A Simple Guide to Drafting Board Meeting Minutes

Knowing how to draft valuable board meeting minutes is neither an instinct nor something learned in school. Nevertheless, if you are a member of a board of directors, or a corporate secretary or other professional who assists a board of directors, you may be required to draft board meeting minutes or to advise another on how to do so. This article provides a basic understanding of why board meeting minutes are important and how to draft them.

What is the purpose of minutes?

Board meeting minutes serve two primary purposes: to assist the board in supervising the organization, and to protect each director from liability for alleged wrongdoing. Lawyers are apt to appreciate board meeting minutes’ protective role, but tend to undervalue the minutes’ supervisory role. Directors tend to undervalue both, and are likely to secretly believe that minutes are an outdated and unnecessary obeisance to parliamentary procedureu00e2u20ac”a ritual without reward. Directors should reconsider the value of minutes and educate themselves as to how minutes can help the board supervise the organization and protect them from liability.

Good minutes enhance a board’s ability to supervise the organization primarily by helping the board manage its information and hold management accountable. Boards must make informed decisions, but have finite resources to gather and process information. Good minutes describe and, where possible, incorporate by reference and attachment all information that the board has considered, and organize that information for future use. This systematic collection and organization of data maximizes the amount of usable information available to the board when making a decision; increase’s the board’s efficiency by reducing the resources used by the board searching for and regathering information; and helps to refresh the directors’ memories regarding topics discussed and decisions made.

Keeping good minutes also helps the board hold management accountable. A bank’s board develops strategies, policies, and procedures that management then implements. By setting forth these strategies, policies, and procedures and recording the board’s instructions to management regarding their implementation, minutes create a basis for management oversight.

In addition to enhancing the board’s ability to supervise the organization, the secondary role of good board meeting minutes is to protect the directors from liability by preserving evidence that the directors fulfilled their fiduciary duties. Delaware courts have led the way in defining when a director has fulfilled his or her fiduciary duties. The Revised Model Business Corporation Act, which is largely built on the principles set forth in Delaware case law and which has been implemented in most other states, requires, in Sectionu00c2 8.31, that a shareholder bringing suit against a director must establish that the director did the following:

– did not act in good faith

– made a decision that the director did not reasonably believe was in the bank’s best interest

– made a decision without being informed to the extent the director reasonably believed appropriate

– lacked objectivity or independence with respect to a decision because of a family, financial, or business relationship

– acted while experiencing a sustained failure to be informed about the business and affairs of the corporation

– received financial benefit to which the director was not entitled, or

– otherwise breached any applicable duties to deal fairly with the corporation and its shareholders.

Good minutes establish a credible record that preemptively addresses each of these grounds for director liability. This record, because it is created contemporaneously with the director’s actions, enjoys a strong presumption of accuracy that a shareholder action will find difficult to overcome.

How long should minutes be?

Whether to draft short or long minutes with respect to a particular discussion or decision at a board meeting is determined by the twin purposes of minutes: to enhance the board’s ability to supervise the organization and to protect the directors from liability. Shorter minutes have the advantage of being easier to draft and easier to review. Longer minutes have the advantage of providing more information to form a basis for holding management accountable. They also better protect the directors from liability by providing a more complete description of how the directors satisfied their duties. Thus, the best practice is to draft short minutes with respect to routine or relatively insignificant matters, where the ease of drafting, reviewing, and referencing is more important than the value of accountability and bolstered protection that additional detail could provide. It is preferable to draft long minutes with respect to any matter of such character or magnitude that the board wants details to assist in supervising management or when objections (particularly from shareholders) could ariseu00e2u20ac”where accountability and additional protection from liability are more important than succinctness. Because the circumstances dictate the relative benefits of length and brevity, you must exercise your best judgment in deciding what matters deserve greater or lesser detail.

What information should be in minutes?

Minutes should begin with a preamble that sets forth the background information necessary to understand the context of the meeting and any deliberations taking place and decisions made. The preamble should identify the participants by listing the directors, management, experts, and other guests present, and note whether directors present by teleconference are able to communicate with all the other directors. It should also specify the date and time of commencement, to allow the reader to identify how each meeting relates to the broader sequence of events. Also, the preamble should state where the meeting is held, to provide evidence that the board satisfied any applicable meeting location and notice requirements and to provide the reader with the context.

If any law or provision in the organization’s articles, bylaws, or operating agreement requires the meeting’s purpose to be specified, the preamble should specify why the meeting is held. In addition, the preamble should identify whether the meeting is of the full board or a committee and whether the meeting was regular or special, to provide information necessary to determine any limits on the authority exercised at the meeting. It should also specify how notice of the meeting was given or whether it was waived, to evidence that the board satisfied any applicable notice requirements. Finally, the preamble should indicate whether the directors present reviewed, discussed, and approved the previous meeting’s minutes.

The body of the minutes should describe the board’s information-gathering, deliberation, and decision-making process. In doing so, the body of long minutes should document:

– that information presented to the board was relevant to the topic of discussion and of a level of detail appropriate to support any decision made

– why the directors found each presenter of information to be credible

– why the directors found the information presented to be credible

– that the board considered and discussed multiple alternatives, with summaries of those alternatives

– any differences of opinion among the directors, because differences of opinion are evidence of bona fide, constructive deliberations

– why the board chose a particular alternative rather than the others and, if any of the directors dissented from a decision, who dissented

– why the board believes that the decision made is in the best interests of the organization and its shareholders

– facts that show that each director is independent and objective with respect to the decision

– facts that show no director received any unfair personal benefit

– that each director believed himself or herself to be informed to the extent that the director reasonably believed necessary to make the best decision for the organization;

– that the directors who made the decision have a history of being informed about the topic; and

– that the directors did not notice any “red flags” that would indicate to a reasonably attentive director that more information or deliberation was required.

In the case of short minutes, this information can be summarized in one or two sentences.

If you forget everything else when drafting minutes, remember the two most important items: information and alternatives. First, minutes should always summarize the information obtained or presented, attach copies of any reports or other documents distributed to the directors, and incorporate by reference, in the body of the minutes, all such attachments. Second, minutes should always describe the alternatives that the board considered before making a decision. The inclusion of information and a description of alternatives in the minutes are critical because they allow the board to hold management accountable with respect to decisions the board made in the past, helps the directors make efficient, informed decisions in the future; and can support a court’s determination that the directors fulfilled their fiduciary duties.

With respect to any particular discussion or decision, the body of the minutes should indicate whether any directors listed in the preamble as present did not participate. For example, if a director recused himself or herself because of a conflict of interest or a lack of information or preparedness, the minutes should record this proper recusal so that no wrongdoing is imputed to that director.

Minutes should have a short closing section. The closing should indicate the date, time, and location of the next board meeting as a courtesy to the directors and to link together the minutes for each of the board’s meetings. The closing should also note the time of adjournment to demonstrate how much time the board devoted to its responsibilities.

Minutes that follow this framework will advance the twin goals of enhancing the board’s ability to supervise the organization and protecting the directors from liability. If you help your board ensure its minutes accomplish these ends, you will have provided a great service not only to the board but also to the organization.

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