The Importance of Board Minutes

Whilst board minutes are often neglected by companies, they form an integral part in ensuring that a company is well governed and is operating in compliance with its legal and regulatory obligations.

Under the Companies Act 2006 (“Act”) a company is legally required to take minutes of all proceedings at meetings of its directors. Whilst the specific meaning of “proceedings” is not defined in the Act, the minutes should accurately record all resolutions and decisions taken by the board and any explanatory rationale as to why a specific resolution/decision was made. Failure to accurately minute proceedings constitutes an offence committed by every defaulting officer of the company, which makes compliance vital for not only the company, but also the individual directors.

In addition to taking accurate board minutes, it is important to ensure that they are also circulated amongst all the directors shortly after the close of the meeting. A useful approach is for the minute taker to send the draft minutes to the chair for their review and approval, enabling them to make any amendments they think fit. Once reviewed by the chair, the board minutes should then be circulated to all the directors in advance of being formally approved at the next directors’ meeting.

Purpose

Fundamentally, the purpose of board minutes is to demonstrate, for the purposes of the Act, that a given meeting was actually convened and held. Additionally, the minutes serve to remind the directors of the actions they have agreed to take and any actions that need to be taken going forwards, as well as informing those directors that were unable to attend the meeting of the decisions reached.

Contents

The contents of the board minutes will vary depending on the “proceedings” of any given meeting, however there are certain features that should always be included, for example:

• the company name and registration number as well as the date, time and location of the meeting;
• the names of the directors present and any that sent their apologies;
• the name of the director chairing the meeting;
• confirmation of whether a quorum is present;
• any declaration of conflicts of interest or authorisations of conflicts of interest; and
• the outcomes and decisions reached at the meeting.

Benefits

As mentioned, board minutes provide clear evidence that a given meeting actually took place. They also serve to remind directors of any actions they have agreed to take during the meeting so that these can be carried out moving forwards. Minutes also serve a vital function in recording any director declarations of interest made in accordance with the Act.

When looking to sell a company via a share purchase, or obtain funding via a third-party lender, any potential third party purchaser/investor is likely to want to review the company’s historic board minutes as part of their due diligence exercise to ensure that the company has taken decisions properly and in compliance with the provisions of the company’s articles of association, as well as any statutory requirements. Similarly, an auditor is likely to want to examine a company’s board minutes when conducting an audit, again to ensure that the decisions taken at board meetings are in keeping with the company’s accounts.

For these reasons, it is critical that companies ensure that they are accurately recording and minuting all directors’ meetings and keeping the approved minutes with the company’s statutory books and records for an extended period of time, in case they need to be referred to at any point in the future.

Should you require general advice and assistance in preparing board minutes, please do not hesitate to call our Corporate team on 0113 207 0000.