Monday, February 13, 2017


By Bill Siegel

Well drafted minutes are extremely important as they are often admitted into evidence in suits brought by shareholders on behalf of the corporation or in securities class actions.  More often than not, it is years before the lawsuit is filed and even longer before the suit is tried.  Thus, well thought-out minutes help create an accurate record and are useful in assisting those in refreshing their memories.  Without them, one has to reconstruct what took place and, even then, there are inconsistencies which can create creditability issues and factual disputes.  Well drafted minutes will memorialize what actually took place, the role taken by each director and the overall deliberative process in taking or not taking certain actions.

To start with, all board attendees should be identified by name and positions(s).  Since certain attendees may hold different positions, some of whom may not be board members, they should be identified by the title when being recognized for a report or opinion.

It is also important to protect the attorney-client privilege.  In this regard, the minutes should identify instances in which the board received privileged information. Since not all information during a meeting is privileged, it is necessary to review the minutes to ensure that anything privileged be removed.  Moreover, when the board receives privileged materials, it is essential that those who are not covered by the privilege leave the room.
It is not unusual for a board to deliberate on matters involving the interests of a fellow board member.  Great care should taken to memorialize substantive deliberations and decisions that were reached without the participation or influence of any other individual who could be considered interested.
Though often overlooked, the format of the corporate minutes should remain uniform and consistent.  Generally, this involves establishing guidelines to ensure that the board’s deliberations on a particular topic were consistent.  In some instances, certain topics may require a more detailed deliberative process as opposed to other topics, which may not require such consideration.  In this way, when monthly board minutes are reviewed years later by opposing counsel and/or the Judge, the minutes are consistent as to the manner in which the board deliberated on the same topic.  If the there is a lack of consistency, opposing counsel may have an opportunity to create confusion if the level of detail in the minutes was inconsistent, reflected a lack of interest on the board’s part or perhaps impinged the minutes’ credibility.

It is also important to ensure there a process is in place for timely approving the minutes.  In this way, if a particular topic or concern continues to be discussed from one meeting to the next, minutes that are timely approved can serve as a road map for continued discussion and deliberation.  Evidence showing that the board did not timely approve minutes and, instead, would bundle them in one approval process could be something that opposing counsel may use to attempt to convince a Judge or jury that the board was careless and perhaps negligence, whether true or not.  Also, the minutes should be provided to board members well in advance of the next board meeting so that they have a reasonable time to review and comment.  This also helps them prepare for the next meeting and, perhaps, to raise additional issues that may not have been included in the agenda.  

Finally, minutes should contain different viewpoints or strategies.  This helps show the board exercised a sufficient level of deliberation when having to make a decision that may prove controversial.  Moreover, there are times decisions when board members change their mind whether through subsequent events or the opinion of others.  When these decisions are memorialized from meeting to meeting, courts will recognize the process and/or discussion undertaken by the board in exercising its fiduciary duty.

Bottom line, thoughtful articulation of the process and the deliberation in the minutes, will ease the pain and help the company prevail in any potential dispute or litigation.

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