What are corporate records? Management, compliance & more
Corporate records are integral to successful governance and compliance. Within most organizations, the company secretary, legal operations and governance and compliance teams act as the keepers of the corporate record, protecting the company’s operations and reputation.
Yet, what exactly are corporate records? Why are they so important? And why does accurate corporate records management occupy so much of senior stakeholders’ time?
In this article, we’ll explore:
- The elements of the corporate record
- Why corporate records are important
- How to master corporate records management
- How modern entity management solutions keep the corporate record secure and accessible.
What are corporate records?
Corporate records are the records required by a U.S. corporation to demonstrate that it is functioning in accordance with the rules of the Internal Revenue Service (IRS) and the laws of the state in which the business entity is incorporated.
Put simply, corporate records serve as the official log of the company’s decisions and actions.
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 easily available in the event that regulators come to audit the corporation.
Traditionally maintained as a physical record book, most corporations now maintain their corporate records digitally on a local network server and/or within a cloud-based system.
How long to keep corporate records
How long you keep corporate records depends on the type of records and the regulations that govern them. Outside of permanent records, though, businesses keep records for three to seven years. The duration corporations must store corporate records typically fall into the following categories:
- Permanent records: Corporations must keep certain documents indefinitely, including Articles of Incorporation, bylaws and amendments, meeting minutes and more.
- Financial and tax records: Documents in this category must be kept for seven years, ranging from tax returns and supporting documents to bank statements and invoices.
- Employment records: Employment contracts, performance reviews, disciplinary records and related documents must be kept for seven years after employment ends.
- Legal and contractual records: You should keep these records, including contracts and agreements, leases and more, for seven years.
- Operational records: Regulations don’t require corporations to hold operational records for over three years, though you must keep some for as long as seven. These records include correspondence, internal reports and project documents.
Who is responsible for corporate records management?
The job of managing corporate records tends to fall to the company secretary. The secretary will typically be present at board meetings and will be responsible for noting attendance, recording and distributing the meeting minutes and following through with all necessary documentation and agreed-upon action points.
While the company secretary tends to have primary responsibility for corporate records, those responsible for governance and compliance within an organization — including the legal operations team — must also ensure that corporate records are carefully maintained.
Corporate records must be kept in strict accordance with local laws so that the company, its shareholders and its board members remain protected.
Why are corporate records important?
Local regulations require corporations to maintain corporate records that prove they're functioning appropriately. However, thorough record-keeping not only promotes compliance but also supports the company’s long-term success through:
- Liability protection: Corporate records demonstrate that it is a separate entity with its own governance processes, helping to maintain the “corporate shield” — that is, keeping 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.
- Board effectiveness: As soon as an entity is legally incorporated in any jurisdiction, it creates a corporate record the board can refer back to, aiding decision-making. Most jurisdictions require that an entity hold documentation such as articles of association and annual reports, hold regular board meetings, and record and minute these meetings.
- Good governance: Corporate records help show regulators that this is a healthy, functioning, viable entity with well-documented governance practices. Writing the governance framework and keeping it in a centralized platform accessible to all paves the way for broader adoption of essential practices.
- Accountability: Corporate records must be signed and recorded, and any actions taken must be backed up with documentation that is also stored with the corporate record. This holds boards, leaders and employees at all levels accountable for the decisions and actions the record includes, supporting the company’s achievement of its strategic goals.
What do corporate records include?
Corporate records include the articles of association, company bylaws and other incorporation documents. They also include the policies and resolutions made and agreed upon by the board. The corporate record is not static; it 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 in many cases 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 resolutions.
Corporate records example
After undergoing a spree of acquisitions — including five in the last year — a financial services company struggled with a complicated web of legal entities. Each entity carried its own risks, costs and administrative burdens. These burdens also brought with them extensive corporate records. The tightening global regulatory environment only heightened the need to simplify corporate records management and corporate structure to reduce costs and risks.
