Corporate Board Minutes

Corporate Minutes, Why Have Them?

Question number one above is the often asked question by the officers and the directors of any given corporation, whether it be a California Corporation or a Delaware Corporation or for that fact a corporate entity in any of the 50 United States.

This paperwork item of business is usually considered mundane and boring ; and is usually assigned to the first year associate or the paralegal. And, frankly, in many instances the breadth of the knowledge of the paralegal and or the first year associate might very well be enough in this given year.

And, this is probably the attitude of most corporate officials until such time as the minutes become important. An example of an important matter might be an audit by the Internal Revenue Service to check to see if the company is documenting its expenses and income correctly and consistent with the tax returns and or financial statements of the company. This type of a matter arising is pretty common and that is why we , at my office start the minute drafting for a given year with a complete copy of the company’s tax return for the calendar and or fiscal year in question.

How to get started?
Well little guidance is given by the statutory schemes in any of the 50 states of the United States.

A good starting point?

  1. Purpose – the upshot of why minutes is to describe the processes of the board and the facts and processes it uses in making its decisions.If properly prepared, these documents present evidence , in a written form, that the board exercised its general and fiduciary duties and did so in a reasonable and prudent manner.Minutes should describe the board’s full , informed and reasoned proceedings will be reflective of it’s ‘business judgment’ whether with respect to seeking financing for the company; expanding the company’s business or simply allowing and approving certain material business expenses of the company.

    The more complicated the item being approved the more involved the papertrail detailing the need, what was done, and why it was done;
    The usual rule of who, what , when , where , why, and how much, will generally cover the questions that need to be answered to produce a comprehensive set of minutes.

    Courts generally do not like to interpret actions of businesses , so if there is a rational business documentation of the activities, the necesscity for the same and the cost and approval , that approach will generally carry the day.

  2. Form of the minutes – There are myriad thoughts on how thorough or un-thorough to be in the creation of minutes. No one approach fits all sizes.At the core of the form is the ability of an outside third party to review the minutes and be able to answer the simple question of :

    From the minutes itself would this outsider conclude that the board made a clear, informed decision based on relevant information?
    There is no real magic to performing this chore on a spot on basis; So this review point ought to be applied to every set of minutes prepared and if the minutes pass the test all should be ok.

    Many courts have commented , in litigation wherein minutes that were submitted were of assistance as they documented:

    The participants in the board meeting;
    Discussion that ensued;
    Evaluation/ interaction/ debate/understanding of the matters under consideration;

    So, one could say that the form of the minutes should be dictated to some degree to the necessity for in depth discussion and interaction or not so much. Each individually draftsman will have to make that decision.

  3. Counsel present as scrivener/ witness to what occurred or simply reiterating what has been reported by the directors to him, i.e. hearsay reflections?Many pundits like the idea of company counsel being actually present at the meetings in order that he or she can give an actual account from their presence of the issues and the handling of the same. This approach is preferred where there is anything other than the simplest of items to approve for the year in question.

Additional comments on meeting protocol:

The minutes, to be of any value must identify who was present; in what capacity; and for how long they attended.

Secondly, there should be an indication of the duration of the meeting;

Thirdly, reflection of actions discussed and taken should not focus on one director or another, but more generically actions that are discussed by and between the board action a one functioning body/ decision making body.

Fourthly, Decisions reflected/ unanimous or if difference in vote then a reflection as to who voted for what etc. properly documenting the carry of the motion or the resolution; further on this same point, depending upon the time consumed and the complexities of the issues, there should be accurate reflection of the banter back and forth with an identification of positions taken and by whom.

Fifthly – use of exhibits as part of the process;

It goes without saying that if you are going to have a cohesive approach and corroborative approach to the use of corporate minutes they should be shored up and corroborated with the use of exhibits that are attached and initialed as part of the preparation process.

The will be more to come in Part II of the Unromantic and often forgotten Art of preparing and using Corporate Minutes.


Presentation Paper for SHW APC Blog and Oral Presentation

By | 2017-08-07T12:50:43+00:00 February 13th, 2017|