When did your minute book last match reality?

The constitution and the shareholders agreement are the documents everybody thinks of, and they are the easy part. They get signed once and then they sit there, unchanged, being correct.

The minute book is the hard part, because it is not a document. It is a running record of everything that happened afterwards. Shares issued, shares transferred, directors appointed, secretaries changed, resolutions passed. Each of those events is small, each generates paperwork, and each one is somebody's job only in the sense that nobody has said it is not.

How the drift happens

It is rarely dramatic. A typical sequence:

The company is incorporated properly, with a full set of documents. Two years later a founder's shares are transferred to their family trust: the accountant handles the lodgement, and the transfer form goes into the accountant's file rather than the company's. A director is appointed the following year; the ASIC form is lodged, no resolution is ever written. A small issue of shares to an employee is agreed in a meeting nobody minuted.

Five years in, the registers held by the company do not match the ASIC extract, and roughly half the supporting instruments are in an accountant's filing system. Nothing improper has happened. The record of it has simply never been in one place.

The test

There is a quick version of this diagnosis and it takes about ten minutes.

Pull the current ASIC extract. Then, without looking at it, write down from your own records: the members and their holdings, the directors, the secretary, and the date of the most recent change to any of them.

Compare. The size of the gap between the two lists is the size of the problem.

Then ask a second question, which is usually the more revealing one: for the most recent share issue or transfer, can you produce the resolution and the instrument, today, without asking the accountant?

Reconstruct the index before fixing anything

The instinct on finding gaps is to start producing the missing resolutions. That is the wrong first move, and it is adviser work rather than filing work in any case.

The right first move is an index: everything that exists, in date order, with gaps marked as gaps. Resolutions, minutes, transfers, certificates, appointments, resignations, lodgements. Assembled from every source, which means the company's own files, the accountant's file and the ASIC record: all three, because none of them is complete on its own.

An index that shows what is missing is more useful than one that quietly implies completeness, because somebody is eventually going to rely on it.

Reconcile, and record the discrepancies without resolving them

Compare the registers against the extract and against the instruments in the index. Every difference goes on a discrepancy schedule.

Do not resolve them as you go. Several will need lodgements, some will need documents produced, and a few will need somebody to work out what actually happened. That is work for the company's adviser and accountant, and it is far cheaper for them to work from a schedule of eleven specific discrepancies than from a folder.

Resist the urge to assume the extract is right, too. It reflects what was lodged, which is not always what was agreed.

The routine matters more than the reconstruction

Reconstructing the book is a one-off. Keeping it current is the part that determines whether you are doing this again in five years.

What keeps it current is a change checklist: for each event type (issue, transfer, appointment, resignation, address change) what documents are produced, in what order, who does it by role, what gets lodged and by when, and where it is filed. Named by role rather than by person, so it survives the finance manager leaving.

That, plus a meeting pack template so the resolutions actually get written at the time rather than reconstructed later, is most of the discipline.

Why it is worth doing before you need it

The minute book is the first thing a buyer's advisers ask for, and it is an unusually good proxy for how the business has been run. A complete book with a clean register says the company has been administered carefully. A book with five years of gaps invites a much closer look at everything else.

It is also the cheapest possible thing to have in order, and it becomes more expensive every year the reconstruction is deferred.

The boundary

Indexing what exists, reconciling the registers against the extract, scheduling the discrepancies and writing the change checklist is filing work.

What each discrepancy means, what needs to be lodged and by when, and what documents have to be produced to close a gap are questions for your own external adviser and your accountant. Producing a missing resolution is their work, not the index's.

The discrepancy schedule is the point of the exercise. Eleven specific items, each with the evidence attached, is something they can quote on. A minute book and a request to check it is not.