While the company did use entity management software, its legal entity challenges related to corporate records persisted; corporate records must be efficiently created and securely stored in a centralized platform to aid compliance and enable better decision-making. The company transitioned to Diligent Entities for its enhanced collaboration and automated workflows that standardized record-keeping processes.
As the firm continued its M&A activity, it found that Diligent Entities provided much-needed agility to be ready for a deal at a moment’s notice with a clean, corporate record and quick, flexible reporting.
“After an acquisition, everything immediately goes into Entities, so we have a clear trail of data cleaning. From there, we can collaborate with other teams, such as tax, for the company’s best path for rationalization since all the information and reports are right in front of us.”
– VP, Assistant General Counsel.
Corporate records management
As businesses grow, the volume and complexity of corporate records grow with them. Corporate records management is the maintenance of corporate records throughout their lifecycle, from creation to distribution to their eventual disposal. This practice is crucial for ensuring important information is effectively managed and supportive of compliance, operations and risk management.
The four steps of corporate records management
- Creation and capture: Create important records and capture them as they’re received physically or electronically.
- Classification and storage: Categorize records based on their content, function, and relevant retention requirements, then organize them systematically to make them easy to access. Given modern entities' global and interconnected nature, secure, cloud-based storage is increasingly becoming the preferred storage route for many organizations.
- Maintenance and use: Some records, like articles of incorporation, will remain the same. However, others, like bylaws, may evolve with the organization. This requires that records remain usable over time, including updating and protecting them from damage or loss.
- Retention and disposal: Establishing retention schedules dictates how long to keep different types of records and how to dispose of them when the required duration has passed.
Best practices for managing corporate records
While managing records may sound simple, having an effective corporate records management program is key to maintaining control over your information and data. It’s also essential to support regulatory compliance and ensure the board and other leaders can quickly access the insights they need to make decisions.
- Develop a records management policy: Clearly outline your organization’s approach to records management, including specific roles and responsibilities. This will create more consistent records management and a defensible process for regulators.
- Offer corporate records training: Though audit and legal department soften work with corporate records, many employees and departments may need to create or access them. Earn employee buy-in by training them on why records management is important, your organization's processes and their specific responsibilities.
- Regularly review and update practices: Like the financial services company mentioned above, organizations can quickly outgrow records management policies that were once sufficient. Take time to review and enhance practices to ensure they remain effective, compliant and supportive of business needs.
- Use appropriate software: Manual records management can become untenable for even small organizations, given the number of records businesses must store and the duration they must store them. Centralizing document management in a single platform streamlines the corporate records process significantly.
Leveraging corporate records for strategic governance and compliance
The corporate record is the entity’s way of showing that it operates according to its own governance policies and the law, making them essential to governance and compliance. As such, those in charge of the entity or group structure must have easy access to accurate, up-to-date records — making the centralization of corporate records increasingly critical.
The importance of centralized corporate records
A centralized corporate record system offers a unified repository for storing, managing and accessing the organization’s documents. Centralization ensures that records are consistent, accurate and easily accessible. Without it, it’s challenging — and often impossible — for modern entities to guarantee the integrity of their records.
Think back to the financial services company mentioned above. The more entities it adds to the corporate structure, the more corporate records it has to manage, each of which can evolve with the business and regulatory landscape or simply because its own needs have changed. Centralization reduces the chances of multiple versions of the same document, disparate protocols for handling records or inefficient access to them — thereby maintaining a single source of truth for the entire entity.
Modern solutions: entity management software
As entities grow, corporate records management reaches a tipping point; the organization is amassing new records and updating old ones at a rate that manual management can’t match. Modern entity management solutions are designed to help organizations maintain and manage their records more efficiently.
These purpose-built tools offer a range of features tailored to the unique demands of record-keeping, including:
- Templates: Standardizing templates for documents like contracts and leases ensures uniformity and reduces the time employees spend creating records from scratch.
