Trans Tasman Round table

As official company records of directors’ meetings, courts place weight on the contents of minutes. Minutes are increasingly being 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. The James Hardie case was a stark reminder of the dangers of not keeping proper minutes of a directors’ meeting (ASIC v MacDonald (No 11) (2009) NSWSC 287).

“ As official company records of directors’ meetings, courts place weight on the contents of minutes. Minutes are increasingly being used in court to prove or disprove that directors have fulfilled their fiduciary duties.”

Who takes the minutes?

In public companies, the company secretary is the usual minute taker. Most proprietary companies also have a company secretary (who is the usual minute taker), although proprietary companies are not required by law to have a company secretary. If a proprietary company does not have a company secretary, then it is common for a person from within the company to be asked to perform the minute taker function at a meeting. This may be a director of the company or may be 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 may request that its solicitor or accountant attend the meeting to perform the minute taker function.

It is not advisable for the CEO or chair to take the minutes, as they should be participating in the meeting rather than creating a record of it.

What are the legal requirements for board minutes?

In order to fulfil their obligations under section 248G of the Corporations Act 2001 (which is a replaceable rule) or an equivalent constitutional provision, directors individually must ensure, by a process of voting, that it is possible to determine whether they support, oppose or abstain from a particular resolution, which requires accurate minutes.

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. The minutes are meant to be contemporaneous documents aimed at being a true and accurate reflection of the events occurring at the meeting and the statutory requirements outlined in section 251A of the Corporations Act 2001 ('Act') are strictly applied by the courts:

(6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved

Importantly, in order to comply with the requirements of section 251A of the Act, 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; and
  • Signed within a reasonable time after the meeting by the chair of that meeting, or of a succeeding 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.

With respect to signing the minutes, it should be noted that electronic signatures have been recognised in Australian law under the Electronic Transactions Act 1999 (Cth) (and similar state and territory legislation) provided certain requirements are met. These provisions do not apply to the Act, as such minutes must be signed in hard copy prior to storage.

After signing, the minutes should be kept as part of the company records. Section 1306 of the Act permits companies to prepare and store their books and registers including minute books 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. Further, companies are required to take reasonable precautions to protect its records against damage and tampering.

Members have the right to inspect the minutes of general meetings, but not those of directors’ meetings (s 251B). As such, it is highly recommended that the minutes of general meetings and board meetings be stored separately.

Do minutes have to be in English?

There are no requirements under the Act that board minutes be taken in English. However, as a matter of good practice, recording minutes in English will assist auditors in their work and save on delays if the minutes are requisitioned in a court action. Future directors of the organisation who do not speak the language in question will more readily understand where the organisation has been in the previous years.

Should directors make their own notes of board meetings?

There is no legal obligation on directors to take personal notes. The responsibility for record keeping lies solely with the organisation. It is unlikely that a court would view the absence of a director’s notes as a sign that a director has not fulfilled his/her duties.

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 used proper care and diligence. However, taking notes can create risk – ambiguous, inconsistent or incomplete records can be used against a director.

Boards have a responsibility to properly evaluate the minutes circulated after meetings. Directors may want to take notes during the meeting to refresh their memory when the minutes are circulated. They should request additions, clarifications or corrections where necessary. 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 from company to company

General inclusions would be:

  • Name of the company
  • Nature and type of meeting, for example, directors’ meetings, committee meeting etc.
  • Place, date and starting time
  • Name of the chair
  • Attendees, either physically or by 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. To make cross referencing easier, resolutions should be numbered. Note that listed companies have additional requirements relating to proxy voting (s 251AA)
  • When attendees leave and re-enter the room
  • Abstentions from voting, for example, due to conflicts of interest
  • Closing time
  • Signature of the chair.

With the focus on accountability in the current regulatory and corporate governance environment, some commentators suggest as advisable 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. Recording the length of time spent on a discussion can denote the relative importance of a matter to a board meeting, reinforcing that directors have given it due consideration.

“ With the focus on accountability in the current regulatory and corporate governance environment, some commentators suggest as advisable the inclusion of broad reasons for decisions in the minutes.”

Minutes can be used for a director’s defence in court. However, poorly taken minutes may also be used against a director by regulators or the opposing party

Matters which 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.

Should there be minutes of ‘in camera’ meetings?

Sometimes boards may want to meet without management present. Perhaps one or more directors may need to absent themselves from discussion of a matter due to conflicts of interest or duty. In these examples, the meetings could be said to be held in camera.

Whether there should be minutes of an in camera meeting is up to the individual board. Some organisations allow their minutes to say that an in camera meeting took place but don’t share any further information. Other organisations may be fuller in their descriptions.

If formal actions come out of this meeting, then it would be advisable to document them so that outcomes can be tracked in subsequent meetings.

“ If formal actions come out of this meeting, then it would be advisable to document them so that outcomes can be tracked in subsequent meetings.”

Whether the minute taker should be present will depend on the individual organisation and the situation. If the board wants to meet without management and the company secretary is a board appointee, which is typical in Australia, then they can probably stay. The chair will be instrumental in this decision.

Points to consider

  • The constitution may specify items and processes that should be recorded in minutes, such as proposers and seconders for motions.
  • Each decision made by the board should be clear to anyone reading the minutes, including those who did not attend the meeting.
  • Ensure that the key points of the board’s discussion have been recorded so that these can be reviewed quickly if the topic is revisited.
  • 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 (see sample action list).
  • If there are many items for ‘noting’ or ‘information’, it may be more convenient and efficient to group these together and list them as ‘noted’ or ‘taken as read’ in the minutes.
  • The board should receive progress reports on the implementation of decisions.
  • The minutes should record who was present and, if anyone was present for only part of the meeting, either the time of their entry and exit or the agenda items that were discussed when they were in the room.
  • Any conflicts of interest should be noted with a record of how they were handled.
    • Was the level of discussion appropriate to the seriousness of each item under consideration? This can be shown either by noting the start time for each agenda item or by using phrases such as ‘debated at length’ or ‘discussed in depth’.
  • 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.
  • Remember that, in the worst case scenario, board minutes may be used in court to indicate what board members knew and authorised.

A sample board agenda

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Disclaimer

This document is part of a Director Tools series prepared by the Australian Institute of Company Directors. This series has been designed to provide general background information and as a starting point for undertaking a board-related activity. It is not designed to replace legal advice or a detailed review of the subject matter. The material in this document does not constitute legal, accounting or other professional advice. While reasonable care has been taken in its preparation, the Australian Institute of Company Directors does not make any express or implied representations or warranties as to the completeness, currency, reliability or accuracy of the material in this document. This document should not be used or relied upon as a substitute for professional advice or as a basis for formulating business decisions. To the extent permitted by law, the Australian Institute of Company Directors excludes all liability for any loss or damage arising out of the use of the material in this document. Any links to third-party websites are provided for convenience only and do not represent endorsement, sponsorship or approval of those third parties, or any products and/or services offered by third parties, or any comment on the accuracy or currency of the information included in third party websites. The opinions of those quoted do not necessarily represent the view of the Australian Institute of Company Directors.