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Board meetings: Get the details right

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2nd Aug 2011
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NOTE: Although written in 2011 this article remains relevant as at November 2015

Following on from her series on incorporation, Jennifer Adams offers advice on regulations and best practices that apply to holding company board meetings.

In his article on management reporting, Are you a player or a spectator?, David Carter wrote that ’board meetings are simply an exercise in back seat driving. By the time they get to the boardroom the events under discussion may have happened over a month ago’.

So if past is past, is there a need for board meetings particularly for private limited companies managed by less than, say, three directors? A chat over the coffee machine will suffice - surely? Life is not always that simple; some key points for company directors to consider follow.

NOTE: The Regulations noted in the text are to be found in The Companies (Model Articles) Regulations 2008.
  • There is no specific legal obligation for directors to meet as a board. The default Articles applying to any company not adopting alternative or amended articles state a ‘general rule’ that any decision made by directors must be either a majority decision if made at a meeting or a unanimous decision otherwise. (Reg 7(1))
  • If no meeting takes place the regulations suggest that agreed resolutions be written and signed by all those eligible; the resolution only taking effect once the last director has indicated agreement - but it is only a suggestion that the resolution be in writing.
  • Many companies have a policy that should attendance not be possible then agreement to resolutions has to be confirmed (for example by the sending of PDF files to email addresses specified for that purpose). Suggestion: Amend Articles specifying either agreed different methods of making board decisions or stating that decisions reached are always confirmed in writing - shareholders are less likely to challenge the validity of decisions made if this is shown to have been agreed.
  • The ‘general rule’ does not apply if a company has one director; the default Articles do not require more than one. (Reg 7 (2)). Hence no legal requirement for Board Meetings equals no legal need for minutes (but see Minutes below).
  • As the company grows, it is likely to need a formalised corporate strategy to facilitate that growth. The company’s directors will have to plan for the resources needed to implement the strategy.
  • All contracts not in the normal course of business (eg those concerning land) should be referred to the board.
  • The board is legally responsible for ensuring that the company complies with its Articles as well as other relevant legal, regulatory, and governance rules.
  • Any source of outside finance will require assurance that their money is being well managed; they will expect evidence of a correctly run framework for governance.
  • Declaration of interim dividends and recommendation of dividend payout - dividends cannot be declared unless the directors have previously recommended the amount. (Reg 30). Suggestion: Prepare a standard text confirming due consideration of accounts and authorisation of the dividend. This does not need to be formally minuted, but should be signed and dated by the director(s) when each payment is made. See Dividends: Get the details right.

Conduct

  • A valid board meeting requires a quorum of at least two directors; the actual number being decided upon by the directors themselves. (Reg 11).
  • The Companies Acts leaves it to the directors to decide how to convene and conduct board meetings, but if not structured the meeting could result in just a meeting of informal discussion.
  • Preparation is key to a successful meeting and keeping to a set agenda will help to ensure:
    • that matters needing to be discussed are discussed
    • that enough time is allowed to reach each decision
    • concentration
    • advance preparation by attendees
    • assistance as an aide memoire in the meeting itself and for minute taking.
  • Best practice is for a formal notice to be sent to each director with a board pack comprising concise back-up information enabling effective preparation and use of meeting time. Directors should be able to prove that they had sufficient information to comply with their statutory and other duties.
  • The location for the meeting should be specified in the notice and ideally at least one director should be physically present at that location. If the majority of directors participate remotely, it could be argued that a decision was made where the majority were physically present which could have tax consequences if deemed outside of the UK. Suggestion: Amend Articles to agree a policy on remote participation; telephone conferencing being a common means of participation.
  • The Health and Safety Executive recommends that the safety of workers be a regular item for discussion by the Board.
  • Format - a recent debate in AccountingWEB's Company Secretary discussion group on this topic (Can minutes & stock transfers forms be held electronically?) centred on this topic and came to the conclusion that:
    • The Companies Acts give no specific indication as to whether minutes can be kept electronically. s248 Companies Act 2006 just states that minutes are required and s249 confirms that any minutes that are produced are deemed evidence of meeting content.
    • Article15 states that directors must ensure that a record is kept of every unanimous or majority decision, be in writing and be kept for at least 10 years from the date the decision is recorded.
    • s1134-1135 of the Companies Act 2006 confirm that company records include minutes and can either be held as hard copies or in electronic format but “must be  capable of being reproduced in hard copy form if so required”. Suggestion: whichever format is decided upon, the decision should be confirmed at a board meeting.
  • Minutes record decisions taken and as such need to include sufficient background to those decisions for future reference.
  • Minutes are evidence should a third party such as the company's bank, landlord or member of a Tax Tribunal (CCE v Elm Milk Ltd 2006) require sight of a particular board resolution.
  • Shareholders have no legal entitlement to view board minutes
  • Minutes should not be too long or too short but be detailed enough to confirm that the board were aware of and have complied with their obligations. Suggestion: wording confirming compliance should be inserted into board minutes once a year as a reminder.
Further reading

Replies (2)

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By yeboyye
07th Aug 2011 10:56

Death of a director

Private company formed before the Companies Act 2006.  Company is in the process of being wound up under ESC C16.  Two directors/shareholders.  One director/shareholder has died.  Do we need to hold a shareholders meeting to appoint another director e.g. the spouse of the deceased director, or can the remaining director deal with the remaining issues e.g. final distribution, application for striking-off?

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By gsgordon
08th Aug 2011 18:06

Rules for Company incorporated before 1 Oct 2009?

Dividends: Get the details right says I can prepare a minute that authorizes a dividend instead of having to hold a board meeting. This appears to be subject to the new Table A from CA2006 applying.

CH website says the new Table A applies to companies incorporated on or after 1 Oct 2009.

Does that mean the advice given there does not apply to us, as we were incorporated before 1 Oct 2009? If it does not apply, can we now adopt the new Table A?

In particular, I'd like to be able to declare and pay a dividend from our private company without a meeting, as in - "Therefore suggest a standard text is prepared confirming due consideration of accounts and authorisation of the dividend (whether interim or final) which is signed and dated by the director at the time each payment is made." (From Dividends: Get the details right.)

Can this be done for a company incorporated before 1 Oct 2009?

I assume the text would include the words "The accounts to 'date' show that £XX is available as distributable profit. It was resolved that an interim dividend of £YY per Ordinary Share be declared and paid on 'date' to shareholders registered at the close of business on 'date'.", and this would be signed and dated by the 2 directors.

Or can anyone suggest a better form of words, or a free source of the words.

Thanks (0)