Proper board meeting minute taking has recently increased in importance as a result of a number of court decisions. Bankers and other businessmen doing business in the corporate form should carefully consider the impact of cases such as In re Walt Disney Company Litigation (Del. Ch. 2004).

In many states, minutes are considered to be prima facie (i.e., presumptive) evidence of what actions an entity actually took. Some courts have also taken the position that other evidence (such as witnesses testifying that serious debate did actually occur in a meeting, even when the minutes don't record such debate) won't be allowed unless minutes are clearly incomplete or ambiguous.

In re Walt Disney Company Litigation (Del. Ch. 2004) is a case in point and is particularly instructive with respect to the appropriate level of detail in board minutes. The Disney plaintiffs charged that the board of directors of Disney violated their duty of good faith when considering the CEO's hiring of a new president. When Disney's board met to discuss the hiring, the minutes did not review or approve: (i) any presentations or reports regarding the terms of the draft hiring agreement, (ii) any questions raised by any board members, and (iii) the employment agreement being authorized. The Disney board ultimately approved the hiring. The total space in the minutes dedicated to the hiring was less than one and one half pages.

Some Disney witnesses told the court that board members did, in fact, give the hiring serious thought and deliberation at the meeting. But when Disney filed a motion to dismiss the plaintiffs' case, the judge rejected the motion and sent the case to trial - partly on the basis that the minutes (both as to content and length) indicated a lack of serious deliberation by board members.

In the banking context, the importance of internal bank board minutes was underlined recently. The FDIC filed a lawsuit at the end of 2010 against a large law firm that had been hired to defend the board of directors of a bank that ultimately failed. Copies of board minutes are alleged to be among the internal bank documents received by the law firm shortly before the bank failed.

When the bank failed, the firm is alleged to have transmitted the documents to individual board members in what appears to have been an attempt to circumvent an FDIC practice of not allowing directors of a failed bank access - outside of the normal process of discovery in pending lawsuits - to internal bank documents relevant to their defense against claims by the FDIC as a receiver for the bank. The law firm has denied any wrongdoing.

In response to the FDIC suit, a public letter to the Chairman of the FDIC dated December 22, 2010, was issued by the American Association of Bank Directors. The letter called on the FDIC to routinely permit bank directors access to internal bank documents such as board minutes when the directors are in the process of responding to FDIC inquiries prior to the institution of a formal suit.

Since overly-detailed minutes can be used as a weapon against a bank or other business in a lawsuit, it may be tempting to write extremely brief minutes ("the Board debated resolution X, and X was approved"). But this approach can lead to aproblem- courts may assume that since debate or careful deliberation was not explained, it did not happen. That conclusion could be very harmful to an entity defending against, for example, a charge that directors did not exercise due care in making a decision.

Ultimately, while minutes can be used to show a lack of deliberation or due care, they can also be used to show that directors did meet their various required responsibilities and duties. The following is a list of some practices that have become increasingly common for entities trying to follow minute-taking best practices. In reading the below, note that above allminutes must be truthful and accurate. Minutes cannot compensate for inappropriate or deficient board behavior, and should in no circumstances be misleading or overstate director diligence.

(1) Minutes as Summaries. Minutes are often a summary, not a transcript. Well-drafted minutes often reflect the general substance and tenor of debate, time spent at the meeting in total and on particular issues, a list of materials given to the board, a summary of the findings of any non-board-member presenters (such as officers or outside consultants), the complete text of approved resolutions, and whether board members received materials before the meeting.

(2) Recording of Individual Director Votes and Quotation of Directors. Some entities choose to record individual directors' votes. At least one financial institution regulator now requires individual directors' votes to be recorded. When their individual votes are recorded, directors may, with an eye toward future lawsuits, cast defensive votes. And from the perspective of the entity, a list of dissenting directors may become a plaintiff witness list. For these reasons, unless law or regulation requires it, many commentators recommend against recording individual directors' votes.

Whether or not an entity chooses to (or is required to) record individual director votes, quoting directors during debate is a separate issue. Although debate (including both positive and negative arguments for a proposed action) can be generally summarized, many commentators have concluded it is not usually necessary to attribute specific quotes to specific directors.

It is not unusual to identify officers, consultants, etc. that are making reports or presentations. As to directors, identifying specific speakers could, in some circumstances, be helpful- specific directors may be able to later establish the seriousness and depth of their individual deliberations. That practice could also, in other circumstances, be harmful- a director's specific words could be used in a lawsuit to attack such director's later change of opinion, or simply be quoted or used out of context. Other, more silent directors may be challenged for individually not making comments or posing questions.

A third possibility is to not identify individual board members during debate, unless a director specifically requests to have a particular comment, question, position, etc. identified to them in the record (the request itself should also be noted in the minutes). This approach allows individual directors to leave a "paper trail" of their specific actions, while preserving a generally quote-free atmosphere of debate.

(3) Length of Minutes. The length of the minutes as to any specific item should generally reflect the relative importance of that item. The length of the minutes as a whole should bear a direct relationship to the importance of the meeting agenda. There should not be any fixed "one paragraph" or "one page" rule per issue. As stated previously, minutes must truthfully reflect what actually occurs at a meeting - the above assumes that directors spend time and divide debate in a manner proportional to the relative importance of various issues.

(4) Meeting Notes and Minute Drafts. Notes of a board secretary (as well as non-final drafts of minutes and director notes) are discoverable by plaintiffs in lawsuits to the extent they do not address legally privileged matters (i.e., the court will permit plaintiffs to see such notes and drafts if they are requested).

Meeting notes and drafts are often more detailed than the minutes actually produced. After counsel and the board of directors approve final minutes, a corporate should carefully consider whether it is necessary to retain secretary notes, non-final minute drafts, and directors' notes from the board meeting. Note that there are many situations (for example, during lawsuits or government investigations) when discarding any corporate materials should only be done on the advice of counsel.

(5) Prompt Review and Approval of Minutes. Minutes should be reviewed and approved promptly by the board. Excessive editing of draft minutes by management before their presentation to the board may be problematic, as such editing could suggest inappropriate after-the-fact changes.

(6) Legally Privileged Matters. Minutes should clearly state which portions of the board discussion are attorney-client privileged, and should confirm (if accurate) that the privileged discussion was conducted in the presence of a lawyer.

Alternately, minutes can state that a privileged discussion between the board and its lawyer occurred, and that separate minutes were taken for the discussion. Clearly identifying privilege in the minutes will make it much easier to later distinguish between privileged and non-privileged discussions.

(7) Transcripts and A/V Recordings. Entities should carefully consider whether they will retain verbatim transcripts or audio/visual tapes of board meetings. Temporarily-stored electronic recordings as an aid to the preparation of the minutes are a common practice. It is likely, however, that in a lawsuit any such existing materials are discoverable. The use of these types of records as permanent meeting records can also discourage the free and honest flow of debate among board members. Note again that there are many situations (for example, during lawsuits or government investigations) when discarding any corporate materials should only be done on the advice of counsel.