Company Board Meeting Minutes Mistakes
All states require corporations to take and distribute minutes of meetings, and all states require that boards of directors keep meeting minutes. But there are no specific rules about what to include in board meeting minutes and how to take these minutes. There certainly are mistakes you can make in taking minutes that can make the life of your corporate board more difficult.
The Purpose of Keeping Corporate Board Meeting Minutes
There are actually several reasons for taking and recording minutes of your corporate meetings. The first and most important reason to take minutes of meetings is to have a record of what you decided. The second reason for corporate board minutes is for fiduciary and liability purposes.
Board members are in a position of trust. They are making decisions about money invested by corporate shareholders, and they need to be able to prove they acted wisely, in the best interest of the corporation, and without conflicts of interest. Having board meeting minutes helps the board prove they acted in good faith and avoid personal liability for their actions.
The third reason is for tax purposes. A corporation is a separate entity from the individual shareholders. To be sure you are keeping that separation, board meeting minutes provide a record. Without them, the IRS or state agencies can negate the tax status of the business. A corporation that doesn't show it is acting as an entity separate from the owners can create a difficult tax situation.
There's a balance for businesses to strive for between making sure board members are doing their duty and being protected, against long, aimless board meetings that waste member time. Now that we've discussed the reasons for taking board meeting minutes, here are some mistakes businesses make, and some thoughts on how to correct them.
Not Creating and Distributing an Agenda Before the Meeting
Another big mistake made by corporations in their board meetings is not setting an agenda before the meeting and not distributing the agenda, and relevant documents before the meeting. The agenda should include specific amounts of time for each item on the agenda.
Having a specific agenda not only makes the meeting run more smoothly, but it lets the board (and anyone reading the minutes later) know the relative importance of each item on the agenda. That doesn't mean something can't come onto the agenda if it's important and urgent, but items can be added to the agenda by vote. And much that's urgent should be handled by the executives, not the board.
Missing Important Parts of the Board Meeting Minutes
The template for board meeting minutes should include:
- The date, time, and location of the meeting
- Beginning and ending time, and times allotted to specific items on the agenda
- What type of board meeting — regular, special or annual (all states require corporations to have an annual meeting)
- Who was present, noting directors, guests, and staff members, and which board members were not present. The names of anyone coming late or leaving early must be noted.
- Specifying whether a quorum is present. A quorum is usually required by the corporate by-laws for any votes to be taken. The quorum requirement is usually more than half of the members. (For a board of nine members, for example, five members must be present for a quorum).
- If presentations are given by committees or others, including names and titles of presenters.
Meeting Minutes Too Specific
Probably the biggest mistake boards make is to require detailed information on discussions (sometimes arguments) and processes. The meetings should reflect the results of decisions, not who said what in the discussion. Let's say your board is voting on a motion to sell a new line of products. The meeting minutes should say: "Motion to add a new line of spices. Motion seconded and approved, with so-and-so dissenting." If the group had a discussion, you should record the length of the discussion and summarize it, but you don't need to go into detail about the discussion.
Minutes That Are Not Specific Enough
On the other end of the spectrum, some minutes are not specific enough to provide information and keep the members out of trouble. If the decision wasn't unanimous, a record of which board members dissented, which abstained (and note if the abstention was because of a potential conflict of interest).
While you don't have to record the blow-by-blow of every discussion, or who said what. But there should be enough information in the minutes to reflect the spirit of the discussion.
Board Meetings Too Long
No one likes long meetings, but there are some ways to shorten the meeting and the minutes. You may want to save board meeting time by creating a consent agenda. Basically, this agenda is a list of issues that can be dealt with quickly without discussion. The list might include minutes from the previous meeting, financials, and reports from committees or the CEO.
The consent agenda, and the reports and other information, must be distributed before the meeting so that members have an opportunity to read them. Then, at the meeting, the consent agenda is part of the process of the meeting. Any board member can raise a question or concern about the consent agenda, but if there are no issues, the entire consent agenda can be voted on at one time.
The Wrong Type of Decisions
A corporate board makes decisions on overall policy. The day-to-day decisions are made by the corporation's executives based on that policy. Sometimes boards overreach and try to make decisions that are best left to the management.
Not Approving the Minutes
It's tempting, in the hustle and bustle of board meetings, to forget to approve the minutes. But it's important to make sure the minutes correctly reflect both the letter and spirit of the meeting. Minutes are considered "draft" until approved.
Not Keeping Records of Meeting Minutes
After all the trouble you go to in order to keep good minutes for your corporation, don't forget to keep your corporate meeting minutes somewhere safe and accessible. Set up a process for keeping minutes in a corporate records book, or "in the cloud," in a password-protected file.
Forgetting to Acknowledge the Role of the Corporate Secretary
Most of the duties relating to corporate minutes come under the domain of the corporation's secretary. Being a good corporate secretary is an art, and these individuals often are not acknowledged enough. Say "thank you" to this person regularly.
Not Including an Attorney as an Advisor to Your Board of Directors
Whether your corporation is private or public (with publicly traded shares), you should have an attorney advising you on how to take corporate minutes, and to be in attendance at important board meetings to make sure you and your board are protected.