Records of the decisions or resolutions passed at a board meeting are recorded in board minutes. Sometimes the drafting and signing of board minutes is treated as an administrative ‘tick in the box’ exercise but the consequences of getting them wrong can be detrimental both to a business and its directors. Seeking legal advice on the drafting of these documents may be more expensive in the short-run but could save a business a great deal of money and worry in the long-run.
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What are board minutes and board resolutions?
The directors will typically take decisions together on behalf of the company as a board of directors in accordance with the constitution of the company. These decisions will be made at a meeting of the board (a board resolution) and recorded in board minutes. Some decisions may also be taken without a meeting and recorded in a written resolution (directors’ written resolution).
Board minutes
Every company is required by law to take minutes of every board meeting. Board minutes should be an accurate record of the decisions taken at the meeting and in the case of significant resolutions, should provide reasons for the decision in order to help discharge a director’s statutory duties.
Board minutes serve a number of important purposes for a company and its officers. They not only serve as a written record for the board itself but provide evidence of correct decision-making procedures if ever needed in disputes or litigation.
For more information on boards and board management, please see our article How to build and manage a board of directors.
Director’s written resolution
These allow directors to take decisions without the need to call and hold a board meeting and are generally used for more routine decision making.
The decision must be taken unanimously by all eligible directors but does not need to be taken at the same time, as the resolution will come into effect as soon as the final director agrees.
The articles of association must be checked to ensure they allow for this form of directors’ decision-making. The standard form articles Table A and the Model Articles do both allow for decisions to be taken by way of directors’ written resolutions.
For more detailed information on the different types of resolution and record keeping, please see our article Meetings and resolutions in company law: an overview.
What are the risks of using online platforms to source template documents?
Many online platforms and corporate governance software now offer template board minutes and written resolutions as part of their package. This may seem like a simple solution to get these documents drafted so you can move forward with the ‘more important’ matters but the risks of going down this route are substantial.
The platforms are not regulated by the SRA so they are not held to the same high standards as law firms. The templates may be out of date and/or not fully compliant with English law. Once drafted, the documents may not be reviewed by a lawyer to ensure that they work for the individual business.
Lawyers can also advise on the execution of the documents and on record keeping and inspection rights to ensure that companies and directors are in compliance and are not at risk of fines or worse.
What legal issues might arise from using online platforms for board minutes?
Records of director decision-making can be crucial as primary evidence in any disputes or litigation which the company or a director may face. This is why it is so important to get them right. Mistakes in the way the documents are drafted or procedures being incorrectly followed can render decisions invalid which could have a devastating impact on a business financially and even result in civil and criminal liability for a director for breach of company law.
What best practices can help mitigate the dangers of online platforms for board minutes?
Best practices include checking all procedural requirements are met and decisions are taken in compliance with constitutional and company documents. These will include the articles of association, any shareholders’ agreements and any delegation of authority documents.
The articles and shareholders’ agreements should be reviewed to ensure the meeting is being called and held in the correct way, which will include notice and quorum requirements. Any potential conflicts of interest should be considered, dealt with and documented properly to ensure resolutions are validly passed.
Our team can navigate through all of the above to ensure that any board resolutions are valid and to safeguard against potential directors’ liability. If you need assistance, fill out the short contact form below or call us on 0800 689 1700 and a member of the team will be in contact.
