Ten Things: Preparing Board of Director Meeting Minutes

I want to pivot away from the “value” discussions that have dominated the last several “Ten Things” posts to get back to some tactical, nuts and bolts problems facing in-house lawyers from the corporate governance-side of things.  I have written about basic corporate governance as well as how to protect your board of directors, but one question I have gotten several times over the past few months is how to prepare proper board of directors meeting minutes.  Preparing board meeting minutes is another one of those tasks that no one really teaches you how to do, you just kind of figure it out.  Or, at least, that’s how I learned.  My learning method was pretty simple, when I first stepped into the role of corporate secretary I looked at the minutes of the last year of board meetings prepared by my predecessor and kept what I liked and discarded what I didn’t like – guided mostly by common sense.  I also found a few publications on proper board meeting minutes and read those (some of which are noted later in this post).  That’s it.  Over the years, I learned a lot about drafting board meeting minutes, mostly on what not to do because you could fill a file cabinet with all of the different advice on what to do when drafting minutes (and who needs another file cabinet full of crap?).  Anyway, since you all asked so nicely, this edition of “Ten Things” discusses my thoughts on how to prepare proper board of directors minutes:

1.  Why it matters.  On the most basic level, minutes provide a written summary of the key information, discussion, and actions taken at a board of directors meeting. You have two goals when drafting minutes: (a) summarize what happened at the meeting, and (b) don’t write anything so stupid that it shows up as Exhibit A at trial.  Most lawyers are pretty good at (a) and surprisingly bad at (b), myself included.  Why?  Because we cannot resist the urge to write down more than is necessary.  And the more you write, the more likely Exhibit A is in your future.  Consequently, drafting minutes is all about balance and the ability to write down just enough to protect directors from liability by providing a record of the discussion and decisions with a sufficient level of detail so that the Business Judgment Rule kicks in. This means that the minutes show that the officers and directors of the company made decisions that they believe, in good faith, to be in the best interests of the company, after appropriate due diligence, care, and thought.  The rule protects officers and directors even if the decisions turn out to be pretty terrible.  Since the minutes are the official record of any board meeting, it is important that they reflect “how” the directors and management exercised the appropriate level of diligence, care, and thought over issues facing the company.  Easy, right?  Nope![1]  But, fortunately, most business at a board meeting is pretty routine so the times when you need to be really on your toes are infrequent – but you need to recognize them when they do arise.

2.  What do you need to capture?  For good or bad, there are no hard and fast statutory rules about what board of directors minutes must say and how it must be said.  But, given the goals noted above, there are some things you should include.  In large part, you are looking to capture any significant actions of the board, e.g., elections of officers and directors, committee reports, management presentations, special business, resolutions, and similar items.  There are also a lot of “basic” items you should capture as well, including:

  • Type of board of directors meeting (regular, annual, special).
  • That advance notice was given and the meeting was called to order.
  • Names of the attendees (including those board members who could not attend), who is presiding, and who is taking the minutes.  Any guests, experts, management members should be noted as well.
  • That a quorum of directors was present.
  • That materials (if true) were provided to the directors in advance of the meeting, including any material resolutions in draft form.  Also, note any new substantive materials provided to the directors during the meeting.
  • A copy of the agenda distributed in advance of the meeting (or any amended agenda distributed the day of) usually as an attachment to the minutes.
  • Start time, date, place of the meeting.
  • The general nature of any substantive discussions.
  • Actions and resolutions approved by the board.
  • Copies of any resolutions voted on by the Board (or the exact wording of the resolutions included in the body of the minutes).
  • Any executive sessions.
  • The time the meeting ended and the date of the next meeting.

Below, I will set out some sample language and a sample of board minutes prepared in the style I prefer.  The key for you, however, is to develop a consistent format that satisfies the comfort level of the CEO, Chairperson, and board members generally.

