February 2011 Issue 7
BoardWorks International
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A Fresh Look at Minutes

It is surprising how often the question of board minutes gets raised with us. Boards, individual directors and board support staff are equally likely to initiate an inquiry. This level of interest seems to reflect both variability in practice and the absence of agreement on what is ‘best practice’. About that there appears to be some very strongly held (and opposing) views.  Consequently, in this issue it might be helpful to cover off some of the main aspects concerning the recording of minutes. Please note, however, that this commentary does not constitute legal advice. You should get specific legal; advice if there is any uncertainty.

Why have minutes?

In most jurisdictions it is a legal requirement of incorporated bodies to keep a written record of the board's decisions. This is whether decisions are taken at a meeting or via some other process.  Failure to keep such a record might be taken as a worrying sign of the board’s competence, even integrity. It may also compromise some aspects of a corporate entity’s legal protections (e.g. of limited liability).

Minutes provide a record of important organisational transactions.  Minutes constitute a 'paper trail' that prove that proper authority was exercised. This can be very important if disputes arise within the organisation or with outside parties.

Minutes can be important to demonstrate to stakeholders that the organisation and its board acted appropriately and in compliance with applicable legal and contractual requirements.

Potential conflicts of interest are common. Minutes can record the process steps adopted to protect both the organisation and the conflicted party from accusations of undue or improper influence.

Where external reporting is important (e.g. to a regulator) board action as recorded in the minutes may be the triggering event for disclosure.

What should be in the minutes?

Minutes should be a record of procedural matters.  Therefore, the minutes should disclose that the meeting has been duly constituted (e.g. that a quorum of members was present; that prior minutes were approved, etc.) and adjourned and that applicable procedural steps have been taken. 

The minutes are not only a record of a board’s decisions but of the history and development of the board’s thinking about important matters. The more important something is the more thorough the minutes with respect to it should be. Minutes should be written carefully but be balanced to ensure that they are neither too long nor too short. Legal advice has changed over the years. Once minimalist minutes (a record of decisions and not much else) were favoured. Today more fulsome disclosure of a board’s thinking is considered appropriate.  Apart from decisions, the minutes should include just enough to record the most important ingredients in the board’s thinking.  It is normally neither necessary nor advisable to note who said what.  The objective is to document the processes and outcomes.

Minutes should also record that appropriate governance processes were observed.  Proof of the extent to which directors adhered to good standards of practice may become important in some circumstances. Because it is difficult to hold directors individually and collectively accountable when decision-making processes are either not in place or are ignored, process minutes encourage a higher level of accountability and protect both the board and its stakeholders.

Documents which form an important part of the board's decision-making should be referenced or even attached.

If normally part of n the board's operating style, Parliamentary-style procedural motions and voting outcomes should be accurately recorded.

Finally, declarations of directors’ interests (or of any other participant in the board's decision-making process) should be disclosed in the minutes. This should be accompanied by a record of the action taken to manage or mitigate any conflicts of interest. An example might be if an interested party withdraws from the meeting while a matter is discussed and resolved.

Processing the minutes

A draft of the minutes should be prepared by the secretary of the meeting and forwarded as soon as possible after the meeting to the chairperson for review and comment.  The draft should then be sent to all directors for any further comment.  Each director should thoroughly review the proposed minutes and compare them with any notes they, themselves, took of the meeting. 

Formal approval of the minutes at a subsequent meeting is necessary to constitute draft minutes as the official record. If no changes are proposed soon after the meeting, however, it can be assumed that formal approval will be a matter of routine.  While, traditionally, the approval of the minutes is one of the first items on a board meeting agenda there is normally no need for this. Placement at the top of the agenda runs the risk that 'matters arising' will become an opportunity for time-consuming, ad hoc and tangential discussions to occur. In the worst case, this is also an opportunity for dissatisfied directors to relitigate matters dealt with at the previous board meeting.

Committee minutes

A similar approach should be adopted for committee minutes because the same principles apply.  A possible exception is the minuting of ‘in committee’ discussions.  In such cases the agenda is best kept brief and the minutes need only state that the meeting took place, and who was in attendance.

Special situations

There may be occasions, for example, when the board wishes to take legal advice during its board meeting.  It is advisable in such circumstances to recess the regular meeting and convene a special meeting covered by lawyer-client privilege.  Privileged minutes should be kept of the separate meeting. 

Taking the minutes

The form and practice of minute taking can have a significant influence on the board’s efficiency and effectiveness as. Taking good minutes is an art. It may be a worthwhile investment to have a professional minute taker on the job.

 

 

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