Are You Keeping Proper Records?
Written by: Guy Jeffress
The recent federal case of Renee Mason, DPM, v. Brian Mazzei, Et Al., 2023 WL 234777, out of the U.S. District Court for the Western District of Virginia, highlights the importance of adhering to proper record-keeping formalities, even if you are involved in the operating of closely held company. The case at hand involved a small professional corporation founded in 1995. After reviewing the evidence and holding a hearing on a motion for summary judgment, the court found that the lack of resolutions, consents, a properly kept share register, the failure to issue share certificates, and other conflicting evidence, including the testimony of Mason and Mazzei, made it difficult to determine the identity of the shareholders, or shareholder, of the corporation. To quote the opinion, “The record is unclear whether stock certificates were ever issued and whether the parties paid for their shares. . . The only stock certificate book in the record is full of blank certificates beginning at the certificate marked number 0. Mazzei testified that no money was ever paid for the stock. Mason testified that she believed the parties had paid for the stock . . .” Thus, there remained a genuine issue of material fact as to whether either or both the plaintiff Mason, and/or defendant Mazzei were in fact, shareholders. The inability of the court to make a determination will result in the further expenditure of time and money to determine something that could (and should) have been resolved years before. The everyday effort of operating a business can result in a situation where the preparation and maintenance of company records gets put on the back burner. If you have questions or concerns about record-keeping formalities for your own company, please contact the attorneys at Vanderpool, Frostick & Nishanian, P.C.
This blog post is not intended to provide legal advice or substitute for the advice of legal counsel with respect to specific facts and situations. See disclaimer