Why board minutes matter

Posted: 11/07/2022

Board minutes are important. Although often seen as an administrative burden, they play a key part in a company’s good governance regime. All boards should strive to produce minutes which are clear, accurate and contain a meaningful summary of the matters discussed and the decisions taken. Failure to do so may be interpreted as being symptomatic of more serious underlying problems.

This article outlines the often overlooked role of board minutes and provides some practical points to help with proper minute taking.

Why do we need to produce minutes?

It’s the law
Every company is legally required to keep minutes of all ‘proceedings’ at meetings of its directors. This will not only apply to formally convened board meetings but also to informal get-togethers of the board. Any decisions of the board made during such get-togethers should be minuted.

The Companies Act 2006 does not define ‘proceedings’ but it is considered good practice to ensure that the minutes accurately record all resolutions and decisions (which may include dissenting views) and contain enough information for the reader to understand the background to the various decisions and, depending on the importance of the resolution, the thought process that led to them being made.

A proper record/evidence
The purpose of minuting meetings is to ensure that there is an accurate record of the proceedings at the meeting. Minutes that are recorded in accordance with the act’s requirements and which are signed by the chairperson are evidence of the proceedings at the meeting and, unless the contrary is proved, that:

• the meeting is deemed duly held and convened;
• all proceedings at the meeting are deemed to have duly taken place; and
• all appointments made at the meeting are deemed valid.

Recording compliance
Minutes can be helpful in recording compliance with legal requirements and duties, including directors’ duties such as the obligation to declare interests in proposed transactions or arrangements. While the act changed the requirement for directors to declare such interests at a board meeting (the obligation is now to declare the interest to the other directors), a board meeting may well be the most appropriate forum in which to declare such interests, allow discussion of the interest and record the agreed arrangements in the minutes.

Formally documenting declarations helps to evidence that interests have been properly considered and declared. Likewise, directors have a duty to promote the success of the company and, in doing so, must have regard to a list of specified factors. While it is unnecessary to document every factor considered in reaching their decision, if any factor is particularly relevant or if the decision is controversial, directors will, if they are able to produce records such as minutes of discussions, be better placed to prove that they paid due regard to the relevant factors.

To read more about directors’ duties, their role and responsibilities, see our article here.

Content
Although the content of minutes will obviously vary from meeting to meeting, there are set matters which should always be covered in the agenda.

These include:

• the date, time and location of the meeting;
• a list of the names of directors and other attendees at the meeting;
• determination of quorum;
• consideration and declaration of directors’ interests;
• matters reported on and referenced supporting papers; and
• the decision(s) reached.

‘Checking off’ these items when preparing the agenda ought to help as a reminder as to the points that need to be addressed at the meeting.

Information
Minutes can be extremely useful for providing information to directors who were unable to attend the meeting or to any new directors who may wish to look at how matters have been dealt with previously. Companies should bear in mind that it may not just be the directors that will look at the minutes:

• Minutes may be examined by potential purchasers/investors who are conducting due diligence on a company and who will want to look at the company records to see that matters have been properly dealt with.
• Third parties such as investors, banks and strategic partners may also want to see minutes (or relevant extracts) as evidence of the approval of transactions to be entered into with them.
• Courts may also look at the minutes of a meeting to determine what occurred in the meeting and as evidence as to how the board was going to deal with a situation.
• Auditors have a statutory right to inspect the minutes and may do so to check that the minutes are consistent with the company’s accounts and records.
• Directors of companies facing financial difficulties and who may need to be in a position to justify to any insolvency practitioner the steps they have taken should ensure that regular board meetings are held so that all decisions made during board meetings and the basis for those decisions are fully minuted (including dissenting views).
• While shareholders have no general right to inspect board minutes (in the absence of an express provision in the articles or another agreement to which the company is a party, such as a shareholders’ agreement), if there are legal proceedings taken against the company by a shareholder, the relevant minutes may need to be disclosed.

Top tips

Don’t forget the articles
Alongside the act’s requirement to take minutes, a company’s articles may contain additional provisions regarding the preparation of board minutes which should also conform with those requirements.

Content
Boards take different approaches to the level of detail to be included in minutes and the style adopted may depend on the use to which they are put and the preferences of the directors. As mentioned, the key purpose of the minutes is to ensure that there is an accurate written record of the meeting.

Minutes should concisely summarise the matters discussed - the level of detail should reflect the importance and complexity of the matter. Alongside the formal minutes of meetings, any supporting board briefing packs should preferably be appended to the minutes although, for lengthy board briefing packs, these could be referenced in the minutes.

Correct record
Care must be taken to ensure that the minutes correctly record what happens at the meeting. Once signed by the chairperson, the minutes are evidence of the proceedings at that meeting. The approval of board minutes is often seen by directors as a mere procedural step but directors should ensure, as far as possible, that the minutes form an accurate record of what actually happened at the relevant meeting. The subsequent approval by the board of minutes which contain mistakes may result in an invalid resolution unintentionally being ratified.

Committees
Where the board have delegated any of their powers to a committee, such committee should also keep minutes of their proceedings. Along with being good practice, it is usually a requirement under a company’s articles.

Table A expressly states that directors must keep minutes of committees and, while the Model Articles for private companies does not have a similar express provision, it does require committees to follow procedures which are based, as far as applicable, on the provisions of the articles governing decision-taking by directors.

Legally privileged matters
When the board meeting deals with any legal advice that has been obtained, for example in relation to a dispute, the directors need to be careful that they do not jeopardise any ‘legal privilege’ attaching to that advice.

Generally, if external legal advisers attend the meeting and offer advice at the meeting, that advice will be privileged even if minuted. However, if minutes include the commercial discussions around the advice or its implications, the privilege may be lost. One practical way of addressing this is to have two sets of minutes: one that records that the board has received confidential legal advice and deals with the legal issues and a separate set of minutes that deal with the commercial issues relating to that advice. Identifying privilege in the minutes will make it much easier to later distinguish between privileged and non-privileged discussions.

Circulation and approval
Board minutes should be circulated promptly after meetings. Good practice is to send out draft minutes to the chairperson as soon as practicable after the meeting to which they relate. The chairperson should review the draft minutes then distribute a copy to the directors, on the basis that any director who wishes to amend the draft should respond promptly and any disagreement regarding the content should be resolved between the directors.

Once a draft has been settled in this way, the minutes should be approved by the board at the next meeting, the chairperson should then sign them, and they should be recorded in the minute book. Once the minutes have been signed they should not be amended.

Record-keeping
It is a requirement under the act to retain minutes for at least 10 years from the date of the meeting (and permanently for minutes that relate to meetings held before 1 October 2007). Failure to do so is an offence by every officer of the company who is in default.

The act allows minutes to be kept in hard copy or electronic form and provides that minutes may be arranged in such manner as the directors think fit. If minutes are held in electronic form, directors should be mindful that the act requires that such records must be capable of being reproduced in hard copy form.

In addition, as noted above, a company’s articles may contain specific provisions relating to board minutes which will need to be complied with. Table A companies must keep their board minutes in 'books kept for the purpose' which appears to require that they be kept in hard copy rather than electronic form.

To read more about company statutory registers and their requirements, see our article here.

This article is intended to provide a summary of the law in this area as at June 2022 and does not constitute legal advice. Should you wish to obtain advice based on specific facts and circumstances, please contact us.

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