Minutes of Meetings Still a Vague Area in Terms of Style
By: Arthur Drache
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| The term books and records seems to include minutes of meetings. In RC4909 dealing with record keeping, we find the following: |
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| "the following must be kept as long as the charity remains registered and for two years after the registration is revoked: |
| - all records of any donations received by a registered charity that are subject to a direction by the donor that the property given be held by the charity for a period of not less than 10 years; |
| - minutes of meetings of the executive; |
| - minutes of meetings of the members;" |
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| Most organizations, whether they are incorporated or not, keep at least some sort of minutes of meetings, though the detail and scope vary enormously. They may range from a record of decisions made to almost verbatim descriptions of what transpires, with the views of all participants being recorded in detail. |
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| There may be all sorts of implications stemming from the minutes of meetings, both positive and negative. |
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| In once case decided by the Federal Court of Appeal the board of the organization consisted of three people, each of them very busy professionals. Their meetings were haphazard at best and almost always by telephone. No minutes were kept, though there is no doubt that decisions were taken and implemented. |
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| One of the several reasons given for revoking the organization's registration as a charity was that under subsection 230(2) of the Income Tax Act, a charitable organization must keep "records and books of account". Failing to do so is one ground for revocation of the charitable status under paragraph 168(1)(e) of the Income Tax Act. In the event, the failure to keep minutes, while not a crucial element , was part of the reason why the organization lost its appeal against revocation. |
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| But this can be contrasted with a second case heard by the same court. The evidence before the court included minutes of board meetings. The Board was quite large and comprised of very active members, all of whom had strong views on just about every topic. The minutes reported heated debates about the approaches being used in carrying out their charitable mandate. |
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| These debates, recorded in great detail in the minutes, became fodder for the CRA when arguing in support of the organization's revocation. By selecting parts of the minutes of several meetings (often out of context) and reading them to the court, the Justice lawyer attempted to show that the organization was "out of control", even though a review of all the minutes would disclose nothing more than internal debates about how the highest level of efficiency could be achieved. Those arguing for change, of course, put "horror scenarios" forward, and it was these which the CRA seized upon. |
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| The charity lost by a 3-0 decision. |
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| In another situation where the charity's secretary was in the habit of keeping almost verbatim notes, at the end of a meeting and likely after adjournment, the Chair informally asked the members whether any of them were willing to canvass on behalf of a candidate for Parliament during the election which was in progress. The secretary had that matter noted. Five years later a CRA audit used the statement to bolster its case that the charity was improperly involved in politics. |
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| The lessons we take from these experiences is that while it is absolutely necessary that formal minutes of meetings be kept, particularly to show that the directors or trustees are doing those things which are legally required of them, recording every slight difference of view within the board may be asking for trouble in the future. |
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| But we also have run into a situation where the keeping of good minutes saved a non-profit from serious trouble. |
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| In this case, the CRA was proposing to retroactively strip the organization of its status as a non-profit because, in its view, the organization had accumulated too great a surplus and appeared to have no plans to reduce it. |
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| Representatives of the Board said that to the contrary, the intention was to create a charitable foundation and to transfer the excess funds to the foundation. The CRA auditor said, in effect, "prove it". And lo and behold, the minutes from a board meeting eighteen months before showed that the issue of setting up a foundation was not only discussed, but steps were being taken to ascertain from their lawyer and membership what the proposed foundation would be set up to do. |
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| Though the consultation process with members was not as yet complete, the CRA accepted that the intention was there and gave the organization a year to set up the foundation, transfer the funds and retain its non-profit status. |
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| It is said that the role of a good lawyer is to anticipate problems, including "worst case scenarios", something which most people do not like to do. In the case of charities and non-profits, a good lawyer will be trying to anticipate how documents will appear to either or both of CRA bureaucrats or, in the truly worst case scenario, to a panel of judges. In 99.9% of the cases, such documentation (be the documents minutes, agreements or correspondence) will never be closely examined by anybody outside the organization. |
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| But all these documents should, while retaining accuracy, be drafted with the view that they might be the subject of intense and even hostile scrutiny. Thus they should be prepared with a view to meeting the statutory and operational requirements while at the same time trying not to reveal matters which could be potentially embarrassing. |
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| One option in extreme cases, is to have the meeting go into either an in camera or off the record session which would allow full and frank debate (this is not uncommon, for example, when personnel issues are discussed) with the record simply reflecting the fact that after such a discussion, the board made certain decisions which are, of course, to be recorded. |
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| This allows the members to properly exercise their obligations to offer their views while at the same time simply reflecting decisions, with negative votes or abstentions duly recorded. |
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| Doing minutes of meetings should be a mundane exercise in most cases but the statutory obligation under subsection 230(2) should be kept in mind.tempered with a certain level of common sense, knowing that at some stage, minutes could become public. |
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