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Corporate Book Replacement

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Q: I’ve lost my corporate books. What do I do?

A client recently came to me on the verge of panic. He found an interested buyer for his data technology company, and the buyer has commenced the due diligence process. The would-be buyer has asked to see his corporate records – but they are nowhere to be found.Now what?

A: You may recreate lost or destroyed corporate records.

 

Corporate Book Replacement

Many small businesses don’t have a dedicated business attorney who would ordinarily keep the company’s corporate books and records. While recreating such records is critical, it can be a dicey matter – it really depends on the business owners’ past behavior. On one hand, recreating corporate records can be blatantly fraudulent. On the other hand, it can be employed as a legitimate business practice. Whether recreating the records in particular situation is legitimate or improper is a complex, multidimensional question that frequently plagues the owners of small businesses.

 

Why Are the Records Being Recreated?

The fundamental question is this: Are the records being recreated merely to memorialize something that actually occurred in the ordinary conduct of the business? Or are they being created to mislead others into believing something occurred when in reality it did not? If the business owners wish to recreate the records to mislead a shareholder, director, potential purchaser or any third party who is acting in reliance on the records, we would insist they not do it. On the other hand, if the company simply wants to memorialize the actions that occurred in the life of the corporation, I would first recommend a shareholders’ or board of directors’ meeting be called to discuss the situation fully and openly. The issue of the lost records and replacement options should be discussed. Once the shareholders and directors have agreed to recreate the records for the purpose of memorializing past acts and decisions, they should add a corporate resolution that specifically approves the recreation of the corporate records and ratifies the previous decisions of the officers and directors of the corporation.

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