3.  Prepare a shell in advance.  The very first time I took the minutes of a board of directors meeting, I was furiously scribbling notes in my notebook and on a copy of the agenda.  I was so busy writing that I was not really paying that much attention to the substance of what was being said.  And my hand kept cramping up!  After I prepared the first draft of the minutes it dawned on me that I could have prepared a “shell” of draft minutes (with plenty of space between agenda items) in advance and simply added notes to the different sections as the meeting progressed – while affording me the luxury of actually paying attention because so much of the meeting minutiae was already in draft form, e.g., attendee names, dates, times, expected topics, etc.  Basically, all I had to do was use the pre-meeting agenda as a guide to the topics, add the names of the directors and expected attendees/presenters, include the time, date, quorum, etc. and – presto – draft minutes that captured 80% of what was going to transpire.  Here is the list of items all board meeting minutes typically follow:

  • Welcome and call to order with a quorum, location, and time.
  • Who is present/who is presiding/who is taking the minutes.
  • Approve minutes from last meeting.
  • Old business.
  • New business (including management presentations).
  • Any recess periods/people entering or departing the meeting.
  • Resolutions/approvals.
  • Committee reports.
  • Next meeting of the board of directors.
  • End time/adjournment.
  • Executive session (if any).

The order may change but, for the most part, these items are the guts of every board of directors meeting I have ever attended.  Having a shell of the minutes prepared in advance will save you a lot of time and allow you to be a more active listener and participant in the meeting. It also plays nicely into ensuring that the company’s board minutes have a consistent look and feel – with little variation in tone, style, formatting, or level of detail over time.

4.  It’s not a transcript.  The most important lesson to learn about board of directors meeting minutes is that they not supposed to be a transcript of the meeting.  You are not trying to capture everything anyone said or the detail of back and forth discussions.  First, that is virtually impossible to do unless you are a trained courtroom reporter.  Second, it violates Rule #2 above – don’t write anything that can be used as Exhibit A at trial!  And whatever you do, do not record a board of directors meeting, even as a way of helping you keep notes. And make sure no one attending the meeting records it either – make this request a standard part of the opening remarks that kick off the meeting.  I know recording meetings is easier than ever, especially with tools like Zoom or Teams.  But, don’t do it.  You will regret it – as much as buying a shrimp cocktail from a vending machine. In an alley.  In a war-zone.  When you’re writing board minutes imagine you are starting them with this opening line, “Dear Company suing us, here is what our board of directors was discussing today…”  If you keep that in mind, you’ll understand why trying to make them a transcript is such a bad idea – especially since board minutes are not protected by the attorney-client privilege (though portions may be).  Still, it’s hard to make a bright-line rule about what to write and how to write minutes, so keep these three points in mind:

  • Make each entry of the length and level of detail that provides an accurate summary of what happened at the meeting.  That noted, resist the urge to add extraneous details.  You are not James Michener!
  • Vague and ambiguous minutes are the enemy.  Keep them precise and concise.
  • It is fine to note that various viewpoints were discussed, as were alternative strategies and ideas.  But, there is no need to document the arguments in detail, only that a deliberate and thoughtful discussion of pros and cons and alternatives ensued.

Board minutes should be as boring as vanilla pudding, written in plain, neutral language with no exclamation points, asides, jokes, puns, or anything else good writers enjoy.  Adverbs are your enemy here. This is a “just-the-facts” situation if ever there was one.

