Publications >Formal requirements for minutes of Directors' Meetings

 

In many cases, there are few exact requirements for minutes of Director's meetings. There are however different obligations imposed on different entities that may affect the content of the minutes.  The following non-exhaustive list of statutory and contractual requirements - collectively described as (surrounding legal obligations) may impact on the content of minutes:

 

 

The Corporations Act 2001 (Cth) (the Act)

The Act provides little prescriptive guidance on the exact format of minutes for minute takers except for the following:

 

Section 251(a) minutes

A company must keep minute books in which it records within 1 month:

	proceedings and resolutions of Directors' meetings (including meetings of a committee of Directors);
	resolutions passed by Directors without a meeting; and
	minutes must be signed by the chair of the meeting within a reasonable time after the meeting.

Some commentators have concluded (and it appears to be reasonably accepted practice) that minutes should be circulated to attendees for verification before the chair signs the minutes as being accurate.

The company must:

	ensure that minutes documenting the passing of a resolution without a meeting are signed by a director within a reasonable time after the resolution is passed.
	keep minute books at its registered office, its principal place of business, or another place in the jurisdiction approved by ASIC

 

Minutes can be evidentiary

Unless the contrary is proven, a minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates see section 251A (6).  See a discussion on Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 here.

Members have the right to inspect the minutes of members meetings, but the Act does not make provision for member access to the minutes of Directors meetings.  Falsification of any books can be a criminal offence.

 

Format of minutes - s1306(1)

Minute books may be kept or prepared by:

 

	by making entries in a bound or loose leaf book; or
	by recording or storing the matters concerned by means of a mechanical, electronic or other device.

If an electronic copy is chosen, the matters recorded must be capable, at any time, of being reproduced in a written form and electronic copies will require the original signature of the chair.  Notably minutes are not defined in the Act, therefore there is no prescribed form.

 

The entity's constitution

Most constitutions impose an obligation on an entity to record minutes of meetings of Directors.  These obligations range from simple in the case of a proprietary company to more detailed in the case of a public company listed on the ASX.

 

Constitutions of ASX Listed Companies

Public companies listed on the ASX have constitutions that may contains provisions relating to minutes as follows:

	the names of the Directors present at all Directors' meetings and meetings of Directors' committees;
	all proceedings and resolutions of general meetings, Directors' meetings and meetings of Directors' committees;
	all resolutions passed by the Directors;
	appointments of officers, but only if the Directors resolve that a Minute of the appointment should be made in accordance with the Corporations Act; and
	all disclosures of interests made in accordance with the Corporations Act.

 

Minutes must be signed by the chairperson of the meeting or by the chairperson of the next meeting.

 

Shareholders' agreements

A shareholders' agreement can impose further obligations relating to the functioning of Directors' meeting and the minutes.  They may include obligations regarding:

 

	the number of Directors appointed;
	the members right to appoint a director according to a formula based on the percentage of equity held;
	voting at director's meetings according to a formula;
	quorum requirements and time limits for quorums to be present;
	provisions relating to communication devices to be used;
	times and locations of meetings;
	notice requirements (unless waived by all Directors);
	requirements for agendas and resolutions to be validly passed;
	the content of board papers including financial reports; and
	any other obligation that is negotiated between the shareholders.

 

The ASX Listing Rules

The ASX Listing Rules do not contain any provisions relating to the formal content of minutes of Directors' meetings.

 

Ancillary contracts

Care should be taken by minute takers to ensure compliance with various ancillary contracts such as Directors and officers' liability insurance policies that the entity may have that impose obligations in regard to the content of minutes of Directors meetings.  One common obligation provided for in Directors and officers' liability insurance policy is the requirement to keep minutes for seven years.

 

Obligations imposed by the common law

Whilst there is a significant amount of case law that refers to the resolutions contained in minutes, little guidance is provided regarding a prescriptive format for these minutes.

In 1991, Young J, in John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A'Asia) Pty Ltd and Others (1991) 6 ACSR 63 outlined 14 points that provided guidance for the content of company minutes.  It was acknowledged by Young at 63 at 89 that '…there was no reported case that exhaustively defined what should go into company minutes, the textbooks do give uniform guidance…'

 

Young's 14 points

Young quoted a widely popularised text book " Horsley's Meetings" and provided:

1	'Minutes must note the nature and type of meeting, the time of commencement and like details;
2	Minutes must contain a full and accurate record of all business done including a list of who was present and all resolutions passed at the meeting;
3	At least where disqualification follows from non-attendance, the minutes should contain a list of apologies accepted;
4	Minutes must be as concise as the circumstances permit. This reasons for resolutions are seldom recorded.
5	Minutes must be phrased in non-emotive language and on the face of them must appear impartial and above suspicion;
6	A minute is not a report.  Therefore speeches and arguments normally do not appear in minutes.
7	Minutes must contain a record of all appointments made and the terms of reference of any committee that is set up.
8	Normally failed motions need not be recorded.
9	At least in the case of large meetings, there is no necessity to record the name of the mover or seconder or the voting, though the secretary may consider it appropriate…
10	A person present may insist that his or her vote or abstention be recorded;
11	Incidents occurring at the meeting which may be significant should be recorded, not unrelated incidents;
12	Reports of Committees should not be summarised in the minutes;
13	The time of closure of the meeting and the next meeting should be recorded in the minutes;
14	Minutes must be prepared within a reasonable time after the meeting'.

 

Guidance from the United States

In 2005, in re The Walt Disney Co Derivative Litigation the Delaware Court of Chancery had to determine whether the directors had breached their fiduciary duties in relation to the hiring and subsequent termination of former Disney President Michael Ovitz.  Chancellor Chandler remarked that it would have been helpful to see if the minutes had shown how long the directors considered Mr Ovitz's appointment for and the substantial discussion that took place, particularly in relation to other matters that were considered. (The implication here is that the minutes should have shown that the Directors deliberated over the decision for a longer period of time, thus reflecting the importance of the decision, and consequently discharging their duties).

This decision by Chancellor Chandler does not appear to have gone unnoticed by the Australian Institute of Company directors (AICD).  It's publication entitled 'Minutes, Frequently Asked Questions' at page 3 states that 'reasons for decisions should be included in minutes' and further states that:

 

'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'.

The AICD's recommendations for the content of minutes therefore differ from Young's point 4 and point 8 and reflect the heightened awareness and focus on directors' duties, the Disney case and the argument for detailed minutes that go towards establishing that Directors performed their duties.

 

Conclusion

It follows that the minute taker should have a detailed knowledge of the surrounding legal obligations that relate to the entity in question and have a detailed understanding of the duties of Directors that may be reflected in the content of the minutes.

 

Rostron Carlyle provides a company secretarial service and regularly attends meetings, draft minutes and  advises clients on the content, format and structure of minutes of private and public companies. Contact us if you have any questions or require any assistance.

 

References

 

 

Malcolm Burrows

 

"The information contained in this article is general in nature and cannot be regarded as anything more than general comment.  Readers of this article should not act on the basis of this comment without consulting one of Rostron Carlyle's legal practitioners who will consider their particular circumstances".

 

Other articles in the corporate law series include:

 

	Sciacca v Tzvetkoff and BT Projects
	Strict compliance with the Corporations Act required for Minutes to be evidentiary (Lessons from Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287);
	Introduction to Shareholders Agreements
	Statutory directors duties - an introduction

 

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