Getting Board Minutes Right (The Importance Of Documentation)

In today's fast paced and often time poor environment when decisions can often be made on the run, the importance of getting board minutes right is more important than ever.

Why is documenting Board Minutes so important?

Below are Ascentium's top 10 reasons why:

1. Provides clear documentation of who made what decisions, and why.
2. Provides a record of past decisions and discussions for new board members to objectively consider.
3. Encourages directors to prepare appropriately and act responsibly in board meetings.
4. Action items are clearly documented, and which director is responsible for which action point(s).
5. Provides a forum to disclose any conflicts of interest and where such conflicts exist for these to be documented that the relevant board member(s) are not involved in any discussions relating to the identified conflict.
6. Promotes a sense of professionalism amongst the board, reduces misunderstandings, and fosters more disciplined and effective meetings.
7. Supports transparency and ethical behaviour of the board in respect to the decision-making process.
8. Serves as evidence that directors fulfilled their legal duties i.e. acted in good faith and made informed decisions.
9. Serves as a protection mechanism to the board in the event of litigation or regulatory action.
10. Demonstrates accountability to shareholders, regulators, and auditors.

There is a legal obligation under the Corporations Act to maintain accurate board minutes.

As such the failure to maintain minutes or record inaccurate minutes may result in:

1. Fines or penalties from ASIC
2. Invalidation of decisions
3. Director liability if decisions cannot be properly evidenced

The first item on the agenda of each board meeting should be to review and agree on the minutes of the last board meeting and have them signed off by the Chairperson.

Subsequent agenda items (subject to the nature and operations of the business) may include:

1. Discussions on strategic decisions of the business including potential acquisitions and assessment of the due diligence conducted
2. Updates from the CEO covering significant operational and business matters
3. Updates from the CFO covering year to date financial reports with a comparison to budgets together with potential action points to address significant variances
4. Governance matters, including for listed entities consideration of announcements made/to be made to the market
5. Significant HR and staffing matters, where applicable
6. Status of any litigation matters where applicable
7. Remuneration considerations for senior management including the granting of management and/or employee incentive plans
8. Date of next meeting

The above list is not exhaustive, merely a guide.

Ascentium has recently set up a Director services service line to assist boards in fulfilling their legal responsibilities whilst allowing them to focus on their business. If this is of interest to you, contact Ascentium.

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