COMMENT

Source: Model Act, § 16.01. This supersedes former § 14-2-122(a), and provides more specific guidance than the former provision, which only required the corporation to "keep correct and complete books and records of account and . . . minutes of proceedings. . . ."

Subsection (a) requires a corporation to "keep" as permanent records the minutes of meetings of its shareholders and board of directors. Where the Model Act required the corporation to keep only a "record" of actions taken by unanimous consent by its shareholders or board of directors, the Code requires retention of the written consents. In addition, each corporation must "keep" a record of all actions taken by a committee of the board of directors when acting on behalf of the board of directors for the corporation. Subsection (a) does not require a record of actions taken by a committee when the committee is not acting in place of the board of directors, e.g., when the committee is discussing policy and formulating recommendations for action by the board of directors. Also, it does not require either minutes or a record of committee deliberations under any circumstances. Committee meetings are preserved as forums for open and frank discussion and discussion of sensitive corporate data without fear of recordation or disclosure.

Subsections (b) and (c) require the corporation to "maintain" appropriate accounting and shareholder records. The word "maintain" is used to denote current records only and does not require the corporation to keep on hand as permanent records, data, or information of historical interest only; the periods for which these records, data, or information should be kept is not addressed by the Code.

Subsection (b) relates to accounting records. The word "appropriate" is used to indicate that the nature of the financial records to be kept is dependent to some extent on the nature of the corporation's business. "Appropriate" records are generally records that permit financial statements to be prepared which fairly present the financial position and transactions of the corporation. In some very small businesses operating on a cash basis, however, "appropriate" accounting records may consist only of a check register, vouchers, and receipts.

Subsection (c) requires the corporation to maintain such records of its shareholders as will permit it to compile a list of shareholders when required. These records may consist of stubs from which certificates have been detached in the case of corporations with a few shareholders or of elaborate electronic data retrievable only by modern technology in the case of large, publicly held corporations. The record may be retained by the corporation or an agent, who traditionally is the transfer agent but may be another agent.

Subsection (d) generally authorizes corporations to retain records on microfilm, microfiche, computer memory or disc, or any other method that is convenient or appropriate under the circumstances. The basic requirement is that the method chosen must be capable of reduction to written form within a reasonable time. In addition, in the case of the record of shareholders, the method must permit the development of an alphabetical list of shareholders of record as required by Section 14-2-1601(c).

Model Act subsection (e) now appears as Code Section 14-2-1602(a).

Cross-References Articles of incorporation, see § 14-2-202. Board of directors' meeting, see § 14-2-820. Committees of board of directors, see § 14-2-825. "Deliver" includes mail, see § 14-2-140. Directors' action without meeting, see § 14-2-821. Inspection of corporate records, see § 14-2-1602 et seq. Officers, see § 14-2-840. "Principal office": defined, see § 14-2-140; designated in annual registration, see § 14-2-1622. Reports of corporation, see § 14-2-1620 et seq. Restatement of articles of incorporation, see § 14-2-1007. Series of shares, see § 14-2-602. Shareholders' action without meeting, see § 14-2-704. Shareholders' meeting, see § 14-2-701 et seq. Shareholders' voting list, see § 14-2-720.

RESEARCH REFERENCES