- Electronic filing: These features allow organizations to securely submit and store documents on a cloud-based platform, facilitating easy access and management for users anywhere on any device.
- Automated document verification: Manual management is prone to human error. Document verification reduces discrepancies through automated checks to ensure accurate and complete documents.
- Compliance calendars: Tracking regulatory requirements can quickly become overwhelming. Entity management software includes integrated compliance calendars with important deadlines, streamlining critical compliance processes.
Corporate records as a strategic asset
When well-managed corporate records become more than a compliance requirement, they become a strategic asset that supports the organization’s growth and decision-making. With more accurate and accessible records, leaders can glean valuable insights to inform strategic decisions, helping proactively identify opportunities and mitigate risks.
Having the right information at the right time is particularly critical during mergers and acquisitions or periods of global expansion. Entities on a growth trajectory need comprehensive and well-organized records to complete effective due diligence, valuation and integration processes that further the company’s strategic goals without introducing unnecessary risk.
Adding global entities also introduces international regulations and distinct jurisdictional requirements. Maintaining clear and consistent records ensures compliance and facilitates smoother transitions into new markets because leaders will have accurate information to guide their decisions.
The proactive roles of general counsel and compliance teams
Corporate records also put invaluable information in the hands of the general counsel and compliance teams. While many entities have traditionally sought delayed input from these teams, corporate records management can reposition general counsel and compliance as strategic partners to the board.
By analyzing records, general counsel and compliance teams can identify trends, risks and opportunities, allowing them to keep ahead of the executive team’s decision-making. Keeping general counsel and compliance abreast of regulatory changes also reduces the chance that the organization will fail to comply with relevant laws and regulations.
Proactivity is also essential beyond compliance. With accurate and thorough corporate records, these teams can strategically support initiatives like mergers, acquisitions and global expansion, pushing the organization to new heights while meeting legal and regulatory requirements.
Streamline corporate records management
Many company secretaries and legal operations teams are now turning to technology to solve the challenge of secure yet accessible storage of corporate records.
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. They can also report on regulatory requirements and electronically file statutory forms to global regulatory bodies.
Diligent’s entity management software provides company secretaries with a system that can also seamlessly integrate with the board portal, 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 needed — eliminating requests to the company secretary and allowing the focus to be squarely placed back on strategic governance.
Get in touch and schedule a demo to discover how Diligent Entities, part of the Diligent One Platform, can help protect and maintain the corporate record by putting the right information in the hands of the right people at the right time.
FAQs
How long do I keep corporate tax records?
According to the IRS, you must keep corporate tax records for seven years after the records were created.
Are records that have no business or legal significance corporate records?
Records that lack business or legal significance are not strictly considered corporate records. Corporate records should have a clear purpose for the organization’s operations, compliance, legal standing, and strategic decision-making. Personal notes, temporary records, informal communications and outdated materials are not considered corporate records.
How long to keep corporate records after dissolution?
After dissolution, you should keep corporate records for as long as you would have if the entity still existed. Articles of incorporation, meeting minutes, financial statements, annual reports and ownership records should be kept permanently. However, other documents like tax records, financial records, employment records, legal and contractual records and operational records can be disposed of seven years after dissolution.
Are corporate records publicly available?
Some records are publicly available as mandated by law, but others remain confidential.
Publicly available corporate records include:
- Articles of Incorporation
- Annual reports
- Stockholder information
- Securities filings
- Minutes of shareholder meetings
- Bankruptcy filings
Confidential corporate records include:
- Board of directors meeting minutes
- Internal financial statements
- Employment records
- Contracts and agreements
- Proprietary information
What is a corporate records solicitation form?
A corporate records solicitation form is a document shareholders, regulatory authorities, legal professionals or other parties can use to request access to corporate records. The form is for parties with a legitimate interest or legal right to view the records and specify the requested records.
