Directors of Australian companies often use technology
such as teleconferencing to hold board meetings where not all the
directors can be in one place (hey, directors need holidays too!)
and may view board minutes as a mere formality once a decision has
been made. However, aspects of the longrunning James
Hardie litigation provide a reminder of the dangers of not
dotting the i's.
In 2001, the board of James Hardie Industries Ltd held a meeting
which approved a draft ASX announcement; that announcement was
subsequently found to be misleading. It only took ASIC six years to
issue proceedings against the five Australian and two US
One issue was that the US directors had participated in the
board meeting by telephone and hadn't seen the draft ASX
announcement. The court held that the US directors breached their
statutory duties of care and diligence by failing to a request a
copy of the announcement or abstaining from voting when they knew
that the meeting was being asked to approve the announcement. They
were each fined $20k and disqualified from managing corporations
for 23 months.
What can we learn?
If you are conducting a board meeting using video-conferencing
or some other technology, each director must be able to
participate, hear and be heard for the entire duration of the
As a director, you must make sure you request a copy of all
documents being considered or tabled at the meeting and if you do
not have a copy of all necessary documents you should abstain from
voting. The onus is on you as a director to request a copy of the
necessary documents and if this is not feasible, ask the Chair to
have the text read out (that will make for a really fun
The individual will of each director should be made known in a
clearly communicated way and this should be reflected in the
minutes. If a director votes "no" or abstains, the
minutes should set this out, rather than simply stating whether the
resolution was approved or not.
Ensure that draft minutes are reviewed within 1 month of the
meeting and corrected as necessary. Again, each director should see
this as their responsibility, rather than leaving it to the
secretary or Chair.
There's an old saying that whoever drafts the minutes
determines the truth. As a director, you need to make sure that the
minutes are a true record, and particularly that, if you have voted
against a resolution, the minutes say so.
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