A Matter of Minutes: Tips and Best Practices for Drafting Board Meeting Minutes

» Posted in News & Resources

We’ll start this blog right off by admitting that preparing corporate minutes can be a tedious chore, oft postponed and viewed as a lowly ministerial task. However, minutes are a very important record for your business and in some instances can take on a critical significance – good or bad. This is true for large publicly traded companies or smaller privately owned ones. Somewhere – whether it is auditors, shareholders or a potential acquirer of the company – someone will be taking a good close look at your minutes. Sloppy minutes cause problems. Good minutes assure the reviewer that your company is well run with appropriate practices and procedures in place. Minutes do matter, so treat them with respect! With that in mind, here are some tips for preparing minutes of Board meetings.

Who Should Take the Minutes?  Preferably legal counsel should be responsible for taking the notes, preparing the minutes and maintaining the official Board records. Yes, that may sound a tad self-serving coming from a lawyer, but an attorney is much more likely to have the experience to glean the important points, advise on issues of law and prepare neutral objective minutes that adequately protect the integrity of the Board proceeding. If you can’t have your counsel take the lead, then have an experienced lawyer provide some basic training to the person who is charged with the minutes. Some prep time up front will give the minute taker a good basis to navigate the process and will go a long way toward avoiding pitfalls. Do not have someone who is a presenter or reviewer – like the CEO, CFO or Board member – take the minutes: they have enough to do already and you want a neutral note taker.

How Much Detail in the Minutes?  This is probably the most common question our clients ask. Unfortunately, there are no simple rules applicable to every company. Determining the level of detail in Board meeting minutes is more a product of having experience and good judgment. Minutes should have enough substantive information to adequately document the proceedings without getting bogged down in the minutiae. Some guidelines:

• Within the spectrum of minute drafting, stay away from the extremes. Minutes are not a transcript so not every point needs to be documented and avoid a verbatim recitation of who said what. By the same token, don’t go to the other extreme with vague or cursory descriptions.

• In general, minutes should be commensurate with the actual discussion by the Board and reflect the significance of the matter. For example, the evaluation of a potential major acquisition should reflect the Board’s performance of its due diligence obligations in scrutinizing the proposal. Minutes for this type of discussion should be detailed and specific. If the Board is being asked to adopt a new significant policy, like a Code of Conduct, then the minutes should include the Board’s discussion and evaluation of the policy, but not in great detail. Likewise, routine matters, like periodic reports from various departments can also be summarized by referencing just the key points.

• Be careful with attorney-client privileged information and confidential trade secrets. Always keep in mind that others will be reviewing the minutes. Matters that reflect discussions with the company’s counsel should be clearly identified as privileged and the minutes should reflect just the topics covered, not the advice provided. Similarly, be discrete in describing matters that include the company’s confidential trade secrets.

What Requires Official Board Approval?  This is the second most common client question. Again, there is no one-size-fits-all rule here. As a practical matter, check the company Bylaws as they may specify certain requirements (for example, appointment of certain corporate officers may rest exclusively with the Board). Beyond specific requirements, what is voted on and documented in official resolutions is a function of good judgment. It may also be influenced by the corporate culture. Some Boards prefer to take a vote on most items; others will be satisfied with documenting their discussion in the minutes. It helps to review past minutes and try to be consistent when it comes to formal resolutions. With any resolution, make sure to describe votes as unanimous or passed and note any director who abstains or votes against a resolution. Also note any director who has been recused due to a conflict of interest regarding a specific matter.

Other Best Practices for Minutes:

• Draft minutes as close to the actual meeting date as possible. Letting too much time go by often leads to hazy recollections and incomplete minutes.

• Promptly circulate draft minutes to the other attendees. Make sure Board members have ample and unhurried time to review the minutes before being asked to approve them.

• Keep the tone of minutes neutral and objective. Opinions, judgmental language and editorializing have no place in the minutes.

• Note when the Board meets in executive session (meeting among Board members with no management present).

• Do not call a document “minutes” if there was not a meeting duly called and properly held on the matter. This after-the-fact characterization of certain Board actions as meeting minutes – when there was no meeting – is what gets many companies in trouble down the road.

Preparing and maintaining good corporate minutes may be an underappreciated task, but they are a critical component of good corporate governance. Like many things, good minutes may never be noticed, but sloppy or poor minutes certainly will be, and will often lead to bigger problems. So, yes, minutes do matter.