Calling and Holding a Board Meeting, Part 2

In our previous post we discussed how to call a Board of Directors Meeting along with the Quorum Required for the meeting. In this post, we will discuss the Means of Attendance, Written Resolutions Documenting the Board Minutes, Duty of Care, and addressing potential conflicts of interest.

Means of Attendance.

Directors do not need to be in the same physical location to hold a meeting. Board meetings can be held either fully or partially remotely, with one or more of the directors patched in electronically by phone or by videoconference. As long as a director can hear and be heard by all others, the director can be deemed in attendance for quorum and voting purposes.

Proxy Voting by Directors Prohibited.

Shareholders can, and in larger corporations generally do, vote by naming a corporate officer as their proxy and directing how to vote their shares. Because directors are fiduciaries of the company, they cannot vote by proxy. Delaware requires the director to attend, whether physically or by valid remote means mentioned above, in order to provide the opportunity for discussion and debate among the directors.

Written Resolutions Documenting Action and Board Minutes.

Board actions and decisions should be documented formally in a set of resolutions signed by each director. These may be signed in counterparts where the directors are not physically together, allowing each to sign a separate signature page to avoid having to circulate a copy for hand signature.

The corporate secretary is ordinarily responsible for taking and maintaining minutes of the board meeting. The minutes are a record of the process and flow of the meeting, the attendees and procedures taken, the matters discussed, and a summary of the discussion, creating an accurate record of the meeting. The corporation maintains the minutes and resolutions.

Duty of Care – Discuss and Gather Information.

In casting a vote, a director’s duty of care requires that they make decisions based on all information available. Directors should be reasonably confident that they have sufficient information to make an informed decision. Directors often gain this information through, among other means, asking questions of officers or internal or outside experts, reviewing prepared board materials (generally prepared by officers), and discussion and debate among the board, with each bringing their own experience and expertise. Delaware courts ordinarily will not second-guess a board decision where directors engage in a reasonable and prudent decision-making process, even if the decision reached or action taken prove to be foolish or incorrect.

Fiduciary Duty of Loyalty – Consider, Disclosure, and Address Your Conflicts.

As a fiduciary, a director must act in the corporation’s best interest, putting the directors’ personal, financial, or other interests behind those of the corporation. Directors must carefully consider whether they face a conflict of interest in casting a vote or discussing a given topic. Conflicts of interest should be disclosed to the full board. If the conflict is severe enough, the board may exclude a conflicted director from voting on the matter, restrict the director’s ability to debate and discuss the issue with the full board, or take other steps to document and avoid the potential effect of a conflict of interest.

When making decisions that involve the board, it is important to consider various factors. It is advisable to have a conversation with an attorney to address any potential conflicts that may arise. 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.

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