Board Meetings

The management of a company is invariably delegated, under the company’s articles, to the board. Articles will typically provide that the business of the company is to be managed by the directors, who are empowered to exercise all the powers of the company, the powers must usually be exercised by the board collectively at a properly convened board meeting.

There is no specific minimum number of board meetings prescribed by law: directors must meet sufficiently often to ensure that they are discharging their duties as directors. The articles usually provide that any director may, and the secretary at the request of a director shall, call a meeting of the directors. Unless the company’s constitution prescribes a period of notice, the period must be fair and reasonable. As a matter of good practice, the notice should be written, although verbal notice may technically suffice.

The notice must set out where and when the meeting is to be held. There is no general law requirement that a notice convening a board meeting must state the business proposed to be transacted. Business that is done at a meeting of which some directors have no or insufficient notice has been held to be invalid.

The quorum for a meeting of directors will usually be determined by the articles. The articles may provide that the quorum is one. Where the articles do not prescribe a quorum, or a quorum has not been fixed in accordance with the articles, the quorum will be a majority of the board, although in some circumstances the quorum may be determined by the usual practice of the board. A director may not be counted in the quorum if they are disqualified from voting on the resolution.

A quorum must be present at the start of, and throughout, the meeting. In the absence of a quorum no business should be transacted and any resolutions purporting to be passed will be invalid subject to the provisions in the articles, the board meeting should be adjourned until a quorum can be formed. The chairperson is responsible for determining whether there is a quorum.

The articles will often set out what will happen if the number of directors has fallen below that required for a quorum. A decision made at an inquorate board meeting may be ratified by a resolution duly passed at a quorate board meeting: at common law, unless a company’s constitution otherwise provides, a board of directors can, within a reasonable time, ratify the acts of a director or directors who, when they acted, had no authority to bind the company, but which acts were within the power of the board.

Articles will usually provide that resolutions will be passed by a majority of those present and voting. Boards do not necessarily need to pass formal resolutions for their decisions to be binding, but it is conventional for them to do so. Once a proper resolution of the board has been passed, it is the duty of all the directors, including those who took no part in the deliberations of the board and those who voted against the resolution, to implement it.

Articles will often provide that a director cannot vote at a board meeting on a matter in which he has a material interest (direct or indirect) that may conflict with the interests of the company.

Every company is required to take minutes of all proceedings at meetings of its directors, if the company fails to comply with section 248, an offence is committed by every officer of the company who is in default (section 248(3), CA 2006). It is good practice to ensure that, at the very least, the minutes:

• Record accurately all resolutions and decisions
• Contain enough information for the reader to have an understanding of the background to the various decisions
• Depending on the importance of the resolution, contain the thought process that led to them being made

The company must retain minutes of meetings of directors held on or after 1 October 2007 for at least ten years from the date of the meeting (section 248(2), CA 2006).

If the company fails to comply with section 248, an offence is committed by every officer of the company who is in default (section 248(3), CA 2006).

A director, while in office, has the right to be informed about the company’s affairs and to inspect all the company’s books and records. The right must be exercised for a proper purpose, to enable the director to discharge his personal obligations to the company and his statutory obligations. Shareholders have no general right to inspect board minutes in the absence of an express provision in the articles (or another agreement to which the company is a party, such as a shareholders’ agreement).

Acknowledgement: Thomson Reuters online resource Practical Law

NOT LEGAL ADVICE: Information provided in this Blog, is for information purposes only. It is not and should not be taken as legal advice. You should not relay on or take or fail to take any action based upon this information. Never disregard taking legal advice or delay in seeking legal advice because of something you have read in this blog, or on this website. Ian Randall is an Attorney & Counsellor at Law (NY), with 25 years of Corporate and Commercial experience in several jurisdictions. To see how Owllegal could help you, please visit; www.owllegal.org or email Ian Directly, his email address is ian@owllegal.org.