The Importance of Taking Minutes

Corporate minutes serve an important function in the running of a business. Minutes are a record of the actions and discussions of a board or committee. Well-kept minutes serve as a record of corporate decisions (e.g., should we sell the business, hire a new executive, obtain additional funding, or even something as simple as changing banks or registered agents). Properly prepared minutes reduce the possibility of successfully piercing the corporate veil or breach of fiduciary duty claims.

Historically, board meeting minutes were very short and perfunctory. However, more recently the courts have begun to look at minutes as reliable evidence of what actually took place during the board meeting – not just the actions taken, but the process by which those actions were reviewed and approved (see In Re The Walt Disney Company Derivative Litigation, 906 A.2d 27 (Del. 2006)). Therefore, the trend is for minutes to provide a thorough summary of what transpired at the meeting.

To demonstrate compliance with fiduciary obligations, the minutes should include the substance of the item being discussed, how much time was spent on discussing the issue (this helps to reflect the level of attention provided by the board), and a description of the material presented to the board for its review. Regardless of the subject matter discussed at a meeting, certain fundamental matters should always be reflected in the minutes, these include the date, time and location of the meeting, whether it was a regular or special meeting, the names of attendees (as well as those absent), whether a quorum was present, a description of the business and financial matters discussed at the meeting, presentations made, and by whom, a description of actions taken, including adoption of resolutions, and the ending time of the meeting. Sign and date the minutes (I usually sign after the minutes are approved at the next meeting).

There are times when the board should adopt formal resolutions instead of simply recording its actions in the minutes. There are certain situations where a board is required by statute to adopt a resolution (such as approving a plan of merger, the issuance of stock, or certain lending transactions. Check with your attorney when in doubt.

I recommend drafting the minutes as soon as possible after the meeting to ensure that important items are not missed. In drafting the minutes use clear, concise and consistent language. Consider the reader – the minutes may be reviewed by someone who wasn’t at the meeting. Be objective. Also, don’t record of film the meeting, not only may it chill conversation, a director may make a comment that could later be taken out of context or be potentially embarrassing.

Finally, the process of preparing minutes of meetings serves to impose a discipline on the board process which in the long run can only result in better overall corporate governance