5.  Ask if something is not clear.  If you have ever sat in a board of directors meeting you know that the discussion can go quickly and hearing everything can be difficult, especially when you are writing things down, listening for legal issues or questions directed to you, and keeping track of votes, resolutions, attendees, and so forth.  Simply put, if you are the secretary of the meeting, be sure to speak up if you think you missed something important or something isn’t clear to you.  Seek immediate clarification so that you can accurately capture the gist of the discussion, what was decided or deliberated, or what actions the board wants to be taken, by whom, and by when.  If you need to, simply say something along the line so of “Excuse me Madam Chair, I need to clarify something for the minutes.” And then ask your clarifying question.  I will caveat this by saying at most you will get one or two opportunities to do this during a full day of board meetings.  Any more frequently and the directors and management may start to question whether you are up to the job (plus the interruptions can be annoying).  Another trick I used was to wait for a break and then just asked the presenter or director if they could clarify the point they made earlier during the meeting.  Finally, your saving grace is that the minutes are only a draft and you will send them to the directors for their input before making them final – yet another opportunity to ask if you captured something correctly (though my strong preference was always to get it done correctly in the moment if possible).

6.  Protecting the directors.  Above I noted that the board meeting minutes are, in part, written to protect directors from liability.  Generally, we are talking about ensuring that the minutes properly reflect directors’ exercise of their fiduciary duty and duty of care to the corporation.  Accordingly, the minutes not only document the decisions of the board of directors but also – within limits – the deliberative process that went into the decision.  Minutes that show that directors considered all relevant issues before making a decision, generally put the board and the decision within the confines of our good friend the Business Judgment Rule.  Yet, they are not a transcript, and minutes that are too detailed can actually be used to challenge decisions of the board by revealing what was not discussed or considered.  Since I know this is all clear as mud, here is an example of what I consider a good and proper level of detail, in this case, the discussion of potential acquisitions and sale:

D) Business Development

Ms. Jones provided the Board with an update regarding the Company’s business development activities in the first quarter.  She discussed the current status of Project [X] and outlined key next steps. Ms. Jones also provided a summary of the process utilized for considering whether to move forward with Project [Y], and Mr. Jangles discussed the expected timeline if the Corporation were to move forward.  Ms. Lane provided additional information regarding the potential sale.

Mr. Jangles then reviewed two potential acquisitions, Corporation A and Corporation B, and described the anticipated benefits associated with the possible acquisitions. 

The Board discussed the development activities and possible sale and acquisitions and asked questions regarding the presentation, including the pros and cons of moving forward with each, all of which were answered by members of management

Mr. Mathers excused Messrs. Gimble, Gamble, and Gompers, and Mss. Kelvin and Smith, from the meeting, and invited Messrs. Dallin and Mozart, and Ms. Parmesan of Big Bank to join the meeting.  Mr. Jackson and Ms. Lee of Mega Law Firm PLLC also joined the meeting via teleconference and provided privileged advice around certain questions asked by the Board.

7.  Privileged discussions.  Another way to protect the board is to ensure that any discussion that falls under the attorney-client privilege or the work-product doctrine is captured correctly in the minutes.  Simply put, there are times when the advice of counsel is provided during board meetings, either by the general counsel, other in-house lawyers, or outside counsel.  Most frequently, these are planned discussions and presentations and you can prepare for them in advance, including noting on the prepared agenda a privileged discussion with counsel on some topic will occur, e.g., “Privileged Discussion with General Counsel and Outside Counsel re Smith Litigation.”  When preparing the entry to reflect the discussion, you should only write that the directors and management participated in a privileged discussion with counsel and the general subject matter or topic, but do not try to summarize the actual discussions that occurred or the advice given by counsel.  And, of course, remember that just because a lawyer participates in a board discussion, that does not trigger the privilege in and of itself.  There must be a request for legal advice or legal advice given, or – for work product protection – a discussion about pending or likely litigation.  Regardless, I would try to minimize the number of privileged discussions that are on the set agenda of a board meeting to the minimum possible, if any.

