OCR Operating Agreement and Shareholder Agreement Scans

To OCR an operating agreement or shareholder agreement from a scanned minute book, pull each company agreement out as its own file, convert the agreement, then every amendment, joinder and consent in date order. Export the member schedule as a table and recalculate its units and percentages, because ownership figures are the part a misread digit damages most.

A minute book is a binder of company papers kept over years by different hands. The agreements in it are contracts among the owners, and what you need from them is who owns what, and what an owner may do with it. This post covers handling the pages and gives no view on who is a member as a matter of law.

Which company agreements sit in a scanned minute book?

A scanned minute book for a limited liability company may hold the operating agreement, its amendments, joinders signed by later members, assignments of interests and written consents. For a corporation, expect bylaws, a shareholder agreement, joinders, stock records and resolutions. Sort the contracts among owners from the minutes and filings around them.

The names vary. Delaware's statute, at 6 Del. C. 18-101(9), defines a "limited liability company agreement" as "any agreement (whether referred to as a limited liability company agreement, operating agreement or otherwise), written, oral or implied, of the member or members as to the affairs of a limited liability company and the conduct of its business." That is one state's definition, and the company in your file may be formed elsewhere, so check the statute of its formation state. For sorting pages, the lesson is to go by what a document does and not by its title. A scan headed "Company Agreement" or "Regulations" may be the document you are looking for.

Confirm each label against your own documents, since a company's papers can use any of these words differently.

For a limited liability company, read the operating agreement for the members' names, the ownership percentages, and any fiduciary duty the text states for a manager. Note a dissolution or winding up section by page. In a corporation's minute book, do the same with the bylaws and any shareholder agreement, and check the signature dates on each.

What the binder order does and does not tell you

A minute book has tabs, and the tabs reflect one person's filing habits. A joinder may sit behind the tab for the year it was signed, behind the operating agreement, or loose in a pocket that the scanner operator fed last. Take the scan order as a clue to where things were kept and build your own index from the dates and titles on the pages.

Papers outside the agreements

Formation filings, annual reports, tax elections and meeting minutes share the binder. They are worth a searchable PDF so that search reaches them. Leave them out of the agreement set, but note any minute or consent that approves an admission or a transfer, because it will matter when you reconcile the members.

Member schedules and capital tables at the back of an operating agreement

The member schedule is a short table at the back of the agreement, listing each owner with an address, a capital contribution, a number of units or shares and a percentage. Convert it as a table, one owner per row, and keep the schedule's title and date with it, since later documents replace it by name.

Look for it under titles such as "Schedule A", "Exhibit A", "Schedule of Members" or "Capitalization Table". A shareholder agreement may have the same thing as a schedule of holdings by class of share.

Features that upset a table export

• Addresses in a cell. A three-line address inside one row can be exported as three rows, with the units and percentage attached to only one of them.
• Names of trusts and entities. "The Wexcombe Family Trust u/a/d 3 March 1998, Lionel Wexcombe, Trustee" may wrap and split. Later joinders and assignments must match the full name, so restore it exactly from the image.
• Classes in adjacent columns. Class A units, Class B units and a total, each with a percentage, give six narrow numeric columns that can merge.
• A totals row. It is your check figure. Make sure the export kept it and that it is not counted as a member.
• Handwritten changes. A schedule in a minute book may have an owner struck through and another written in. Record what the image shows and treat the handwriting as a question for the file, not as a fact.
• Blank cells. A contribution left blank and a contribution of zero are different statements. Keep blanks blank.

Columns to keep

If you use Schema Law for the conversion, its Excel export places each table on its own sheet with the rest of the text on another, and the export formats list describes the CSV and JSON alternatives. Whatever tool you use, the schedule is only a few rows long, so read every cell against the page.

Why do ownership percentages in a scanned operating agreement need a second read?

Ownership percentages need a second read because they are short numbers that carry voting power and money, and nothing in a sentence around them exposes a wrong one. They do come with a built-in test: the units must sum to the stated total, and the percentages must sum to one hundred.

Why digits and decimal points are misread, and which characters trade places, is explained in the post on why OCR gets numbers wrong. What is particular to an ownership schedule is that the figures are tied to one another by arithmetic, and you can use that.

Four checks to run on every schedule

1. Sum the units. Compare with the totals row and with any statement in the body of the agreement about the number of units authorized or issued.
2. Sum the percentages. Expect one hundred, or a figure within rounding of it. Note how many decimal places the schedule uses.
3. Recompute each percentage. Divide each member's units by the total. A recomputed figure that differs from the printed one in a single digit is the sign of a misread. A difference in the last decimal place alone may be rounding in the original.
4. Compare with the words. An agreement may state a holding in words and figures, or repeat a percentage in a recital, a distribution clause or a signature block. Where two statements disagree on the image, record both.

A worked check

The fictional Larkspur Mill Holdings, LLC has this schedule in its 2021 amendment, as exported:

The units sum to 1,250, which matches the totals row. The percentages sum to 102. Recomputing gives 200 divided by 1,250, which is 16.00 percent, so the Achebe row is the suspect. The image shows 16.00%, with a speck of toner closing the top of the 6. Without the sum the error would have gone unnoticed, because 18 percent is a perfectly plausible holding.

When the paper itself does not add up

Sometimes the recalculation fails and the image agrees with the export. The schedule as signed has an error, or rounds in a way that leaves the total at 99.99. Do not repair it. Record the figures as printed, record your recalculation beside them, and mark the row for the lawyer. Whether units or percentages govern when they disagree is a question for the agreement's own terms and the governing law.

