We recently gave an overview of the duties and responsibilities of a director in the Isle of Man. So how are directors’ discussions and decisions recorded? Effective minute writing is how!
Increasingly subject to external scrutiny writing minutes is an essential part of business meetings and can be relevant in legal proceedings, Courts rely on them as evidence unless provided otherwise. It is so important that the decisions at board meetings are recorded properly and provide an accurate, impartial, and balanced record of business transacted at a meeting. They may also protect your Company and its directors by providing evidence of the discussions and consideration that have taken place.
There is no “one size fits all” and each organisation will have to decide how best its meetings should be recorded. However, there are some basic principles that should be followed and company law in the Isle of Man requires all companies to keep minutes of meetings and resolutions of all meetings of directors.
Usually, the Company Secretary prepares the minutes of board meetings. The detail in the minutes will vary depending on the type of organisation but they should provide enough information to be understood when they are read by someone who was not at the meeting (such as auditors) and by directors in years to come.
They should contain sufficient detail to demonstrate that the directors properly undertook their duties and responsibilities and include the matters which were considered to support decisions made, they should tell the story. A decision made may later prove to be ill advised, but provided the directors considered the relevant factors at the time the decision was made, they are unlikely to be criticised.
It is vital that consideration is given to the legal requirements for board meetings as well as any requirements in the Articles of Association. For example, if your meetings do not meet the requirements for a quorum, the meeting and the decisions made at that meeting could be invalid.
Company law in the Isle of Man requires all director interests to be reported and noted. Often the Articles of Association will dictate whether or not the director who has an interest can take part in the discussions and / or vote on such matters.
The length and level of detail in the minutes should be commensurate with the nature of the transaction being considered. You would expect far more detail and consideration to be given to a multi million pound property acquisition or investment than a decision to open a bank account for example.
You may find it useful to consider the following aspects of a material transaction to ensure all aspects are covered:
- Financial (cash flow, how will it be funded, cost of finance etc.)
- Investment decision (valuation, expected return, timeframe)
- Professional advisers (legal, tax, surveyors, financial)
- Practical (charges or security, surveys, insurance cover, conditions, warranties, limit of liability)
- Corporate Governance (Articles of Association provisions, shareholder, finance provider or investor approval requirements, location of original deeds, safe custody).
Once approved and signed the Minutes will become a permanent record of the company and should be retained in accordance with legal requirements.
Good minutes can be deceptively difficult and time consuming to prepare and they may be your defence in future legal proceedings or regulator reviews; make sure you have someone with the right skills and experience to prepare them!