Much of the talk around governance and compliance centers on this thing called the corporate record. We are told that the company secretary, legal operations, and the governance and compliance teams are the keepers of the corporate record and protectors of both the company’s operations and its reputation. Everything these important staff members do in their day-to-day working life involves the corporate record.
But what are these corporate records? And why are they important?
In this article, we’ll look at the basics of the corporate record, show why it is important and how it is accessed and maintained, and finally delve into how modern governance solutions such as entity management software and board portals can help to keep the corporate record both secure and accessible.
The Official Log of the Company’s Decisions and Actions
By the legal definition, corporate records are “such records that are required by a corporation to show that it is functioning according to the rules of the Internal Revenue Service” or the applicable local regulatory body.
Traditionally kept in a corporate record book or in a physical filing cabinet in the office, corporate records are more frequently moving to some form of technological storage, such as on a local network server or in a cloud-based system.
These corporate records must include a copy of the articles of association and company bylaws, the minutes of all shareholder and director meetings, and a stock register for keeping track of stock transactions, if applicable. The records should be held in a single, central place and be easily available if the regulators come to audit the corporation.
It’s the job of the company secretary, and also the legal operations team and those responsible for governance and compliance, to ensure the corporate records are carefully maintained according to local laws so that the company, and its shareholders and board members, remain protected.
Why Are Corporate Records Necessary?
Corporate records show that the corporation is functioning appropriately as required by local regulation. They show that it is a separate entity with its own governance processes, and helps to maintain the “corporate shield” or “corporate veil” – that is, keeps the legal entity separate from its owners in terms of liabilities. This means that, for example, any creditors cannot go after shareholders’ personal assets in the event of corporate distress.
In short, as soon as an entity is legally incorporated in any jurisdiction, it creates a corporate record – the majority of jurisdictions require that an entity holds documentation such as articles of association and annual reports, that it holds regular board meetings and that these meetings are recorded and minuted. Corporate records help to show regulators that this is a healthy, functioning and viable entity.
Maintaining Corporate Records
The company secretary is generally designated to keep all of the corporate records, which must be signed and recorded, and any actions taken must be backed up with documentation that is also stored with the corporate record. The job of maintaining corporate records tends to fall to the company secretary, as they are present at board meetings and take the roll call and minutes, and so they can follow through with all necessary documentation.
In addition to the articles of association, bylaws and other incorporation documents, the corporate records include the policies and resolutions made by the board. This means that the corporate record is not a static thing, and is in a state of constant evaluation and growth. Corporate resolutions can be made on many matters, including:
- Records of major transactions
- Approvals of contracts
- Records of sale or purchase of real estate
- Hiring or layoffs of large numbers of employees
- Expansion into a new market or new location
All of these decisions and more must be recorded by the company secretary and entered into the corporate record, alongside annual reports, corporate business and tax dealings, stock dividends and director conflict-of-interest resolution.
This constant movement of the corporate record makes the job of its storage and maintenance an important one. Not only does the company secretary need to be able to access the corporate record to add and amend documentation as necessary, but other key stakeholders may also need access to read, edit or update documentation. It’s this access need, and the progressively global nature of business, that makes the old filing cabinet storage system increasingly obsolete. Company secretaries and legal operations teams are turning to technological storage solutions to make the corporate record fit for modern governance.
Secure, Cloud-Based Storage Puts the Corporate Record in the Right Hands
The corporate record is an essential protection for owners and shareholders against lawsuits and creditors, and helps to safeguard against sanctions from tax and regulatory authorities – it’s the entity’s way of showing that it is operating according to the law, that its processes are transparent and that all regulatory matters are taken care of. And if that’s the case, those in charge of the entity or group structure should demand not only that proper corporate records are kept, but that they are maintained and stored in the best possible manner.
Increasingly, company secretaries and legal operations teams are turning to technology to solve the challenge of secure yet accessible storage of the corporate record. Entity management software provides a secure, cloud-based space to store entity information, documents and organizational charts, creating a single source of truth for the corporate record. Company secretaries and those working in governance and compliance can manage the ongoing accuracy of the corporate record using compliance calendars, reminders and workflows for better data, and they can report on regulatory requirements and electronically file statutory forms to global regulatory bodies.
By working with Diligent’s entity management software, company secretaries have a system that can also seamlessly integrate with the board portal to create an all-in-one , allowing the sharing of data between the board and entities to mitigate data transfer risks and the risk of human error creeping into the corporate record. Entity data can be accessed from anywhere, by anyone authorized to do so, when they need it – no more requests into the company secretary, who can then focus on being more strategic with governance.
Get in touch and schedule a demo to discover how Diligent’s entity management software and Governance Cloud solution can help to protect and maintain the corporate record, putting the right information in the hands of the right people at the right time.