Often Overlooked: The Importance of Good Board Minutes

Admittedly, one of the more mundane tasks of a director, in-house lawyer or company secretary is keeping board minutes; often written up in haste, circulated for approval, and then forgotten about. However, like many things mundane, they don’t matter until they do. Below I set out why they matter, the consequences of failing to keep proper records, and practical tips for drafting good minutes. Please note that most of the below applies to English incorporated private limited companies. 

Keeping a record 

Under English law, it is a statutory requirement for companies to keep a record of director’s meetings and to keep those records for at least ten years from the date of the meeting. Such records may be stored in hard copy or digital form. However, if they are in digital form they must be capable of being reproduced in hard copy (e.g. printed on paper).

There is no statutory requirement to keep records of informal director decisions. However, the company's articles of association (“articles”) might have specific requirements for informal decisions. For example, the Model Articles for private companies require that directors must ensure that records are kept of every unanimous or majority decision taken by the directors.

Consequences of not keeping a record

Decisions by directors will not necessarily be invalid if they are not properly recorded (a question we are often asked by clients). However, if a company fails to keep proper records of directors’ meetings, a statutory offence is committed by every officer of the company (not the company itself) who is in default, which may lead to fines being imposed. If the company’s articles contain provisions on keeping records of meetings and the directors fail to do so, then such directors may be in breach of their duties to the company, including the duty to act in accordance with the company's constitution.

The other side of the coin is that board minutes matter most where bad decisions are made in good faith (having followed all relevant procedures). Board minutes that comprehensively record proper procedures being followed and considered decisions being made, can prove incredibly valuable in difficult situations (e.g. having a complete record of decisions made during the weeks and months leading up to a company’s insolvency).

What should board minutes look like?

There is no prescribed form for board minutes/resolutions. However, in a large corporate group it is often preferred to use the same format across all group companies. The look and feel of a company’s board minutes will depend on various things, such as the nature/size of the company, the business being discussed at a particular meeting, and whether the company is private or public. Certain transactions (e.g. share buy-backs) will require bespoke and often complex minutes to be drafted (often by the company’s solicitors). 

In any event, and as a rule of thumb, board minutes/resolutions should record formal discussions and (crucially) all decisions made at a meeting. Minutes do not need to read like a transcript of the meeting. Commercial discussions that do not result in a formal decision being made need not be recorded. However, some companies use board minutes as a catalogue of such discussions (which can be a helpful historical reference tool). There is an interesting difference here between UK/EU companies and US companies, which is that EU/UK companies tend to record discussions that lead to formal decisions in far more detail than their US counterparts (the latter typically recording simply that “discussions ensued”, for example).

Practical tips (for good minutes)

Irrespective of the nature/business/size of the company and what is being discussed/decided at a particular meeting, a good set of minutes should include most, if not all, of the following:

1. Pre-meeting. Ensure that all directors receive an accurate, up-to-date board pack (agenda and reading materials) ahead of the meeting and with sufficient time (5–7 days) to prepare for the meeting. This doesn’t need to be recorded in the minutes, but it sets the tone and expectations for the meeting.
2. Company details. Company name, number and registered address.
3. Meeting details. Date, time and place of where the meeting was held.
4. Attendee details. Name those who were in attendance (whether in person or remotely), who was absent, and indicate who was nominated as chairperson.
5. Quorum. Note that the meeting was duly convened and that a quorum was present.
6. Purpose and background. Describe the purpose of the meeting, i.e. that it was convened to approve a specific action or transaction. Explain the commercial rationale for the proposed action/transaction, and the financial and/or legal advice received in relation to it. Use this as an opportunity to define important terms.
7. Declaration of directors' interests. List the directors and their respective interests in the business being transacted in the meeting. Check the articles for approving director conflicts and whether interested directors may count in relation to quorum and voting.
8. Documents. List the material documents (and whether in draft or final form) produced and considered at the meeting.
9. Resolutions. Clearly record the formal decisions (resolutions) taken by the directors. Take care to explain that the proposed action/transaction is in the best interests of the company. Note, resolutions may be conditional on something else occurring, such as a shareholders’ resolution being passed.
10. Practicalities. For example, where a transaction is approved, note that the company (not the directors) will be entering into that transaction and that the directors are authorised to execute the relevant documents (whether by simple contract or deed).
11. Administration. The directors, secretary or external solicitors should be instructed to carry out relevant administrative tasks in relation to the director resolutions, e.g. Companies House filings, updating statutory books, issuing share certificates etc.
12. Sign and date. Ensure that (i) the chairman or all directors (where unanimous decisions are required) sign the minutes/resolutions, and (ii) that the minutes/resolutions are dated. Unsigned, undated board minutes are incredibly common, and an easy fix to keep your records in good order. 

If you would like to discuss any of the above in further detail, please contact Albert Mennen (Albert.Mennen@twobirds.com), or any other member of the Bird & Bird corporate team.