Minutes of Directors' Meetings
- Date:31 Jan 2013
- Type:Director Q&A
Minutes are an official record of the proceedings and resolutions of general meetings and directors’ meetings, as well as resolutions passed outside of meetings.
Section 251A (1) of the Corporations Act 2001 provides that a company must keep minute books in which it records within one month:
- proceedings and resolutions of meetings of the company's members
- proceedings and resolutions of directors' meetings (including meetings of a committee of directors)
- resolutions passed by members without a meeting
- resolutions passed by directors without a meeting, and
- if the company is a proprietary company with only one director--the making of declarations by the director
Minutes contain fairly standard content which must be verified after the meeting and kept secure. Once signed by the meeting’s chair, minutes are legal documents and criminal penalties can be imposed for falsification of records.
How minutes are taken can either help directors or possibly create risks. As official company records, courts place weight on the contents of minutes. Minutes are increasingly being used in court to prove or disprove that directors have fulfilled their fiduciary duties. Well-taken minutes record corporate decisions, highlight director dissent where appropriate, reduce misunderstandings as to the board’s intent in a matter and show compliance with legal duties and responsibilities. The James Hardie case (ASIC v MacDonald (No 11) (2009) NSWSC 287) was a stark reminder of the dangers of not keeping proper minutes of a directors’ meeting.
What are the Legal Requirements?
Minutes must be lodged in the minute book within one month of the meeting. The courts are strict about this one month time limit. If it is not complied with, then it is possible that minutes will not be allowed as evidence in a court proceeding. As was said in ASIC v Macdonald (No 11) (2009) NSWSC 287 at para 70:
'When the legislature created the requirement of one month in s 251A(1), it did so with the object of restricting the benefit of the section to reasonably contemporaneous documents. Hence the need for strict compliance’
After a meeting, the company secretary is responsible for their compilation and sending them to the chair, preferably within 48 hours of the meeting. The chair has to sign them within ‘a reasonable time’ after the meeting (s 251A (2)) but will first want them verified by other attendees. For monthly board meetings, minutes would normally be included in the following month’s board papers for confirmation before signing. If board meetings are held less frequently, they would need to be circulated to attendees for verification before a month has elapsed.
Once the minutes are signed, only clerical errors can be amended. To make corrections, directors have to pass a resolution at a future meeting. They can also rescind previous resolutions in a similar way if they no longer believe them to be the best decisions.
The company is responsible for safely and indefinitely keeping the minute books. They must be kept at the company’s registered office, principal place of business or another place approved by ASIC – (s 251A (5)). Minutes can be stored in bound or looseleaf formats or electronically, so long as they can be reproduced in a printed form (s 1306). If minutes are stored electronically, it is important to remember that the electronic versions will need to include the chair’s signature (probably by scanning a hard copy of the minutes).
Looseleaf folders may need to have each page numbered sequentially for security reasons because it is easy to remove or add pages.
Criminal proceedings can occur for breaches which lead to the falsification of company books. It is a criminal offence to engage in conduct which results in the concealment, destruction, mutilation or falsification of any books related to company affairs (s 1307(1)). The penalty for such an offence is two years imprisonment and/or a fine. There are related criminal offences in connection with the destruction, removal or falsification of matter which is recorded or stored in an electronic form and is used in connection with the keeping of company books.
Members have the right to inspect the minutes of general meetings but not those of directors’ meetings (s 251B). It is highly recommended that the minutes of general meetings and directors’ meetings be stored separately. The member can access the minutes free of charge at the registered office but the company may charge for a copy of the minutes. If so, they cannot charge more than the amount prescribed in the Regulations of the Corporations Act 2001. If a member requests a copy of the general meeting’s minutes and the company does not require the member to pay for the copy, the company must supply it within 14 days of the request or seek ASIC approval for an extension (s 251B(3)). If the company requires payment, then the company must supply the copy within 14 days of receiving payment.
Who Takes the Minutes?
In public companies, the company secretary is the usual minute taker. Most proprietary companies also have a company secretary (who is the usual minute taker), although proprietary companies are not required by law to have a company secretary. If a proprietary company does not have a company secretary, then it is common for a person from within the company to be asked to perform the minute taker function at a meeting. This may be a director of the company or may be the person that is generally responsible for maintaining the company registers and notifying ASIC of basic changes when required.
On occasion, an organisation might prefer to use an independent minute taker. The organisation may request that its solicitor or accountant attend the meeting to perform the minute taker function.
What Goes into Minutes?
The level of detail included in the minutes will vary from company to company.
General inclusions would be:
- Name of the company;
- Nature and type of meeting, e.g. directors’ meetings, committee meeting etc.;
- Place, date and starting time;
- Name of the chair;
- Attendees, either physically or by remote access. Invited guests should be separated from usual attendees;
- Apologies accepted;
- Presence of a quorum;
- Minutes of the previous meeting;
- Materials distributed before and during the meeting;
- Proceedings of the meeting and resolutions made. To make cross referencing easier, resolutions should be numbered;
- NB. Listed companies have additional requirements relating to proxy voting (s 251AA);
- When attendees leave and re-enter the room;
- Abstentions from voting, e.g. due to conflicts of interest;
- Closing time;
- Signature of the chair.
