Best Practices for Documenting Board and Owner Meetings

September 24, 2020  |  Carole Clark Isakson

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.

The nuances of company ownership

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.

Understanding the decision-making process

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

Meeting minutes for an actual meeting (whether held in person or by electronic means) should include:

  1. The name of the organization.
  2. Date and time the meeting is called to order, and by whom – usually the Chairman; if there is no designated Chairman the President will frequently do this, otherwise agree on who will run the meeting, and document the activity.
  3. Whether the meeting is of the board, or of the owners – who will be shareholders, partners, or members depending on the entity type.
  4. Attendance – specifically listing who is present, who is absent, and whether you have enough people in attendance for a quorum.
  5. General description of what was discussed – there is no set rule on how detailed this needs to be. In some cases, you’ll want to include the fact that a discussion happened just to show the board/owners were thinking about it. In other instances, you may prefer to simply make a general statement of topic.
  6. Specific and detailed descriptions of every motion made, seconded, and that a vote was taken to either affirm or deny the action. 
    Here is an example: “Isakson made a motion, seconded by Clark, that three parking spots in the parking lot be designated for the exclusive use of families with small children.  A vote was taken, and the motion was unanimously approved. Motion passed.” 
    In some cases, a motion may be made, but not seconded. That would be noted as well. A motion could be made and seconded and not pass. It is important that the persons voting (and their vote) be documented in your minutes; and
  7. Time the meeting is adjourned (by motion to adjourn).

Written action

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:

  1. Name of the organization and “WRITTEN ACTION” in the document title.
  2. Citation to the authority to act (i.e. affirming you can do things in writing and without a meeting, generally a reference to your Bylaws or Operating Agreement).
  3. Subject matter describing the cause for your proposed action.
  4. The words “RESOLVED,” followed by the actual thing which you have decided.
    Here is an example: “After discussing the need for reallocation of parking spaces, it was RESOLVED that three parking spots in the parking lot be designated for the exclusive use of families with small children
  5. The actual date the Written Action is being signed or the effective date of the Written Action; and
  6. A signature line for each person entitled to vote on the matter. 

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.

Barna, Guzy & Steffen has an outstanding team of corporate and business law professionals available to talk to you about your specific needs. Contact us today. We look forward to hearing from you.