There are two approaches to the amount of detail that should be set out in the minutes of meetings of the board of directors and committees of the board. Under the minimalist approach, minutes include the text of resolutions accompanied by little narrative, with a view, in part, to providing less ammunition to plaintiffs for future litigation against the directors. The more expansive approach has been to provide greater narrative with the resolutions. In considering which approach is more desirable, bear in mind that minutes not only provide information, but also protect the members of the board or committee from potential liability. To succeed in challenging a business decision, a plaintiff must establish that the directors acted in breach of the duty of care imposed by the relevant corporate statute. The directors and officers must act prudently and on a reasonably informed basis, and exercise the appropriate degree of diligence in reaching a decision. If that is the case, the decision will be protected by the business judgment rule. The court will protect decisions of directors that are made within a range of reasonableness and not substitute its opinion for that of the board even though subsequent events cast doubt on the board determination. Directors must be able to establish before the court that, based on the information available to them at the time, their decision was reasonable in the circumstances. The courts tend to look more at the decision-making process and less at the decision itself.
The minutes of meetings become the self-serving written record to establish that business decisions are based on appropriate prudence and diligence. The minutes should be sufficiently detailed to support directors’ reliance on the business judgment rule.
The level of detail in the narrative will vary with the significance of each matter considered by the board or committee of the board. Routine business that will not have a material effect on the operations of a corporation may be dealt with in a more summary fashion in the minutes. Business of a more significant nature, such as the sale or merger of the corporation, a major financing, a significant acquisition or disposition, a critical lawsuit or a matter involving a material conflict of interest, would merit substantially more detail in the minutes to establish that the board or the committee followed the appropriate processes. Before making such a decision, the board must:
- obtain the appropriate information;
- seek the necessary expertise of outside professionals;
- ask the appropriate questions;
- debate the salient issues; and
- give deliberate consideration without undue haste to all of these inputs.
Where a material matter is before the board or a committee of the board, erring on the side of greater detail as opposed to less is advisable