Note: This article is part of an ongoing series on Board Directors. To learn more about their roles and responsibilities, download this free eBook today Director's Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.
Everyone who has been involved with a town meeting, a charitable board, or a corporate board (or watched a television drama involving such a meeting) has witnessed the ritual of approving the minutes at the beginning of the meeting. Most of us cannot even remember the first time we were exposed to the concept. All we know is that is a universal practice and always has been. Dealing with board minutes can be a bit of a chore, but they must be an important one given how much attention is paid to them. What are they all about? If we are going to be involved in startup boards, we need to get grounded in the basics.
What are board meeting minutes?
Minutes are nothing more than the official notes of a meeting (as opposed to personal notes an individual might take for themselves). Minutes document the date and time of the meeting as well as who was present. They record what items were discussed, and whether any decisions were made (or in more technical terms, whether any votes or “resolutions” were taken). And, importantly, they record the formalities which were observed and the requirements which were met, such as whether the number of participants present represented a quorum, or minimum necessary number of people to take a vote.
Why does an early stage company need to write up board meeting minutes?
Minutes serve two purposes: one practical and one theoretical. On a practical level, minutes serve as an official record of what happened and can be helpful in recording and reminding people of the history of events, any agreements, any assignments or delegations and any deadlines agreed upon. The minute book is, in effect, the official corporate history. In this regard they may also be very useful as orientation materials for new directors. Further, they are required under most state laws (including Delaware) and may be required under the company’s charter. They will certainly be required by auditors and any potential acquirers of the company.
But the reality is that people can generally remember what they discussed from one meeting to the next and so it is rarely necessary to review the minutes to remember what was agreed. So why the enduring and universal insistence on minute-taking? Because on a theoretical level they provide tremendous protection against potential claims of wrongdoing. As a brief refresher of a topic we’ve previously covered in our Legal Duties of Directors piece, directors and officers of a company are not liable for making mistakes of judgment. They are liable for being sloppy, hasty, careless, conflicted, reckless or ill-prepared. The law has long protected the right of directors to exercise their business judgment without fear of being wrong, PROVIDED the process they used was appropriate. Your minutes, both in their existence and their content, are your proof that the process you used was appropriate.
Who writes the board meeting minutes for an early stage company?
In established organizations, minutes are typically done by the person holding the title of corporate secretary. But in reality, anyone can do them provided the output of their efforts meets the approval of the rest of the board. In many startups, minutes are done by outside corporate counsel who often volunteer to attend board meetings in order to keep on top of client developments and to be on hand to advise on legal matters. In some cases they may be done by the board chair or lead director. Once a company becomes larger, an in-house lawyer serving as the general counsel will generally carry the secretary title and take care of the minutes. (Only in the largest corporations will there be a separate dedicated secretary - needing this is a problem most start-ups can only dream of having.)
What do board meeting minutes look like for an early stage company?
Minutes have a relatively uniform and formal appearance, with a title and date block at the top and a preamble paragraph covering attendees at the beginning. This is typically followed by a note about the meeting being called to order, a formal resolution approving the official minutes from the last meeting, and then a recitation of of the various items discussed, including any votes taken. Then they will often end with a notation that the directors had an executive session without members of management present, and record an official vote to adjourn.
At the end of the day, the precise format does not matter much as long as these elements are present:
Date, Time and Place
Call to Order
Overview and Agenda
Individual Discussion Topics and Related Resolutions
For more on the language and practice of writing good minutes see our separate piece Seraf Toolbox: Writing Good Board Minutes - Top 10 Dos and Tips.
What happens to board meeting minutes after they are written?
Minutes are typically created shortly after a meeting while recollections are fresh. Standard practice is to circulate them in draft form to meeting participants for comment. Once any comments are incorporated, the minutes are circulated in connection with the next meeting, formally approved as the official record of the meeting to which they relate, and filed in the official corporate minute book for safekeeping.
As you can tell, basic minute writing is not overly difficult, which is a good thing, considering how important they are. However there can be a lot of art to maximizing their protective value and minimizing any liability they might create. If possible, you will want to defer to an expert, or become a little more expert in minute writing before undertaking it yourself. For some tips on doing them well and traps to avoid, see Seraf Toolbox: Writing Good Board Minutes - Top Ten Don’ts and Traps.
For a more in-depth discussion on early stage company board issues, download our companion eBook: Director’s Guidebook: How to be an Effective Board Director in Early Stage Companies or purchase our books at Amazon.com.