In light of heightened interest in board minutes in recent months in the wake of the Financial Services Royal Commission, The Australian Institute of Company Directors (AICD) and Governance Institute of Australia (GIA) have released a joint statement outlining their shared perspective on current issues in minute taking including the purpose of minutes; the scope of content to be included in minutes; factors relevant to determining the appropriate level of detail to include; how challenge and dissent should be treated; and the role of board papers and other supplementary material.

The statement also includes a legal opinion from Dominique Hogan-Doran SC and Douglas Gration to add legal context to the conclusions, recommendations and positions taken.

[Note: The full text of the legal opinion from Dominique Hogan-Doran SC and Douglas Gration covers matters including: a) the purpose of minutes and detail to be included; b) drafts and notes; c) amendments to minutes; d) challenge and dissent; e) board papers and other supporting documents; and f) legal professional privilege is included as an appendix to the joint statement]

What is the purpose of board minutes?

We concur with the statement of the UK counterpart of Governance Institute that ‘[t]he purpose of minutes is to provide an accurate, impartial and balanced internal record of the business transacted at a meeting.”

Dominique Hogan-Doran SC and Douglas Gration, July 2019

• 'Board minutes are a record of board decisions and the process, or proceedings, by which those decisions have been made. As well as being a legal record, the minutes convey these decisions to the executives who implement them, and serve as a reference for the board if it wishes to revisit them' the GIA/AICD write.
• Importantly, board minutes are not a transcript or verbatim report of the discussion or debate during the meeting or a record of an individual director's contribution. The GIA/AICD consider that this level of 'detail is not required by law, would be inconsistent with the established practice of minute taking and may stifle healthy boardroom debate'.
• Though minutes can facilitate regulatory oversight — minutes may be the only evidence before a court of what occurred at a meeting, because the directors or others present are not called to give evidence — 'this is not their primary purpose'. The GIA/AICD consider that minutes should not be treated as purely a compliance exercise and caution that a 'tick box' approach should be avoided.

What should be included in minutes?

• Though there is no 'one size fits all' approach to this question, the AICD/GIA consider that as a general principle minutes should include the key points of discussion and the broad reasons for decisions to help establish that 'directors have exercised their powers and discharged their duties to act with care and diligence and in good faith, for a proper purpose and in the best interests of the company'.
• In addition, it is also advisable to consider the principles of the business judgment rule when preparing and approving minutes. If judgment is required and directors are balancing a number of competing risks and considerations in their decision-making, it is prudent to actively consider whether the minutes capture them 'adequately but succinctly'. Further, the AICD/GIA note that if the minutes are silent on an issue, a 'court may adopt a degree of scepticism as to whether the matter was indeed considered by the board'.
• Typical inclusions in minutes are: the organisation’s name; the nature and type of meeting; place, date and starting time; chair name; attendees; invited guests; apologies accepted; presence of quorum; minutes of the previous meeting; materials distributed before and during the meeting; proceedings of the meeting and resolutions made (including details of director votes against or abstentions); when attendees leave and re-enter the room; closing time; and chair signature.
• Beyond this, the level of detail is a question of judgment and may vary from company to company and between the matters being considered by the board. The GIA/AICD suggest that the following relevant factors are appropriate to consider when determining the appropriate level of detail to include: a) the nature and importance of, and the risk attaching to, the decision and discussion concerned; b) the level of detail contained in any supporting board paper; c) the regulatory environment that either the company generally or the particular decision is subject to and the need to ensure that the minutes and documents referred to in them can demonstrate compliance with relevant regulatory requirements; d) any perceived self interest or conflict of interest on the part of management or the board in the decision concerned (it is desirable that the rationale for and basis of such decisions is carefully and fully recorded).

[Note: Paragraph 23 of the legal opinion attached to the joint statement sets out a similar list of considerations.]

• The GIA/AICD further suggest that a 'happy medium' between pure minutes of resolution and minutes of narration will often be appropriate, noting that it is 'important that the approach adopted with minutes is consistent'.

The treatment of 'Challenge' and Dissent?

Commenting on the extent to which minutes should reflect the way in which boards 'challenge' management the AICD/GIA consider that while it is a matter for judgment in each case, it is appropriate that the minutes record significant issues raised with management by directors and the responses received or action promised. However, the statement emphasises that 'It is neither necessary nor desirable to record every question put and every response received. It will normally be sufficient to record the thrust of significant issues raised in non-emotive and impartial language'.

