Why are board meetings and minutes important?

Why are board meetings and minutes important?

Private limited companies may not be under a statutory obligation to hold company meetings such as general meetings, annual general meetings (AGMs) or board meetings, but there may be requirements in a company's articles of association to do so.

Board meetings are useful to businesses with multiple directors to ensure directors duties are upheld and decisions made are documented. Board meeting minutes are required to be kept as per the Companies Act 2006 and minutes should be retained for 10 years.

In this blog, we look at what you should document in these meetings via minutes and the reasons why you should keep them.

What is a board meeting?

A board meeting is used to describe a formal meeting of the directors of the company. They are usually held for directors to review, discuss and make collective decisions about the company.

These meetings and taking meeting minutes, are often overlooked or treated by some directors as a minor part of running a business. However, failure to properly minute key board decisions can have significant implications for a company and its directors, both in terms of requirements of their articles of associations, future disputes and future financing, growth and sale of a company.

Benefits of holding board meetings

Holding a regular board meeting can help with the following:

• Regular review of company progress.
• Align the board members and senior management team around key objectives.
• Provide a structured format to make important strategic decisions.
• Discuss the financial performance of the company and progress against KPIs.
• Review overall operations.
• Discuss next steps, future plans and strategic direction.
• Provide accountability to board members and senior management.
• Assess potential risks and plan how to minimise them.
• Discuss opportunities and challenges.

What is contained in board meeting minutes?

Legal requirements of The Companies Act 2006 stipulates that companies must keep minutes which are a written record of general meetings and board meetings. These are used as an official record of a meeting taking place and the decisions made and items discussed.

You need to retain minutes for a minimum period of 10 years from the date of the meeting. They should be stored at the registered office of the company, or an alternative inspection location (SAIL address).

When recording meeting minutes, the information contained should be:

• Company name.
• Date and time of meeting.
• Names of the directors/board members/company secretary present at the board meeting including a record of election of the board chair.
• Note apologies of those people that are not present at the meeting.
• Board meeting agenda.
• References to previous meeting minutes.
• Clear picture of discussions held, decisions made, and motions passed.
• Declaration of interests (does the meeting give rise to any actual or potential conflicts of interest, if so, these should be declared).
• Documents (will any be produced to the meeting to be considered).
• The time of commencement and conclusion of the meeting.
• Date of next agreed meeting if known/appropriate.

What is the difference between a board meeting and a general or annual general meeting?

Board Meetings: Board meetings are meetings of the directors and tend to be held more regularly to discuss matters such as strategic direction, financial performance etc. At board meetings, the decisions can be made by the company directors.

General Meetings: A general meeting is a meeting of the members of a limited company. This type of meeting is more formal than a board meeting of directors, because the calling and conduct of general meetings is regulated by the Companies Act 2006. At general meetings, decisions can only be made by members (or their proxies) who have the right to vote. Most private companies will only call general meetings when extraordinary decisions have to be made by the members.

Annual General Meetings: An AGM is a formal meeting of company's members (i.e. shareholders and guarantors). Private limited companies don't need to have an AGM unless their articles of association say so, or unless their shares are admitted to trading on a UK Regulated Market or on an EU Regulated Market. At Annual General Meetings, decisions can only be made by members (or their proxies) who have the right to vote.

Do you need to hold board meetings?

Although there may not be a statutory requirement to hold a board meeting, what many company directors don't realise is that their companies are also governed by their articles of association. Some companies’ articles of association or shareholders’ agreements require them to have board meetings, sometimes at specific intervals. 

The articles will state that the company is managed by the directors and that they are empowered to exercise all the powers of the company. Legally therefore, the powers of the company should be exercised by the directors and there will be rules in the company's articles of association that set out the following:

• notice of a meeting sent to each director before the board meeting is held
• the notice should include where or how the meeting will take place
• minimum number of directors that should attend (a quorum)
• decision-making process
• which decisions can be made at a board vs a general meeting
• how to handle conflicts of interest
• choosing a chair for meetings

Do all board meetings have to have recorded minutes?

