After reading our Selecting a Business Structure Series and speaking with your Business Law Attorney, you decided on a Corporation structure for your business. You have filed your Certificate of Formation, enacted Bylaws and a Shareholders’ Agreement, and received your Federal Employer Identification Number (FEIN).
You wonder what you should do with all of this paperwork, what you should keep, and for how long you should keep it.
What Documents Must Be Kept?
Texas law requires that each filing entity (which includes Corporations) keep books and records of accounts. Minutes of the
proceedings of the owners, members, or governing authority for the entity, and committees of the owners or governing authority of the filing entity must be kept. A current record of the name and mailing address of each owner or member of the filing entity must be kept.
—See Books and Records for All Filing Entities—Tex. Bus. Org. Code §3.151(a)(1)-(3)
These records may be kept in written paper form, or another form capable of being converted into written paper form within a reasonable time. This means your Corporation can take steps to “go green” by keeping electronic copies of the records.
—See Books and Records for All Filing Entities—Tex. Bus. Org. Code §3.151(b)
Do Corporations Require Additional Documents?
There are additional requirements for Corporations. Specifically, a Corporation is required to keep a record of the original issuance of shares, each transfer of those shares that have been presented to it for registration of transfer; the names and addresses of all past shareholders, and the number and class or series of shares issued that are held by each current or past shareholder.
—See Books and Records for All Filing Entities—Tex. Bus. Org. Code §3.151(a)(4) & Supplemental Required Records—Tex. Bus. Org. Code §21.173
Corporations should keep a copy of its initial bylaws and any amendments, repeals, or adoptions, as well as its shareholders’ agreement with any amendments, repeals, or adoptions.
—See Bylaws—Tex. Bus. Org. Code §21.057 & Shareholders’ Agreement—Tex. Bus. Org. Code §21.101
Where Are Corporate Records Kept?
All records that Texas law requires to be kept by a Corporation must be maintained at either its registered office, principal place of business, or at the office of its transfer agent or registrar.
—See Books and Records for All Filing Entities—Tex. Bus. Org. Code §3.151(a)(3) & Supplemental Required Records—Tex. Bus. Org. Code §21.173
Who Has a Right to Inspect or Examine the Records?
A governing person may examine the corporate books and records for a purpose reasonably related to her service as a governing person.
—See Governing Person’s Right of Inspection—Tex. Bus. Org. Code §3.152(a)
A court may require the corporation to open its books and records to permit a governing person to inspect, make copies of, or take extracts from the books and records. In such a lawsuit, the governing person would have to show that she is a governing person of the corporation, she demanded to inspect the corporate books and records, her purpose for inspecting the corporate books and records is reasonably related to her service as a governing person, and that the corporation refused her good faith demand to inspect the books and records. In such a lawsuit, the court can award a governing person attorney’s fees and any other proper relief.
—See Governing Person’s Right of Inspection—Tex. Bus. Org. Code §3.152(b)-(c)
Each owner of the corporation may examine the books and records to the extent provided by its bylaws or shareholders’ agreement.
—See Right of Examination by Owner or Member—Tex. Bus. Org. Code §3.153
Be sure to speak with your business law attorney about any questions you may have regarding which records to keep. She can review your records to ensure that you are compliant with the requirements of Texas law.
–Authored by Carrie A. Harris, Esq.,
Matthew Harris Law, PLLC – Business Law Division
1001 Main Street, Suite 200, Lubbock, Texas, 79401-3309
Tel: (806) 702-4852 | Fax: (800) 985-9479