We are often asked how much detail should be included in board minutes, and (perhaps predictably) the answer is: it depends. The style and format of board minutes varies considerably across countries, sectors, and individual companies and, in general, the law leaves the directors with considerable latitude. Although there is generally an obligation to keep a record of decisions taken at board meetings, and some regulators specify additional requirements, it is typically up to the board to decide what should be included. For the UK, a certain amount of best practice guidance is provided by ICSA, an association for those working in governance, risk and compliance, and that guidance is currently under review. A consultation document, issued earlier this month, poses various questions for boards and offers a timely reminder of the need to keep a careful eye on these important company records.
The fact that the law does not offer prescriptive rules does not mean that the choices a company makes are unimportant, and boards would do well to consider – in light of legal and regulatory risks which pertain to their company, and the degree of consensus about decisions – what should be included in the records they maintain. There are a number of reasons for that, not least of which is that the minutes (once signed by the Chairman) will be good evidence of what actually happened at the meeting, and it will be hard (although not impossible) for a director to prove otherwise. Regulators, auditors and litigators acting for those who want to sue directors can call for disclosure of minutes to aid an investigation, and ill-advised board minutes have tripped up many boards whose behaviour has later been put in the spotlight (including in a high profile 2012 Australian case).
So, minutes are important documents and directors should take care to make sure that they fairly and accurately represent decisions that were taken and (often) the main reasons for those decisions. They can also provide evidence that the decisions were well-informed (an assertion which can be supported by relevant board papers). Actions for breach of duty are often founded on, or supported by, what is said (or not said) in the minutes, which means that attention to detail can pay off. Minutes are also an increasingly important tool when it comes to establishing the tax residence of a company. With the current regulatory trend towards increasing substance requirements, minutes are an additional way to evidence the fact that decisions are effectively being taken by the directors at board meetings convened in a particular jurisdiction, through recording the location, participants who are voting and the business of the meeting.
But when should the details of specific discussions and disagreements be included? Mostly the minutes will not name individuals or rehearse the discussions that led to the decision, but sometimes a dissenting director should ask for their dissent to be recorded. That is especially important if the decision is taken when the company is, or may soon become insolvent, or where the decision may be subject to regulatory scrutiny – even if in countries (like Germany) where the board has collective responsibility there may be limited legal benefit in such a note.
Observers are common in the venture capital and private equity sector, and it is essential that the extent of their participation is carefully recorded, particularly if it is important to those individuals that they are not subsequently identified as directors in fact, or "shadow directors" – both of whom may inherit similar responsibilities to the actual directors. The minutes should also carefully reflect the way in which conflicts of interest were handled, including any declarations of interest and the way in which other conflict management procedures were utilised.
In rare cases it may be helpful to record the board's proceedings, but in our experience this is not common practice and may not facilitate a frank exchange of views. However, directors would be well advised to remember that it is relatively easy for others present to record the meeting (especially if anyone is participating by phone), and there is generally no legal obligation to seek permission from other directors before doing so.
Minutes are generally approved at the subsequent meeting and then signed by the chairman. All board members would do well to read the minutes, and seek corrections where necessary, before assenting to their approval.