Well-Drafted Board Minutes Increases The Value Of Your Company

If a company is Goliath then failing to do minutes of board meetings might well be the stone used to fell such a giant in modern commercial warfare alternatively doing minutes of meetings properly can be the sling in a David’s hand. 

REASONS TO ENSURE APPROPRIATE MINUTES

Every business leader has to exercise oversight and ensure accurate minutes of board meetings are in place as there are solid commercial reasons for doing so nevermind the legal duties. The reasons to ensure minutes of board meetings are in place include:

1. Increase in value of the organisation

The value of a business is calculated largely with the financial information being the empirical information. Do not underestimate the value of the qualitative information such as the strategic direction and the monitoring of the strategy implementation by the board. Board minutes provide an essential tool to showcase the good governance processes and procedures in place as well as being the documented history of the company. 

2. Risk mitigation and recordal of the history of the business

Even though it is not a matter of law in the medical field there is a mantra that “If it isn’t documented, it didn’t happen” and that what is said after the fact has little merit. It is very difficult to prove what was decided at board meetings after a long time has elapsed, in the absence of a formal record of the proceedings. According to Scientific American our memories are fairly short:

“Taken together, these studies suggest that although we don’t recall a large fraction of what we experience, what we do remember is accurate, at least for a few days. This is helpful for us all to know.”

Minutes should be recorded at least 10 business days after a meeting and circulated to the executive prior to distribution to the members of the board for input. Traditionally the minutes are tabled and approved at the following meeting and minutes are deemed to be the formal minutes of the board meeting once the Chair of the board has signed the set of minutes as required by law. It is these signed sets of minutes that are scrutinised by external auditors and other assurance providers. Minutes of board meetings are confidential and need not be distributed to shareholders, however it is discoverable and it can be used as evidence in a court of law.

3. Fulfil the legal duty of the directors

Section 73(6) of the South African Companies Act states that:

“A company must keep minutes of the meetings of the board, and any of its committees, and include in the minutes —

a) any declaration given by notice or made by a director as required by section 75; and

b) every resolution adopted by the board.”

The Companies and Intellectual Properties Commission, where companies are registered and regulated, requires that all companies maintain their company records. Included in the definition of company records are notices and minutes of all shareholder meetings, any resolutions taken at those meetings, minutes of meetings and resolutions of directors, directors’ meetings and audit committee meetings.

Even though this duty falls to the “company” the directors are ultimately responsible and this duty is usually explicitly or tacitly delegated to the executive director. The executive director needs to ensure the minutes are accurately drafted, approved and recorded. If a company is required by law to have a company secretary this duty falls to that person. For this reason and a few others, it is well worth appointing a company secretary even if a company is not required by law to do so.

4. Record and disseminate the resolutions of the board

Apart from being a legal duty to record resolutions approved by the board it is imperative to have a record of these resolutions to enable the executive directors and management to act on it and for the board to monitor implementation. The board assists management in setting the strategic direction and then it is for the executives to implement the strategy; this can only be done if the decisions of the board are clearly articulated and disseminated into the organisation effectively. Hence, recording it in minutes aids the common understanding of all on any given matter and it enables the distribution of resolutions to third parties or within the organisation for execution.

5. Enable directors to rely on the director’s defence – the business judgement rule

In terms of Section 76(4) directors can defend themselves against a claim if they acted in good faith and proper purpose and they can prove these three elements:

• Became informed – The director has taken reasonably diligent steps to become informed about a matter
• Disclosure of interests – Disclosed any personal financial interests they may have had on a matter and followed the required steps
• Best interest of the company – The director made a decision and had a rational basis to believe and did believe this decision was in the best interest of the company

The essence of all of the above is usually captured in the minutes of the board meeting and since it is kept for at least seven years it can be relied upon in future to protect individual directors who acted in good faith. 

WHAT ARE TO BE INCLUDED IN MINUTES

Based on the above it is clear that too much is at stake to remiss ensuring professionally drafted minutes are in place. Drafting minutes cannot be delegated to a person in the business that has not been formally trained as it may be unfair to the person and inadvertently put the company or the board members at risk.  

As a minimum the following should be recorded in the minutes:

• The attendees and the capacity in which they attended the meeting. For example: N Nkosi – Independent Non-Executive Director (Chair) or C Delrey – CFO Attendee
• A record of disclosures of conflicts of interests provided prior to or at the meeting
• A brief summary of discussions without falling into the “he said / she said” trap and minutes should be written in the past tense
• A detailed recording of decisions and resolutions noting who voted “for, against or abstained” from a decision and whether anyone was recused
• Noting the actions (matters arising) from the meeting including who is responsible for the item and when the deadline is for conclusion

SUMMARY

No matter how big or small a board or organisation is, in effectively fulfilling fiduciary and statutory duties, having regular board meetings is a vital element and these meetings need to be accurately recorded to the benefit of the company, its office bearers and other key stakeholders. 

FluidRock Governance Group offerings:

FluidRock Academy offers two levels of minute taking training which is highly acclaimed and practical.

“Overall, I really enjoyed the course. I found it uplifting, and I learned a lot in a short period of time. It was thoroughly engaging, and would definitely recommend it”

“I would like to thank the Facilitator for having conducted the training excellently. The course is definitely value for the money.”

Please go to https://www.fluidrock.co.za/academy/ for more information or contact trainme@fluidrockgovernance.com to receive more details or to book a 30 minutes no strings attached consultation.

FluidRock Co Sec specialises in the drafting of minutes on an outsourced basis or we mentor internal employees of our clients to learn how to draft accurate minutes.

“In our opinion, FluidRock Co Sec has performed an outstanding task and we would highly recommend their services. The minutes were well written, easy to read and properly contextualised. Moreover, the quality of the minutes was incredible.” (PIC)

Please visit https://www.fluidrock.co.za/company-secretarial-services/ for more information or contact hello@fluidrockgovernance.com to receive more details or to book a no strings attached 30 minutes consultation.

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