The key to most healthy relationships is maintaining a degree of separation from the other person. Your relationship with your company is no different. Once you have your company incorporated, it is essential to separate your personal and business affairs. In legal terms, this is referred to as maintaining the “corporate veil” (i.e. the separation between the company and its shareholders which is designed to limit the personal liability of those shareholders for the company’s debts). We touched on this in our Article I have my company. Now what?. Here, we set out a short checklist of practical steps your company should implement to maintain this separation:
• Maintain accurate financial records for the company which show a separation between the company’s income and expenses and that of its shareholders.
• Don’t use the company cheque book for personal debts and vice versa.
• Keep minutes of all meetings of shareholders and directors.
• Hold an annual general meeting of shareholders to appoint, or confirm the retention of officers and directors. This should be done even if the officers and directors are the same people as the shareholders of the company.
• Before doing anything that is outside the normal course of the company’s business (e.g. buying or selling a major asset), a directors’ resolution (and/or a shareholders’ resolution, depending on the company’s constitutional documentation) should be passed to permit that activity. All signed resolutions (or minutes of meetings) should be kept in the company’s records.
• Every contract the company enters into must use the full legal name of the company as shown on its certificate of incorporation.
• The signature block in each contract should refer to the signatory’s position in the company and not only their personal name e.g. “Sarah Lisa Long, Director of ABC Limited” not simply “Sarah Lisa Long”.
• Don’t use your name on a contract for the company with a suggestion that you are “trading as ABC Limited” or similar.
• When dealing with any third party, make sure they know you are acting as an officer and/or director of the company and you are not acting in your personal capacity.
• Any assets or equipment used by the company should be owned in the name of the company e.g. the company should be named as the tenant of any leased premises or the hirer of office equipment.
• If you have any old contracts that don’t meet the three requirements above (i.e. are in your personal name, don’t use the full legal name of the company, have incomplete signature blocks or refer to you trading as a company), arrange for fresh agreements to be signed which conform to these requirements.
• The marketing materials and other business documents should also refer to the full company name e.g. business cards, email signatures and letterhead.