Thresholds deserve the same attention as holdings. If a clause requires approval by members holding more than 66.67 percent, and the largest two members hold 64 percent between them, a single digit decides whether they can act alone.

Converting an operating agreement with its amendments and joinders

Convert the agreement and everything that changes it as a dated set: inventory first, then the base agreement, then each amendment, joinder, assignment and consent in the order of its date. Give each document its own file, and build one index that ties every later paper to the agreement it belongs to.

1. Inventory the binder scan. Page through it and list each document with its title, date, parties and page range. Include loose and undated pages as rows of their own.
2. Identify the base agreement. If there is an amended and restated agreement, read what it says about the earlier one. Keep both in the set either way.
3. Split the scan by document. Keep schedules and exhibits attached to the document they came with.
4. Convert the base agreement. Read the definitions, the article on transfers and the schedule against the image.
5. Convert each amendment and note which sections and which schedule it replaces.
6. Convert each joinder and assignment. For a joinder, record who joined, the agreement named, the date, and the units or shares stated, if any. For an assignment, record assignor, assignee, quantity and date.
7. Convert the consents that relate to ownership, such as an approval of a transfer or an admission.
8. Check signatures. A joinder is one signature and a date on a page of its own, so an unsigned or undated one is easy to pass over. The method for recording who signed and when is in the post on extracting signatures and dates from scanned documents.
9. Cross-check the references. Each joinder and amendment names an agreement by title and date. Confirm that the title and date match a document in your inventory. A joinder to an agreement "dated as of 14 June 2005" when your base agreement is dated 14 January 2005 is either a misread month or evidence of another agreement.

Joinders signed without a new schedule

A joinder may add a member without anyone reissuing the schedule. Signature pages are not the whole story either. Delaware's definition of a limited liability company agreement, at 6 Del. C. 18-101(9), says a member "is bound by the limited liability company agreement whether or not the member or manager or assignee executes the limited liability company agreement." Statutes differ, and the point for conversion is narrow: neither a missing signature page nor a schedule that omits a name settles anything. Record what each paper shows.

One readable text

Once the set is converted, someone will ask for the agreement as it now reads. Folding amendments into a single text is a separate exercise with its own rules about order and marking, set out in the post on building a conformed copy of a contract. Finish the inventory and the checks here first, because a conformed copy built from an incomplete set is wrong in ways nobody can see.

Finding transfer restrictions and consent thresholds in the OCR text

Search the converted agreement for the vocabulary of transfers and approvals, then read each hit on the page image. The clauses a transaction turns on are scattered through definitions, a transfer article, a governance article and sometimes a schedule of reserved matters, and they point at each other.

Words to search for

The fuller treatment of search vocabulary, including which search terms find an assignment or change of control clause, is in the post on searching scanned contracts. Recognition can break a hyphenated term across a line end, so search for "tag" and "drag" alone too, and for "first refus" without the ending.

Follow the defined terms

A threshold may not be stated in the clause that uses it. The transfer article may say a transfer needs "the consent of the Required Members", while the percentage sits in the definition of Required Members thirty pages away. For every capitalized term in a transfer or consent clause, open its definition and copy both into your notes with their scan pages. Then check whether any amendment changed either one.

A table for the deal team

Quote the operative words exactly. "More than" and "at least" differ, and so do "Units" and "Class A Units". The table tells the lawyer where to read. It does not interpret the clause.

Who are the current members when the scans span twenty years?

Build the answer as a ledger: start from the first schedule, apply every joinder, assignment, redemption and amended schedule in date order, and see whether the result matches the latest schedule in the file. Where it does not, the gap is a missing document or an unexplained change, and both are findings to report.

The papers in a minute book state ownership in two ways. A schedule is a snapshot of everyone on one date. A joinder or an assignment is an event that changes one or two holdings. A sound record needs the events to explain the movement from each snapshot to the next.

A ledger for Larkspur Mill Holdings, LLC

Here the events carry the 2005 snapshot to the 2021 snapshot exactly. Each row cites a document in the inventory, and the 2016 row can be checked against a consent approving the assignment, if the agreement required one.

When the ledger does not close

• A snapshot shows a member with no event admitting them. Look for a joinder, a subscription agreement or a consent in the unsorted pages, and ask the company for it if it is not there.
• A member disappears between snapshots. Look for an assignment, a redemption or a withdrawal.
• Totals change with no issuance. Units may have been issued or cancelled by a paper you have not seen.
• A name changes. A member that was an individual in 2005 and a trust in 2021 may reflect a transfer to the trust or a schedule that was loosely updated. Treat it as an event that needs a document.
• An event is unsigned or undated. Keep it in the ledger in a separate status and do not carry its numbers forward.
• Two snapshots with the same date disagree. Both go to the lawyer with their page images.

What to hand over

Deliver the ledger, the inventory, the converted files and a short list of open points, each with the scan page that raised it. State plainly that the ledger shows what the scanned papers say. Who the members are today may depend on documents outside the binder, on the agreement's terms about transfers made without consent, and on the law of the state where the company was formed. Those are the lawyer's questions, and the ledger puts the evidence for them in one place. When the company's papers are later gathered for a sale or financing, the same files go into the deal's signed set, which the post on building an electronic closing binder describes.