By: Bob Goldberg, RSPA General Counsel
In the past two years there have been a significant number of reseller and supplier businesses bought and sold. This is always a good sign for it demonstrates confidence in the industry, potential growth opportunities, and exit strategies for those who wish to move on. There are numerous documents, warranties, and representations involved in each transaction. If you are a corporate entity, copies of the Minutes from all Board of Director Meetings during a certain period are required as well as corporate resolutions approving the transaction. Experience has proven that many corporations are not diligent in maintaining their corporate records.
State regulations require a minimum of one annual corporate meeting. This meeting is used to elect directors and approve actions taken. Minutes must be kept of the meeting and placed in the corporate records. Typically the corporate secretary is responsible for taking and distributing the minutes. Minutes should be approved by the board following the meeting. But what should be included in the minutes?
- Board minutes are not a report or transcript of the discussion or debate during the meeting, or a record of an individual director’s contribution. Too much information can be as unhelpful as too little, and can cause a lack of clarity and stifle healthy boardroom debate.
- Minutes should include the key points of discussion and the broad reasons for board decisions. This may help to establish that directors have exercised their duties to act with care and diligence and in good faith, for a proper purpose and in the best interests of the company.
- It is appropriate for minutes to record significant issues raised with management by directors and the reactions received. The minutes should note required follow-up and who is responsible. However, it is neither necessary nor desirable to record every question put and every response received; it would be sufficient to record the thrust of significant issues raised.
What level of detail should be included in board minutes?
- The level of detail in minutes is a question of judgment and may vary from company to company and between the matters being considered by the board. While there is no “one size fits all” approach, relevant factors to consider when incorporating key points of discussion and reasons for decision into minutes include:
- the nature and importance of, and risks attaching to, the decision and discussions concerned;
- the level of detail contained in any supporting board papers which often are attached to the minutes;
- any perceived self-interest or conflict of interest on the part of management or the board in the decisions concerned.
- Minutes should be drafted in a clear and succinct manner, using plain English, and written in a way that someone who was not present at the meeting can follow the decisions that were made.
- The board acts as a collective, not as a group of individuals. Accordingly, the details of any robust discussion that takes place along the way should not be attributed in minutes. It is important to note the difference between a robust discussion that leads to a collective decision by the board, and the dissent of a director in discharging their individual duty to act with care and diligence.
Keeping proper corporate records is required by law and assures good corporate practices. Consider appointing an outside director for new ideas and direction. Avoid having to prepare years of corporate records for the sole purpose of selling your business.