that we were given by the attorney who set us up years ago, but there's nothing in it except for stock certificates signed by all three of us. We've spoken to a couple of attorneys who have told us that minutes are legally required and want to charge us outrageous fees for recreating 30 years' worth of documents.

"Is there any way to solve this problem in a more cost-effective manner?"

 

First of all, congratulations! What you have achieved is the Holy Grail for all entrepreneurs -- realizing your exit strategy by being bought out by a huge company at an astronomical price. Only about one in 500 entrepreneurial startups make it to this point, and you are to be congratulated for a job well done.

As for your corporate paperwork, you would be surprised how many successful companies find themselves in this situation. Most of my clients view legal paperwork as a highly distasteful task, and the thought of it "makes (them) want to throw up." So it never gets done.

However, that's a problem when you have a corporation. The corporation laws in virtually all states require that shareholders hold an annual meeting to appoint the board of directors, among other things.

As for the board of directors, while most state laws don't require regular meetings, they do require some evidence of the votes taken at these meetings -- either minutes of the meeting or a unanimous written consent signed by all three of you.

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