Board Meetings and the Importance of Well-Drafted Minutes

In our previous posts, we discussed how to call a Board of Directors Meeting, the Quorum Required for the meeting, along with the Means of Attendance, Written Resolutions Documenting the Board Minutes, Duty of Care, and addressing potential conflicts of interest.  Our third installment will delve into the importance of well drafted meeting minutes.

“Board minutes” refers to the summary of a board meeting adopted by the directors and maintained as an essential and required corporate record.  Board minutes serve as a comprehensive record of the meeting but also serve important functions. For example, they record specific facts showing that the meeting is valid and proper under the corporation’s governing documents.  The board can use the minutes to document its decision-making process supporting its decisions, which is critical evidence in the event the directors are later alleged to have violated their duty of care.  The minutes should be based on notes, but given their significance, require the preparer to exercise discretion and a degree of art in preparing a final version.

We will discuss some basic concepts for minutes as well as their importance in showing that the meeting is called and held, and that the board had the authority to act.

Board minutes are a factual record. They should not contain opinion or commentary, nor should they be drafted in a way that is false or misleading, whether by overt statement or omission. The key considerations are the level of detail, what language best describes the meeting, and the process undertaken. However, at the same time, meeting minutes should avoid creating potential issues through poorly worded statements that could later be misinterpreted or taken out of context.  The version presented to the board for adoption can be changed based on input from the board as long as the final version is factual and not misleading.

Minutes have value because they are the corporation’s own account, approved by the board.  The shorter the delay between the meeting and the minutes’ approval, the better.  Minutes should be prepared promptly after a meeting and can be adopted by the board through unanimous written consent.

A corporation may find it has not prepared or adopted minutes for one or perhaps many past board meetings and attempt to do so well after the fact.  Although such minutes lose much of the power and liability protection they might otherwise have offered the board, they are still prepared and adopted based on the information available.  The date of their preparation and adoption should be made clear – attempts at hiding their post hoc nature can create far more problems than the original omission might have caused.

Ordinarily, minutes are created and maintained by or under the direction of the Secretary of the corporation, although this is not a strict requirement. Legal counsel can be brought in on the preparation of minutes leading up to the final version adopted by the board.

In any board meeting minutes, at least the following facts should be addressed:

• Quorum – Document the names and total number of the board members in attendance (physically or by electronic means) to show that enough directors were in attendance to take board action.
• Means of Attendance – Each director should be documented as being physically present or attending by some electronic means in which they can both hear and be heard by the other directors.
• Acknowledgment of Notice or Waiver – Delaware corporate law and corporate bylaws often impose some type of notice requirement that dictates how far in advance board members must receive notice of a meeting and how they receive that notice.  Each board member should be documented as having acknowledged notice complied with such requirements or should expressly waive such notice, which also is ordinarily permissible.
• Vote on Resolutions – Minutes should document which board members voted in favor of resolutions that are ultimately adopted. This confirms the vote ultimately authorizing any resolutions passed as a result of the meeting and documents any dissenting votes or those refraining
• Incorporate Materials – Minutes should incorporate a copy of resolutions passed or actions taken at a meeting, which are a separate document. They should also incorporate any board materials reviewed by directors, such as presentations by officers or other information reviewed at a board meeting. Generally, officers assisting in conducting a meeting will prepare board binders of materials.  Incorporating these materials as exhibits to the minutes creates a comprehensive and cohesive record of the meeting.

Please note that the meeting minutes are intended solely for internal use within the company and are not submitted to the Delaware Division of Corporations.

If you have any questions or concerns regarding the establishment of your new Delaware entity, please don't hesitate to contact us!