[Note: The Financial Services Royal Commission's Final Report includes some discussion of the importance of boards getting the right information and challenging management. The extent to which this was evident from the minutes was also discussed briefly. See: Financial Services Royal Commission Final Report volume 1 at p396-397. The issue was also raised during the Round 7 hearings, see: Governance News 26/11/2018]

Unnecessary to include the finer details of 'robust discussion' in minutes

The AICD/GIA make the point that though minutes can assist in establishing that directors turned their minds sufficiently to matters under consideration, minutes should record the resolutions of the board as a whole, rather than the separate views of a group of individuals. For this reason, 'the details of any robust discussion that takes place along the way ideally should not be attributed in minutes'.

The statement adds that 'The more minutes are written in an "x said", "y said" manner, the less the minutes reflect the concept of directors acting as a collective and the more likely that board dynamics could be negatively impacted'. In addition, the statement draws a distinction between what might be characterised as 'robust discussion' leading to a collective decision and dissent.

Many discussions during board meetings include 'untested ideas or general thoughts on a topic' which might be described as 'robust discussion'. The ACID/GIA state that 'These comments are not necessarily for inclusion in minutes and including these details may discourage the free-flowing discussion that should be part of a well-functioning board'. Minutes should record the reason the majority of directors were in favour of the decision notwithstanding dissenting views.

The AICD/GIA suggest that board discussions of this kind might usefully and accurately be recorded using words such as the board 'discussed', 'debated', 'questioned', 'enquired', requested information on', 'tested their understanding'.

Dissent should be recorded

Minutes should record the reason the majority of directors were in favour of the decision notwithstanding dissenting views. The legal opinion accompanying the joint statement adds that though boards generally make collegiate decisions, for which 'they take collegiate responsibility', 'from time to time, an individual director may dissent or abstain from a particular decision and ask that the fact that this conduct be recorded in the minutes. Further, the law imposes individual duties on directors and expects the individual discharge of those duties to be recorded'.

Board papers and other supporting documents

The statement emphasises that 'a well-written board paper will complement the minutes, and can often demonstrate the reason a decision has been taken with little, if any, further elaboration required in the minutes. It is appropriate for board minutes to refer to, without repeating, the contents of board papers and other supporting documents'.

Further, the statement suggests that the content of the board papers should support the decisions being made by the board. Where a board makes a decision not canvassed in the supporting board paper or is contrary to management's recommendation it is 'good practice to include sufficient detail about the reasons for the decision to enable a reader to understand the rationale. Material information not included in board papers which forms part of the decision may also need to be referenced in the minutes.'

Draft minutes and meeting notes: Board's need to 'properly evaluate the draft minutes'

• Notes of meetings: 'Minutes should be the sole, permanent record of the meeting proceedings. Retaining notes may undermine the integrity of the minutes as the final record of the meeting' the AICD/GIA write. As such, it's important for firms to adopt and consistently apply a document management and retention policy. The legal opinion accompanying the joint statement adds that 'Draft minutes and handwritten notes of meetings may be dealt with and disposed of in the same way as other documents (not being financial records) held by a company. Subject to the important caveat below with respect to actual and anticipated legal proceedings, there is no specific obligation to retain drafts and handwritten notes of meetings'.
• Boards need to evaluate draft minutes: The statement notes that as minutes prepared and signed in accordance with section 251 A of the Corporations Act are evidence of the proceedings and resolutions to which they relate (unless the contrary is proven) directors have a responsibility to properly evaluate the draft minutes circulated after meetings and should request additions, clarifications or corrections as needed.
• Directors' personal notes: Though there is no legal obligation for directors to take personal notes, many directors elect to do so. However, like minutes, directors' notes can be discoverable and admissible as evidence. The AICD/GIA observe that 'This might be helpful if the notes show that the director has adequately informed him/herself, questioned appropriately and used proper care and diligence' but caution that taking notes can 'create risk if the notes are considered to be ambiguous, inconsistent or incomplete'. In addition, notes taken by an attendee at a meeting are not minutes, 'but represent the note taker's version of what occurred and may not be accurate'.

Legal professional privilege should be considered

Legal privilege is not usually lost by the board receiving a company’s legal advice. Having said this, the statement notes the importance of exercising 'caution and judgment in determining the degree of detail of privileged information (if any) that is necessary to include in the minutes'. The AICD/GIA suggest that in many cases, it may be appropriate to note that the board considered relevant legal advice when making a decision.

The AICD/GIA further suggest that any privileged information in the minutes should be 'clearly identified and ideally included in an appendix or attachment. Legal advice should be sought where necessary'. The statement adds that where minutes refer to privileged advice 'they should not should not be provided to third parties without first taking legal advice, because disclosure of the substance of the legal opinion might result in the loss of privilege'.