8.  Capturing dissent.  While many discussions and decisions of the board are uncontroversial and unanimous, not all are.  There may be times when you need to capture dissent.  For example, some directors will vote no, abstain, or recuse themselves from an issue before the board.  It may be that they simply disagree or it could be due to a conflict of interest regarding the topic under discussion. Interestingly, there is no requirement that dissenting votes be recorded at all – the only statutory requirement is that a sufficient number of the quorum of directors present approved the measure before the board.  You can simply write “On motion made and seconded, the directors approved the expenditure for [Z].”  In fact, you do not even need to record that a particular director asked a specific question or raised any specific objections to the matter before the board.  Instead, you can simply note that a discussion of the pros and cons took place.  Still, because some directors may feel strongly, be prepared for someone to ask to have their dissent noted specifically in the minutes either in terms of voting “no” or setting out their specific objection.

9.  Review and approval.  As soon as possible after the board meeting (usually no more than a week), the secretary should finalize a draft and circulate it among the directors (with the draft clearly marked as “Draft-Subject to Revision”).  This is also the time to fix spelling and grammatical errors and to make sure you are not using jargon, abbreviations, or acronyms – or at least not doing so without an explanation of what they mean.  Completing the draft and circulating for review quickly is actually a critical step in preparing proper minutes.  By doing this promptly, memories are fresh and it ensures that every director present at the meeting has an appropriate opportunity to review the minutes before they are finalized.  Be sure to give a reasonable, but flexible, deadline for any feedback and edits.  The secretary should finalize the draft minutes once the feedback is in and then the draft minutes become part of the materials for the next board meeting and, as we see above, are typically approved near the beginning of that meeting.  It’s possible that the directors, despite having the earlier opportunity, may want to make changes to minutes during this approval process.  That is fine, just be sure to note in the then-current minutes that changes were requested and approved.  Additionally, once the minutes are approved, the best practice is to ask that everyone (directors, management, legal) – unless there is an applicable litigation hold – properly discard their own notes of the meeting as those notes would not be privileged and potentially could create an alternative record to the formally approved minutes.  Lastly, file the approved minutes and appropriate attachments (agenda, resolutions) in the corporate minute book.  But, any presentations or other materials reviewed or used by the board during the meetings should go in a separate board meeting binder.[2]

10.  Resources and example.  There is one resource in particular that all in-house lawyers with an interest in drafting board of directors minutes should read –  Corporate Minutes: A Publication for the Corporate Secretary (2014) published by the Society of Corporate Secretaries and Governance Professionals. I also think the Seraf-Investor.com’s Writing Good Board Minutes – Top Ten Don’ts and Traps is a must-read.  Of course, a quick search of “sample board of directors minutes” on the Internet will get you lots of free templates and samples.  Finally, because my main goal with the “Ten Things” blog is to always leave you with something practical and useful, below you will find an example of some sample minutes I have prepared (truncated) so you can – hopefully – see what I mean above in terms the nuance of capturing the board meeting discussions and actions so as to provide the directors with Business Judgment Rule cover but without going into too much detail to become Exhibit A at trial.

*****

There are few if any hard and fast rules about drafting board of director meeting minutes.  That said, there are definitely some things I think you should do and that you should avoid.  How the meeting minutes ultimately look for your company will likely be a combination of your preferences as drafter tempered by whatever the members of the board of directors and senior management prefer.  If you are drafting minutes for a publicly-traded company,[3] they will look different than those for a privately held company, e.g., usually a bit longer.  But, they will both contain the core items discussed above.  And, when it comes to drafting minutes, just remember that less is definitely more.  Finally, not everyone will agree with everything I have set out above and that’s okay.  Again, every situation is different.  Just do your homework and figure out what will work best for you and your company pursuant to the laws of your jurisdiction.

Sterling Miller

August 14, 2020

Ten (More) Things You Need to Know as In-House Counsel – Practical Advice and Successful Strategies Volume 2 is out.  It’s my second book based on this blog series.  As the ABA says, “All in-house lawyers need to own this book!”  Click here to buy it.

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I have three published three other books: Ten Things You Need to Know as In-House Counsel – Practical Advice and Successful Strategies, The Evolution of Professional Football, and The Slow-Cooker Savant.  I am also available for speaking engagements, coaching, training, and consulting.

