Much good can come from hiring a corporate secretary to
effectively draw up minutes for meetings of the board of directors.
Dangers lurk in doing the job poorly
Keeping minutes of board meetings may seem like
tedious busywork, but there are good reasons (beyond statutory
requirements) for directors to do so. Minutes, for instance, can
provide proof of corporate authority that enables particular
officers to conduct banking transactions. Or they can serve as a
reminder or direction for action — for example,
instructing an officer to sign a contract on approved terms.
Minutes may also help to defend against claims by unhappy
shareholders or regulators and provide evidence that they have been
sufficiently addressed. For instance, a "due diligence
defence" may exculpate directors who can demonstrate that they
took appropriate time and care in considering a matter.
Similarly, minutes can record how directors responded to a
corporate opportunity, so as to provide the basis for a
"business judgment defence." Anyone seeking to challenge
factbased defences of this sort will have to produce facts that
refute the minutes.
Minutes, however, are not always helpful. These documents are
not privileged and may ultimately be viewed by litigators and
regulators. Minutes may implicate directors in inappropriate
conduct, or may strongly suggest that a due diligence or business
judgment defence may not be available. Directors should always
think about how opposing counsel or regulators might try to
interpret minutes against them.
Minutes must be accurate, of course, but the law provides for
considerable latitude in determining what should be included. Many
have described the function of minute-keeping as an art, and so it
is important that the role be assigned to someone with adequate
expertise and experience — a true corporate secretary, as
opposed to an untrained administrative assistant.
One significant question that boards must make concerns the
degree of detail. Minutes should record that a decision was made
and what the decision was. Minutes should provide whatever
directions and authorities are required to implement the decision.
Beyond this, it may be important to specify considerations that
reflect the deliberations.
For example, in approving an expensive executive employment
arrangement, it may be important to demonstrate that the board
adverted to how the contract would pay out in a variety of
circumstances, as part of its determination that the deal was a
good one for the corporation. Noting that the directors discussed
various scenarios and referring to presentations made in support of
the arrangement may assist in preventing meaningful allegations
that the directors were derelict.
While it may be useful to record specific comments that are
directly relevant to a decision or a potentially available
directors' defence, it is generally unhelpful to record all
comments, with attribution. Many of these thoughts may be
preliminary, ill-conceived or otherwise unhelpful. They can and
should be omitted on the basis that minutes record decisions and
the basis of decisions, but not discussions. However, specific
comments must be included if directors insist on them.
Meeting notes should be taken on a contemporaneous basis, and
minutes should be created promptly after a meeting. Minutes should
then be cascaded for approval. Typically, I might send the minutes
to the meeting chairman for initial vetting, then would circulate
them to the entire board in time for review before formal approval
will be sought. Formal approval should be recorded in subsequent
It is not uncommon for directors to keep personal notes as
meetings proceed. Directors may want to ensure that they are able
to assess draft minutes, when received. However, personal notes
should be destroyed once minutes are approved.
As it is important that minutes be carefully crafted in the
first instance, so it is also important that other possibly
misleading (whether directly or in nuance) and potentially
embarrassing notes not coexist. The benefit of formal minutes can
be lost if one director has a doodle at the side of a notepad,
suggesting (correctly or otherwise) distraction or superficial
It is, however, appropriate to record comments that a director
feels are significant and not otherwise reflected in the minutes,
and to record dissents, whether to particular corporate action or
to the minutes themselves. Formal dissents can afford defences to
the dissenting director.
It is up to you to make minutes your friend, and not your
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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