Yes, a company is legally required to keep minutes of ALL board meetings. The minutes should accurately document all decisions and resolutions and, where possible, the background and facts as to why decisions were made.

If you are looking for finance in the future, often lenders will require board minutes to be provided to evidence that the directors have held a correct board meeting and the appropriate documents and minutes are being taken.

How should meeting minutes be recorded?

Board meeting minutes should be recorded either in hard copy or electronically and stored for 10 years.

When preparing minutes, it is good practice to circulate draft minutes following a meeting to ensure nothing has been missed by the person taking the meeting minutes. It also allows an opportunity to raise any issues regarding the previous meeting minutes at the next meeting. You should then record directors approving minutes.

How can board meeting minutes benefit your company?

There can be many benefits to you and your company also for taking meeting minutes. These are:

• For future financing as lenders will often require evidence of meeting minutes.
• You can use them as evidence should disputes occur between directors.
• They will bind directors and show they act in accordance with the articles of association.
• You can use them as evidence when selling the company that the company has been well managed.

How can I improve board meetings?

If you feel that your current meetings are not achieving what you want them too, then now be the time to change the format and look at ways to improve them. Below are some suggestions:

1. Preparation: Much of the effectiveness of a board meeting happens before the meeting itself. Directors and board members need time to produce and review the right information. Having a formalised 'board pack' prior to the meeting for everyone to review will vastly improve the quality of the meeting itself and the decisions made within it.
2. Agenda: The agenda, along with the board pack can form the backbone of the main meeting. The agenda needs to provide a balance of reviewing past performance and planning for the future. It should include the right mix of strategic discussions and where necessary day to day management. However, ensure that the main focus of a board meeting is setting future direction and strategy and that discussions are not too much around day-to-day detail.
3. Timing: Ensure meetings begin and end on time and each agenda item is given adequate time for discussion, depending on importance. If necessary and discussion is de-railed, take some topics off the table or reschedule them for the next meeting.
4. Well chaired: Whoever chairs the meeting, needs to ensure that the meeting progresses through the agenda, that there are not too many issues that side track main discussions. A good chairperson can hugely improve the outcome and energy in board meetings.
5. Minute taking: Meetings should include accurate minute taking of all relevant discussions and key outcomes including a list of actions for the next board meeting. All attendees should then approve meeting minutes after the meeting has been held and a final copy circulated to all attendees. Effective meeting minutes are vital to ensure accurate records and to avoid conflict or disagreement in future.
6. Breaks/focus: Schedule in regular breaks if your meetings are long. Ensure refreshments are provided and comfort breaks taken to ensure everyone remains focussed and energised. It may be good to ask people to switch off mobiles during the meeting and only check them during the breaks.
7. Safe space: Make meetings a safe space for discussion and allow questions from all members, including new directors who may not fully understand everything such as financials initially. Encourage questions and curiosity but within managed time frames.

Do I need to tell Companies House about board meetings and resolutions?

You do not have to tell Companies House about board meetings, but you are legally required to file copies of certain resolutions. All special resolutions such as changing the company name or amendments to the articles of association, must be filed at Companies House within 15 days of being passed.

You will also need to file copies of certain ordinary, board, or written resolutions, for example, authorising directors to issue shares, or the re-denomination of shares to a different currency.

Conclusion

Whilst not a legal requirement and whilst directors of limited companies will make informal decisions in the day to day running of their companies, all significant decisions and transactions should be documented and approved by the company's board, either via a formal board meeting or by a written resolution.

Regular communication amongst board members and the senior management team is critical for company success, so making meetings a key part of that communication process can be vital to ensure the right strategic decisions are made and approved.

It is vital that a board meeting is held in accordance with the company’s articles of association that empower its directors to collectively exercise all powers of the company. These articles usually require properly convened board meetings to be held to exercise many of these powers.

Board meeting minutes should be a true representation and reference point for all the key points discussed and the decisions made at that meeting. These minutes can be particularly useful for future reference should disputes occur or you are seeking finance or to sell the company.

Running these types of meetings and documenting them accurately is good practice for any company.

If you need further help and advice on your obligations for board meetings, then contact our team in Wirral, Liverpool, or Chester.