Do I need a corporate kit and seal?
written by: phil.vandy
Managing Director of a newly incorporated corporation may wonder "do I need corporate kit and seal?" The answer is obviously yes. Corporate kit is a well organized binder with several things that the company would need almost immediately after its incorporation. For example, it is necessary to maintain record of the first board meeting in which the board of directors do several important things such as authorize one or more directors to open and operate a bank account with specific banks, approve some pre-incorporation contracts, and allot shares to the first shareholders. Law stipulates that a record of such resolutions be maintained in Minutes book. Minutes books are permanent records, and should be available for inspection at any point of time, even after 20 or 30 years. They are often kept on paper leaves, so that if there is any error in recording the proceedings at the meetings, it can be replaced with a leaf containing the rectified version. Such minutes have to be signed by all the directors who attended the previous board meeting at the subsequent meeting. Usually, board meetings are held once in a quarter.
Likewise, shareholders have to be given share certificates within time limits that are specified in the Corporation Act. Failure to do so is considered a major lapse on the part of the directors of the company and entails penalties. Most C Corporation, LLC and other corporations start as small businesses or do not become full-fledged companies from the day one. This means, they do not have electronic format of recording transactions such transfers, share allotments, minutes, and other important records of the business. Consequently, they do need to maintain physical records even if they plan to get their shares listed on stock markets, and their stock records would be maintained in dematerialized format at a later date. Obviously, such corporations would be wasting monies if they order large quantities of share certificates from printing business. Ordering smaller quantities of share certificates, transfer forms, Minutes leaves, etc., can prove to be rather expensive, because it is not economical for most printing businesses to spend manpower for printing few documents. Corporation kit suppliers, however, offer smaller quantities of such share certificates, Minutes papers, etc., at very competitive price.
Directors also need to take considerable precautions relating to share certificates because they represent monies invested in the business and consequently they are accountable to them. If they are not maintained in safe custody, chances are that somebody can steal a few certificates and claim that he or she owns shares in the business. If share certificates are printed in bulk, then their security becomes difficult. But fewer share certificates can easily be secured if kept in a systematic manner. Corporate kits enable directors to keep share certificates safely in its initial stages, since at a later date the business enterprise would anyway opt for electronic way of maintaining such certificates and records.
Most of the corporate kits available in the markets contain index tabs, which serve the same function as a folder with multiple compartments. In the initial stages of the business, the numbers of shares related transactions are smaller. However, there may be several other transactions that mean a lot of paper work. Consequently, chances of share certificates, share transfer form, minutes, etc., getting mixed up with other documents such as bylaws of the corporation and certificate of incorporation increase. Index tabs forming part of the corporate kit prevent such mix ups, and therefore, directors do not lose much time searching for documents.
Not only do corporate kits contain index tabs for allowing systematic operation of the business in the initial stages, they also have a few corporate record ticklers. These ticklers serve as reminders of actions that need to be taken at a specific time. For example, every share allotment, and share transfer needs to be approved within stipulated period, so relevant information needs to be presented at the board meeting held in the quarter. Corporate record ticklers enable the directors of the corporation to accumulate such papers in one folder so that attention can be given to relevant matters at the right time. Alternately, they can be indicators of the date on which the content in the folder should be studied. Folders can be organized according to such dates on the ticklers, so that time is not lost searching for papers.
Common seal or the corporate seal is no longer essential as per the corporation law. But this does not mean that other laws do not require that they be affixed on contract papers. Even the byelaws and constitution of the corporation may require that the company affix such seal as per stipulated procedure. This is the reason, ordering a common seal along with corporate kit is advisable. People making such seals have considerable experience, and know the requirements. They are also able to offer such corporate kits, and seals at reasonable price. Therefore, ordering such corporate kits and seals saves the directors precious time as well as money. Many of these kits are available for less than $50.