Anyone who knows me will remember that I rap on about “if you have not written it down, it has not happened”. Many companies are owned and run by family members or friends who make their decisions informally over a coffee and a chat. When I am advising shareholders in dispute or companies under threat from outsiders and ask why a certain step was taken and where the minutes of the meeting are, I get a slightly blank look and am told that there are no minutes. It does not matter desperately when things are running smoothly. However in choppy waters, the board as a whole (or sometimes an individual director) needs to show not only what it did but why it took that decision. So meetings should be minuted. There is no need for an actual meeting if the board is agreed. A record to the decision and the reasons will suffice. And remember, meetings can be by Skype/Messenger/Facetime phone etc.
Minuting meetings is a skill. There is some helpful guidance from the Institute of Chartered Secretaries and Administrators (ISCA) to be found at https://www.icsa.org.uk/about-us/policy/the-practice-of-minuting-meetings.
In essence, the directors need to record:
- Date, time and place of meeting;
- Apologies for absence;
- What decision has been made;
- The reasons for making it.
There should be a succinct account of what was considered and which factors led to the decision being taken. The minutes should not be a verbatim version of the discussion. When a decision is made, it is a decision of the whole board. So if the board votes say 5:3 the fact that there was dissention is irrelevant. However if a board member insists that his/her vote against is recorded, then that fact has to be in the minutes.
It is the Company Secretary’s job to take minutes but in reality it is the Chairman who will influence what the minutes show.
I recommend consistency in approach. If a company generally shows reasons for its decisions then suddenly does not, the validity of the record may be questioned.
A well run company will be able to show its decision making process and will be far better placed to ward off any challenge to what it has done.
Finally, don’t be tempted to create minutes after the event. It is not hard to see that they are not contemporaneous and it looks soooo bad.