Connect with me on Twitter @10ThingsLegal and LinkedIn where I post articles and stories of interest to in-house counsel frequently.  

“Ten Things” is not legal advice nor legal opinion and represents my views only.  It is intended to provide practical tips and references to the busy in-house practitioner and other readers.  If you have questions or comments, please contact me at sterling.miller@sbcglobal.net.

Here are the sample minutes I promised you above:

MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF
ACME CORPORATION
                                                                                                                                                

August 14, 2020

A regular meeting of the Board of Directors (the “Board”) of Acme Corporation (“Corporation”) was held on August 14, 2020 in the Boardroom at the Corporation’s headquarters in Dallas, Texas, pursuant to notice duly given to all of the members of the Board. A copy of the meeting agenda is attached as Attachment A.

The following directors were present at the meeting:

 

Joe Smith Jack Sparrow
Samantha Jones Clark Kent
Kayne West Bruce Wayne
Larry Lawrence Karen Spissed

 The following attendees also were present for certain portions of the meeting:

 

James Olson  
Lois Lane  
Tommy Bahama  
                (via teleconference)  
Jane Plaine  
(via teleconference)  
Bob Roberts (Jackson & White)  
(via teleconference)  
J.P. Snowpiercer  
Deborah Downer

Steve Milner

 
 Jane Doe  
 John Silver  
   

1.  Call to Order and Presence of a Quorum

Mr. Sparrow called the meeting to order in the Boardroom at the Corporation’s headquarters in Dallas, Texas at 9:15 a.m. with all directors present, and with Messrs. Roberts, Snowpiercer, Olson, and Milner, along with Mss. Lane, Downer, and Plaine present.  Mr. Sparrow presided at, and Mr. Milner acted as Secretary of, the meeting.

2.  Approval of Minutes

Mr. Sparrow recommended that the Board approve the minutes of the meeting of the Board held on May 24, 2020, copies of which previously had been provided to each member of the Board.  Ms. Plaine suggested one minor revision.

Whereupon, on motion duly made, seconded and unanimously carried, it was:

RESOLVED, that the minutes of the meeting of the Board of Directors, held on May 24, 2020, as amended, be, and they hereby are, approved.

3.  Q2 Financial Overview

Mr. Olson and Ms. Lane provided a financial review of the second quarter and discussed the Corporation’s forecast for the remainder of 2020 using materials previously provided to the Board.  Mr. Olson reviewed revenue, EBITDA, and adjusted capital expenditures for the quarter.  He identified key drivers for these results and the outlook for 2020 in light of the COVID-19 pandemic. 

Ms. Lane reviewed key financial information for the second quarter, including profit and loss information and operating segment results for the different divisions.  She compared revenue and expenses to plan and the prior year, and identified the reasons for variances.  Ms. Lane provided an overview of the balance sheet and key cash metrics for the quarter.  She reviewed headcount and provided an overview of the forecast for the remainder of 2020.  Ms. Lane identified the impact of certain trends and potential risks to the outlook, and summarized the performance of the Corporation’s business units and reviewed the impact of COVID-19.

Throughout the presentation, the Board discussed the information presented and asked numerous questions of management.

4.  Cost Savings Update

Messrs. Bahama and Snowpiercer provided a detailed cost savings update to the Board using materials previously provided to the Board.  Mr. Bahama noted that management had identified $50 million of run-rate cash savings opportunities for action by the end of 2020, which was consistent with opportunities previously identified by Large Consulting Company Inc.  He provided background regarding the identified opportunities. 

Throughout the presentation, the Board discussed the information presented and asked numerous questions of management and encouraged management to determine if additional cost savings could be found.

5.  Commercial Update

Messrs. Olson and Snowpiercer, and Ms. Downer provided a detailed commercial update to the Board regarding Division A, Division B, and Division C using materials previously provided to the Board.  They reviewed the status of upcoming material transactions, contracts, and client development opportunities.

