One of the most common questions asked by company secretaries is: “what exactly needs to be included in our board minutes?”

It can be challenging to know how much information to include: if you record too much you risk wasting significant time and administrative costs, as well as overwhelming the reader. Fail to include enough information and the reader will not learn anything meaningful about the Board’s effectiveness or decision-making process and important information which supported a decision could be overlooked.

In this briefing, we discuss why board minutes are key to demonstrating successful governance and how to ensure your board minutes evidence a true record of the organisation’s decision-making.

There is a straightforward legal obligation on directors to create and store board minutes*. However, there are no legal requirements that dictate the level of detail to be recorded within the board minutes.

The purpose of board minutes is to provide an accurate record of the business that takes place during a board meeting. Therefore, the primary concern for directors ought to be that the board minutes reflect how they (collectively) complied with their fiduciary and legal duties when reaching their decisions. Directors must exercise independent judgement, reasonable care, skill and diligence. In addition to this, they should avoid conflicts of interest, declare any interest in proposed transactions and not accept benefits from third parties in the process. Board minutes are the record which demonstrate how the directors have properly fulfilled the position of trust they hold with the organisation and towards its members or shareholders.

Ideally, board minutes will demonstrate that the Board has acted in good faith, in the best interests of the organisation and that the directors do not have any personal interests. More broadly, board minutes should offer transparency to the organisation and its members; they can also be a useful tool for reflecting on strategic decisions and ‘lessons to be learned’.

To establish whether the board minutes are well drafted, the company secretary (or the directors responsible if there is no company secretary) should consider whether an independent third party could easily establish the following:

  • What is the decision the Board has been asked to make?
  • What information have they considered in readiness for that decision?
  • Has the Board scrutinised the information provided and identified whether further information is required?
  • How and why was the decision made?
  • Was the meeting quorate and the resolution validly passed?
  • Have each of the directors present complied with their duties?

If it is not possible to answer the above with certainty, this may cast doubts regarding the Board’s (or individual directors’) competence and the exercise of their duties. Such doubts could include whether a decision has been made without sufficient information being made available, whether they were misinformed or deliberately misled, or even whether the decision was validly passed.

Directors are not expected to act perfectly and mistakes may be made, but it is important that the minutes can evidence that the Board and individual directors acted with the reasonable diligence expected of someone with their knowledge, skills and experience (based on both the standard reasonably expected of a person carrying out the director’s functions and somebody with the same specialist knowledge as the director in question). This does not mean that meetings should be recorded word-for-word or drafted from a position of fear, but they should provide an accurate summary of the discussion and demonstrate that board members have exercised their discretion properly and not just “rubber-stamped proposals” put to them by the executive team.

Each organisation will have its own preferred way of delegating authority, based on the expertise of its executive team and governance arrangements but there are common themes that occur when it comes to applying good governance principles. When drafting effective board minutes in support of your arrangements, our practical tips are as follows:

  • Include copies of the agenda which should set out the decisions the Board will be asked to make;
  • Ensure they evidence: who knew what? And when? And what they did with that information;
  • Demonstrate that directors operating within a group structure were acting on behalf (and in the best interests of) the right organisation, i.e. the one whose minutes are being considered;
  • Record a summary of any discussion but do not record the arguments themselves; instead, focus on outcomes – what decision was taken and how individuals voted or excluded themselves due to conflicts of interest (or otherwise);
  • Show how follow-up actions were allocated with clear deadlines;
  • Identify any legally privileged advice; and
  • Be concise but precise and record detail which is proportionate to the importance of the discussion.
For more information

If you would like more information on the above or wish to discuss governance arrangements within your own organisation, please contact Emma Watt.

Citations


* Section 248 Companies Act 2006
† Useful guides on board minutes include: ICSA’s ‘The practice of minuting meetings’ and the FRC’s UK Corporate Governance Code.

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