how to board minutes

The final round of hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in November raised several issues regarding board minutes, making the taking of minutes a hot topic.

Counsel Assisting Rowena Orr QC questioned current CBA chair Catherine Livingstone AO FAICD (who was not chair at the time of the events discussed) on why the minutes of the bank’s October 2016 board meeting did not contain a record of when the chair challenged management in relation to a regulatory report, raising the issue of whether the CBA’s approach to the board minutes was in compliance with section 251A of the Corporations Act 2001 (Cth).

Likewise, NAB chair Ken Henry AC was questioned whether a board meeting had discussed the bank’s dispute with ASIC over advisor service fees. The minutes suggested the issue wasn’t discussed and committee members asked no questions.

David Bayes FAICD, a non-executive director of Sigma Pharmaceuticals and AICD likes minutes to get to the point.

”Directors understand it is a fine art what to include and what to exclude from the minutes.” Catherine Walter AM

“I don’t like long-winded minutes and verbatim commentary,” says Bayes. “I like them to accurately portray the flavour of what was said.”

“Directors understand it is a fine art on what to include and what to exclude from minutes. They are not meant to be a verbatim record but if directors feel strongly about a pivotal issue there is generally the opportunity to request that their concerns be noted in the minutes,” says Catherine Walter AM, a non-executive company director.

The purpose of minutes

Board minutes are used to record the decisions of the board; to convey board decisions to the executives who will implement them; and serve as reference for the board if it wishes to revisit a decision. They are not a transcript of every word said during the meeting or a record of individual directors’ contributions. However, they can be used as evidence in legal proceedings and as such, care must be taken with their preparation. In particular, minutes can be used in court to prove or disprove that directors have fulfilled their fiduciary duties.

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. Minutes must be concise, phrased in non-emotive language and appear impartial and above suspicion. However, poorly taken minutes may also be used against a director by regulators or the opposing party. The James Hardie case was a reminder of the dangers of not keeping proper minutes of a directors’ meeting (ASIC v MacDonald (No 11) (2009) NSWSC 287).

Points to Consider

  • Ensure that any items requiring implementation or more information are easy to identify. Some companies highlight them in bold type while others create a separate table of actions or “matters arising” from each meeting.
  • If there are many items for “noting” or “information”, it may be more convenient and efficient to group these together and list them.
  • The board should receive progress reports on the implementation of decisions.
  • 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.

Who takes the minutes?

In public and proprietary companies, the company secretary is the usual minute taker. If a proprietary company does not have a company secretary, it is common for a person from within the company to be asked to perform the function. This may be a director or the person that is generally responsible for maintaining the company registers and notifying ASIC of basic changes when required.

On occasion, an organisation might prefer to use an independent minute taker — the organisation’s solicitor or accountant. It is not advisable for the CEO or chair to take the minutes, as they should be participating in the meeting.

What are the legal requirements for board minutes?

Section 251A of the Corporations Act 2001 (Cth) relevantly requires minutes of “proceedings” and “resolutions” of directors’ meetings, including meetings of a committee of directors, to be recorded within one month.

Minutes must contain a full and accurate record of all business done, including a list of who was present and all resolutions passed at the meeting, in accordance with the statutory requirements outlined in section 251A of the Corporations Act 2001 (Cth), which are strictly applied by the courts. The board minutes should be approved by the directors as a true record of their meeting. This is best done between meetings via email and confirmed at the next meeting when the chair signs the minutes. Minutes of all proceedings and resolutions of all board and committee meetings must be:

  • Entered in the directors’ minute book within one month after the relevant meeting
  • Signed within a reasonable time after the meeting by the chair of that meeting, or chair of the next meeting.

Once the minutes are signed, only clerical errors can be amended. To make corrections, directors have to pass a resolution at a future meeting. They can also rescind previous resolutions in a similar way if they no longer believe them to be the best decisions.

After signing, the minutes should be kept as part of the company records. Section 1306 of the Act permits companies to prepare and store in a “mechanical, electronic and other device”. However, the matters stored in the device must be able to be reproduced “at any time” in a written form.

Members have the right to inspect the minutes of general meetings, but not those of directors’ meetings (section 251B) and, as such, these should be stored separately.

Should directors make their own meeting notes?

There is no legal obligation on directors to take personal notes. The responsibility for record keeping lies solely with the organisation. 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 him/herself, questioned appropriately and been diligent. However, taking notes can create risk — inconsistent, ambiguous or incomplete records can be used against a director.

Boards have a responsibility to properly evaluate the minutes circulated after meetings. After the minutes are signed, there is no real reason to retain any notes.

What goes into minutes?

The level of detail included in the minutes will vary depending on the needs of the organisation, for example there will be big differences in the needs of a listed company compared to a NFP. The constitution may specify items and processes that should be recorded in minutes, such as proposers and seconders for motions. General inclusions would be:

  • Organisation name
  • Nature and type of meeting, for example, directors’ meetings, committee meeting
  • Place, date and starting time
  • Chair name
  • Attendees (physically and remote access). Invited guests should be separated from usual attendees
  • Apologies accepted
  • Presence of a quorum
  • Minutes of the previous meeting
  • Materials distributed before and during the meeting
  • Proceedings of the meeting and resolutions made. Note that listed companies have additional requirements relating to proxy voting (section 251AA)
  • Appointments made and the terms of reference of any committee that is set up
  • When attendees leave and re-enter the room
  • Abstentions from voting, eg, due to conflicts of interest
  • Closing time
  • Chair signature.

With the focus on accountability in the current regulatory and corporate governance environment, some commentators suggest the inclusion of broad reasons for decisions in the minutes. A brief outline of factors material to the decision, any dissenting views and the amount of time spent on discussion may help to establish that directors have exercised proper care and diligence in their decision-making.

Matters that should not be included in the minutes are:

  • Individual speeches or arguments
  • Admissions of liability.

Keep to a minimum disclosure of legal advice, which is generally subject to legal professional privilege. Minutes can briefly state that a matter subject to professional privilege was discussed, but not go into detail.

The AICD view is that recording board meetings, verbatim or via transcript-style minutes is not appropriate.