During the update, the Board discussed the update and asked numerous questions of management about the Corporation’s transactions, contracts, and development opportunities.

Mr. Milner, acting as General Counsel to the Corporation, joined by Mr. Roberts of the Jackson & White law firm presented a privileged discussion regarding a legal analysis of a dispute with a current large commercial customer.  The Board discussed the information presented and asked numerous questions of counsel about the dispute and gave direction to Mr. Milner and Mr. Roberts for next steps.

6.  Report of Governance Committee Chair

Mr. Sparrow reported on the proceedings of the meeting of the Governance and Nominating Committee held on August 13, 2020.  Mr. Sparrow stated that the Committee received an update on the new director search process, including information on next steps for a particular candidate. He reported that the Committee recommended the formation of an Executive Committee.  He reviewed the proposed charter for the Committee, noting that the Committee made two modifications to the charter presented to the Board.  Mr. Sparrow reviewed the proposed changes, as well as the proposed function of the Executive Committee. 

Following discussion and questions, and on motion duly made, seconded and unanimously carried, the Board of Directors approved the following resolutions:

RESOLVED, that an Executive Committee of the Board of Directors is hereby established.

FURTHER RESOLVED, that the Executive Committee charter in the form presented to the Board, with the revisions recommended by the Governance and Nominating Committee, is hereby approved as the charter of the Executive Committee and that the Executive Committee is hereby delegated the power and authority as set forth such charter.

FURTHER RESOLVED, that the initial members of the Executive Committee shall be Jack Sparrow (Chairman), Clark Kent, Bruce Wayne, and Karen Spissed.

 7.  Report of the Audit Committee Chair

Ms. Jones reported on the proceedings of the meetings of the Audit Committee held on July 30, 2020.

Ms. Jones stated that at the meeting, the Committee received an enterprise risk and security update and reviewed the 2020 audit plan.  She reported that Big Accounting LLC had reported to the Committee a technical violation of the auditor independence rule, stating that the violation does not affect Big Accounting LLC’s independence or ability to perform the 2020 audit.  Ms. Jones stated the Committee received and reviewed with management an Internal Audit update, a SOX compliance update, and a Compliance Office update.  She reported that the Committee also reviewed new GAAP rules for goodwill accounting

8.  Next Meeting of the Board of Directors

Mr. Sparrow stated that the next meeting of the Board will be held in Dallas, Texas, on November 1, 2020.  Mr. Sparrow then excused all attendees, other than the directors and Mr. Kent, from the meeting and acted as Secretary for the remainder of the meeting.

8.  Executive Session

The directors met in executive session to discuss issues of relevance to the Corporation.

Mr. Sparrow excused Mr. Kent from the meeting.

The directors discussed additional issues of relevance to the Corporation.

There being no other business to come before the meeting, the meeting was adjourned at approximately 12:45 p.m.

 

                                                  

Steve Milner

Secretary of the Meeting

[1] See the Wilson Sonsini firm’s article on the 2019 Delaware Supreme Court’s opinion in the Bell Blue Creameries listeria-related shareholder lawsuit (the court discusses the importance of what is in or not in the minutes).

[2] For a discussion about the importance of ensuring the availability and retention of board-reviewed materials see Yet Another Minute about Minutes.

[3] If you are taking minutes for a public company board, pay attention to what you write down with respect to board action, i.e., the board deciding to do something may trigger a public disclosure, whereas the board considering some action would not.

3 comments

  1. Le ven. 14 août 2020 à 15:29, Ten Things You Need to Know as In-House Counsel® a écrit :

    > Sterling Miller posted: “I want to pivot away from the “value” discussions > that have dominated the last several “Ten Things” posts to get back to some > tactical, nuts and bolts problems facing in-house lawyers from the > corporate governance-side of things. I have written about bas” >

    Liked by 1 person

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