What Should Not Go Into Minutes?
Minutes can be used for a director’s defence in court. However, poorly taken minutes may also be used against a director by regulators or the opposing party.
Matters which should not be included in the minutes are:
- Individual speeches or arguments;
- Admissions of liability.
Keep to a minimum disclosure of legal advice, which is generally subject to legal professional privilege. Minutes can briefly state that a matter subject to professional privilege was discussed but not go into detail.
Should Reasons for Decisions Be Recorded?
With the focus on accountability in the current regulatory and corporate governance environment, some commentators suggest as advisable the inclusion of broad reasons for decisions in the minutes. A brief outline of factors material to the decision, any dissenting views and the amount of time spent on discussion may help to establish that directors have exercised proper care and diligence in their decision making. Recording the length of time spent on a discussion can denote the relative importance of a matter to a board meeting, reinforcing that directors have given it due consideration.
Can Minutes Be Used in Court as Evidence?
Minutes can be used as evidence. Section 251A (6) of the Corporations Act 2001 provides that ‘A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved’.
The minutes are not conclusive evidence of what happened at a directors’ meeting. It is evidence ‘unless the contrary is proved’. For the presumption to apply, there must be strict compliance with the one month limit. However, the High Court in the James Hardie case (ASIC v Hellicar (2012) HCA 17) emphasised that, even where this formal presumption does not apply, the minutes can still be important evidence because they will be a near contemporaneous record of events. Heydon J in that case concluded that the minutes were ' immensely powerful evidentiary support for ASIC's case'.
The High Court also made three other important points in relation to minutes:
- the fact that some parts of the minutes were inaccurate did not necessarily imply that other parts of the minutes were inaccurate
- the fact that the minutes were drafted before the directors' meeting does not necessarily imply that they did not accurately record what happened at the meeting, particularly where the minutes have been considered after the meeting
- if the minutes are false, then adoption of those minutes could mean that directors are in breach of sec 1308 (2) and (4) of the Corporations Act 2001, which make it an offence to make misleading statements in relation to a document required by the Corporations Act 2001.
Do Minutes Have to Be in English?
There are no requirements under the Corporations Act 2001 that board minutes be taken in English. However, as a matter of good practice, recording minutes in English will assist auditors in their work and save on delays if the minutes are requisitioned in a court action. Future directors of the organisation who do not speak the language in question will more readily understand where the organisation has been in the previous years.
Should Directors Make Their Own Notes of Board Meetings?
There is no legal obligation on directors to take personal notes. The responsibility for record keeping lies solely with the organisation. It is unlikely that a court would view the absence of director’s notes as a sign that a director has not fulfilled his/her duties.
Like minutes, directors’ notes can be requisitioned as evidence in court. This might be helpful if the notes show that the director has adequately informed him/herself, questioned appropriately and used proper care and diligence. However, taking notes can create risk – ambiguous, inconsistent or incomplete records can be used against a director.
Boards have a responsibility to properly evaluate the minutes circulated after meetings. Directors may want to take notes during the meeting to refresh their memory when the minutes are circulated. They should request additions, clarifications or corrections where necessary. After the minutes are signed, there is no real reason to retain any notes.
Should There Be Minutes of 'In Camera' Meetings?
The term ‘in camera’ comes from the Latin meaning ‘in the chamber’. It refers to private meetings and is used frequently in the law. Sometimes boards may want to meet without management present. Perhaps one or more directors may need to absent themselves from discussion of a matter due to conflicts of interest or duty. In these examples, the meetings could be said to be held in camera.
Whether there should be minutes of an in camera meeting is up to the individual board. Some organisations allow their minutes to say that an in camera meeting took place but don’t share any further information. Other organisations may be fuller in their descriptions.
If formal actions come out of this meeting, then it would be advisable to document them so that outcomes can be tracked in subsequent meetings.
Should the Minute Taker Stay for an 'In Camera' Meeting?
Again, this will depend on the individual organisation and the situation. If the board wants to meet without management and the company secretary is a board appointee, which is typical in Australia, then they can probably stay. The chairman will be instrumental in this decision.
Should Those Absent Be Able to See the Minutes?
Under the Corporations Act 2001 all directors have a collective responsibility for decisions and actions. Absent directors are bound by the decisions made. Therefore, if a director is absent, he or she probably should see the minutes.
Directors and officers are bound by a duty not to misuse company information to gain a personal advantage or to cause harm to the organisation (s 183).
Annual General Meetings: A Guide for Directors, Australian Institute of Company Directors, Sydney, 2009
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Updated January 2013
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