The day to day operations of an entity can be conducted by the officers and executives in charge. However, companies should be mindful that formal action is required in many cases, especially when making decisions that are outside the ordinary course of business. Such decisions may involve taking out a loan, selling an asset, bringing in new investors, or liquidating the company. Formal actions are taken either by the owners of the company, or by the board, if the company has a such a committee. In addition to these special actions, companies also typically have meetings and elections on an annual basis to cover common tasks allocated to the owners and boards. Read on as we discuss best practices for documenting board and owner meetings.
When referring to “company,” the statement is generally applicable to corporations, limited liability companies, and partnerships. In turn, the term “owners” refers to shareholders (the owners of a corporation), members (the owners of a limited liability company), and partners (the owners of a partnership). The owners of a company may elect a board of directors or a board of governors; for instance, limited liability companies are not required to have a board.
Additionally, this blog is a general statement of typical provisions. Before making any decisions on holding meetings or acting through written actions, please consult your company’s specific Articles, Bylaws (or Operating Agreement or Partnership Agreement), and other governing documents to make sure you follow the rules that apply to you.
Owners and Boards make formal decisions in one of two ways. They may:(i) conduct an actual meeting where actions are taken by motion (i.e. a person makes a motion, someone else seconds the motion, and a vote is then held to see if the motion passes), or, (ii) take action via a written instrument signed by all of those persons required to pass the action. Again, your governing documents will describe whether “all those persons required” is one individual, the majority of the owners, or truly all of them. Likewise, your governing documents will state how many board members must agree on an action if it is one taken by the board. In some cases, the owners and boards will enter into a single written action.
Meeting minutes for an actual meeting (whether held in person or by electronic means) should include:
Holding a physical or audio meeting is not always possible, and a company can typically also act by written action. This is the most common method of acting when approving a bank loan, for instance, or selling a major asset. A written action includes:
The written action must be signed by the correct number of owners or board members for it to become effective. If you write your own company minutes, we highly recommend asking your attorney to review and edit them. This will provide you with important information regarding content and ensure that your documents are legally effective. The greatest danger in drafting your own meeting minutes and written actions is that you will fail to effectively create the record or take the action that you intended to take.