Care needs to be taken with the preparation of board minutes as they are increasingly being used in court to help prove or disprove that directors have fulfilled their fiduciary duties.Â
Minutes are official company records of directors’ meetings, so courts place evidentiary weight on their contents. Well-taken minutes record corporate decisions, highlight director dissent where appropriate, reduce misunderstandings as to the board’s intent in a matter and show compliance with legal duties and responsibilities. They are not a transcript of every word that was said during the meeting or a record of individual directors’ contributions.
The AICD Director Tool Board Minutes is a valuable resource for directors in this instance.
Who takes the minutes?
In public companies, the company secretary is the usual minute taker. If a proprietary company does not have a company secretary then it is common for a person from within the company to take the minutes. This might be a director of the company or it could be someone who is generally responsible for maintaining the company registers and notifying ASIC of basic changes when required.
What goes into minutes?
Section 251A of the Corporations Act 2001 (Cth) requires minutes of all proceedings and resolutions of all board and committee meetings to be entered in the directors’ minute book within one month after the relevant meeting and signed within a reasonable time after the meeting by the chair of that meeting or of a succeeding meeting.
The level of detail included in the minutes will vary from company to company. However, they do need to state who was present and, if anyone was present for only part of the meeting, either the time of their entry and exit, or the agenda items that were discussed when they were in the room. Individual speeches or arguments and admissions of liability should not be included in the minutes.
General inclusions would be:
Name of the company and name of the chairÂ
Nature and type of meeting, for example, directors’ meetings, committee meetings
Place, date and starting time
Attendees, apologies, presence of a quorum. Invited guests should be separated from usual attendeesÂ
Notification of any conflicts of interestÂ
Minutes of the previous meeting
Materials distributed before and during the meeting
Proceedings of the meeting and resolutions made
Abstentions from voting, for example, due to conflicts of interest
Closing time, signature of the chair (actual hard copy signature, not electronic).
After signing, the minutes should be kept as part of the company records.
Can boards meet without management present?
Sometimes, boards might want to meet without management present, perhaps because of conflicts of interest or duty. These meetings could be said to be held “in camera”. Some organisations allow their minutes to say that an in camera meeting took place, but don’t share any further information. Other organisations may give more description.
If formal actions come out of the meeting, then it can be advisable to document them so that outcomes can be tracked in subsequent meetings.
Review the draft minutes
There is a presumption that the minutes accurately record what happened at the meeting and directors have a responsibility to properly evaluate the draft minutes circulated after meetings. It is critical that each director actively reviews the minutes, and that the process of finalising and approving the minutes is managed rigorously by the chair. Directors should request additions, clarifications or corrections where necessary. Remember that in the worst-case scenario, board minutes may be used in court to indicate what board members knew and authorised.
Any conflicts of interest should be noted with a record of how they were handled. Was the level of discussion appropriate to the seriousness of each item under consideration? This can be shown by using phrases such as “debated at length” or “discussed in depth”. If the minutes are silent on an issue, a court may adopt a degree of scepticism as to whether the matter was considered by the board. Some issues may require discussion at more than one meeting. Items that will be revisited by the board should be clearly identified and include a time for subsequent discussions.
Should you take your own notes?
There is no legal obligation for directors to take personal notes. The responsibility for record keeping lies solely with the organisation and, ideally, minutes should be the sole permanent record of the meeting proceedings.
Like minutes, directors’ notes can be requisitioned as evidence in court. This might be helpful if the notes show that the director has adequately informed themselves, questioned appropriately and used proper care and diligence. However, taking notes can create risk — ambiguous, inconsistent or incomplete records can be used against a director.Â
This article first appeared under the headline 'Take Careful Note’ in the April 2024 issue of Company Director magazine. Â
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