Morgan Russell Solicitors

Companies Act 2006 - Board Minutes

A company’s articles normally contain provisions regarding board minutes, either expressly or by reference to keeping written records of decisions taken.  As one of the directors’ duties under the Companies Act 2006 is to act in accordance with the company’s constitution, each director should be aware of the provisions of the articles of the company. 

The Companies Act 2006 provides that minutes of directors meetings should be kept and retained for at least 10 years from the date of the meeting. The minutes can be kept in electronic form but they should be capable of being reproduced in hard copy.

It would be impractical to record in board minutes every word said but they should accurately record all resolutions and decisions made at the meeting.  The minutes should also contain sufficient information to enable someone reading them to understand the background to the decisions taken.  This can often be covered in the explanation of the purpose of the meeting.  Additional information may be required on the thought process to the decision depending on the importance of the decision.

It is good practice to have regular board meetings.  The period will depend on each company concerned but, as good practice, should not be more than 3 months apart.

The procedure for calling and conducting a board meeting is normally contained in a company’s articles.  There is normally no prescribed notice period, but the notice should be reasonable. What is reasonable will depend on the facts of each particular situation. Although normally not required to be in writing, it is good practice to send a written notice together with an agenda.

The quorum for board meetings will normally be pursuant to the articles.  The common default position is that 2 directors constitute a quorum.  If a quorum is not present at a board meeting, no business should be transacted.  Any resolutions passed at an inquorate board meeting will be invalid.

Directors who are interested (directly or indirectly) in any of the matters to be discussed at the board meeting must declare the nature and extent of the interest to the other directors.  An interest would also cover an interest of a family member and transactions with another company of which the director is also a director.  Non compliance with this requirement is an offence and the director may be liable to a fine.

If a director is interested in a matter to be discussed at a board meeting, the articles of the company will need to be considered to see if the director is prevented from voting or being counted in the quorum, and this should be included in the minutes.

It is good practice to circulate draft minutes following a board meeting.  If directors have any comments these can be raised at the next board meeting.  Alternatively, the minutes can be approved at the next board meeting.  Once signed by the chairperson, the minutes become evidence of the proceedings.  Minutes of board meetings, unlike minutes of general meetings, do not have to be made available for inspection by the shareholders.

When considering and passing resolutions, directors should have regard to their directors’ duties.  A director must act in a way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.  In exercising this duty the director must have regard (amongst other matters) to:  

  1. The likely consequences of any decision in the long term. 
  2. The interests of the company employees. 
  3. The need to foster the company’s business relationships with suppliers, customers and others. 
  4. The impact of the company’s operations on the community and the environment. 
  5. The desirability of the company maintaining a reputation for high standards of business conduct. 
  6. The need to act fairly as between the members.

This list is not exhaustive.  The duty is subject to any law requiring directors to consider or act in the interests of creditors (e.g. insolvency situations).  A director will also need to consider his duty to exercise reasonable care, skill and diligence.

There is no guidance as to the weight to be given to each factor and how to deal with conflicts.  Directors will need to exercise their good faith judgement.

Directors will need to consider: 

  1. How to document their compliance.   
  2. The factors and a reference should be made in the minutes to state that the directors have taken the factors into account in reaching their decision.   
  3. Reflecting in the minutes in more detail the points made during discussions in relation to any factor which is particularly relevant.   
  4. Carefully where significant or potentially controversial decisions are involved and in such circumstances it may be prudent to prepare briefing papers on each factor together with any other relevant matters.

Companies may also wish to circulate a copy of the relevant section of the Companies Act 2006 (section 172) with board papers in order to remind the directors prior to each board meeting what needs to be considered.  Companies should consider general practice/policy in relation to documenting compliance with section 172 of the Companies Act 2006.

Further Information

If you have any questions regarding the above or require additional information or assistance, please contact Debbie Turner on +44 (0)1372 461411.

The data contained within this document is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time. This document is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.
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