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January 7, 2006
CORPORATE COMPLIANCE NOTICES - A SHAM OR A BRILLIANT MARKETING PLOY??
If your homeowners association is a corporation in California (and most are), it is likely that you as the person listed as the contact for the Association have received an "Annual Minutes Compliance Notice" (which looks like an official corporate compliance warning notice) in the mail recently. From the looks and feel of it, one (without the savvy needed to truly understand it) would feel the eyes of the Secretary of State - Department of Corporations on them! The notice in my humble opinion makes it look like you had better reply because if you fall out of compliance, terrible things will happen to the Corporation. (Reminds me of the warning notices on new mattresses, making you wonder if the mattress police are standing by waiting for you to rip the label off!).
If you are under the impression that sending in $125 to get a set of minutes is the only way to save the Corporation from doom, read on. Anyone can buy a list of the contacts for all California corporations and mail out official "looking" compliance notices, and offer services for a considerable cost that you can get for pennies or for free elsewhere, if you know where to look. The $125 is a steep price for a set of boilerplate minutes. Why?
It is true that every corporation should have and keep annual meeting minutes on file because one of the requirements for corporations in California is to have at least an annual meeting and to keep records, including books (in a double entry bookkeeping system) and minutes of meetings. There can be a corporation of one, yet the same standard applies, and records must be kept. This is for the protection of the consumer, and in a manner of speaking is what separates (and legitimizes) corporations as opposed to loosely held even more loosely bound "unincorporated associations", which by the way lack important legal protections as well.
If a corporation is audited by the Department of Corporations and has had no meetings or kept no minutes, it is out of compliance. The status could be suspended by the Department, which would require submital of paperwork to correct the error. Personally, I do not know of any corporation that has been audited by the Department of Coporations, but if it were to happen, failure to have the annual meeting or keep minutes of it is probably the least of the problems the corporation has (because those failures indicate a lack of attention to compliance requirements in general).
This compliance notice might lure many uninformed people into sending in the $125 for the minutes. But don't feel bad if it has caused you to do so. I fell for a similar type of scenario when I got a notice in the mail about a year ago that the State was holding money for me. The notice came "in a similar type of official looking" notice and I assumed it was from the State. I sent money (I think it was about $15.00) and I got a letter simply referring me to the State website that lists people for whom the state is holding money (from forgotten bank accounts, etc.) After filling out the forms and proving identity, I received my unclaimed funds (about $25). The state website is free and contains instructions of how to claim unclaimed money. The state advertises the website occasionally. Access is free and is a service of the State. And then there is the time my 10 year old son welcomed me back from a business trip with a huge banner "WE WON TEN MILLION DOLLARS" (having gotten the information from a sweekstakes notice) ... well, that's another story!
So back to the minutes - how about a freebie: here is what minutes contain: date of meeting, whether a quorum of corporate members was present (and if a small group, or a check in system is used, you might include who was present including those not on the Board), who presided, what action items were raised or discussed, notation of reports given if any, and if motions were made, what the outcome was (passed or not passed, approved or not approved), and last of all - adjournment.
There you have it - but if you want to send money for the information, you can discount the cost of your "official notice"and send me $100 (ha ha).
If you need more simplistic information about how to conduct meetings, use parliamentary procedure, and what should appear in minutes, go to amazon.com or your local bookstore and purchase a plain English simplified book on Robert's Rules for around $10 to $15.
That will offer you a lot more bang for your buck.
Sincerely ... (fool me once and I've been fooled; fool me twice and I am a fool ... is that how it goes?)
Don't be fooled by these type of "compliance notices" (or the sweepstakes notices for that matter) - read things very carefully.
Posted by Beth Grimm at January 7, 2006 9:07 PM