Board minutes and shareholder resolutions

Company decisions have to be recorded, and the record is what proves the decision was validly taken. A bank asking for board approval of a loan, a buyer's solicitor reviewing the minute book at due diligence, an accountant supporting a dividend: all of them are looking for a document that shows who decided what, when, and with the authority to do it. Reconstructing minutes two years later is both unconvincing and, where they are backdated, worse than unconvincing.

Two documents in one template

Part A is the minutes of a meeting of the board of directors. Part B is a written resolution of the shareholders. Use whichever the decision requires and delete the other. Some decisions need both: the board resolves to do something and the shareholders approve it, which is the pattern for many of the Companies Act approvals.

Part A gives three common resolution patterns at paragraph 6, and Part B gives an ordinary resolution, passed by a simple majority, and a special resolution, which needs seventy-five per cent. Keep what you need.

Check the articles before you use either

This is the step most often skipped. The company's articles of association, and any shareholders' agreement, may set a higher voting threshold, reserve the decision to the shareholders entirely, or prevent an interested director from counting in the quorum or voting at all. Model Articles restrict an interested director in exactly that way, with limited exceptions, so a two-director company where one director has a personal interest can find it has no quorum for the very decision it needs to take.

What a written resolution cannot do

It cannot remove a director or an auditor before the end of their term. Those decisions require a general meeting, with the notice and representations procedure the Act sets out, and attempting them by written resolution simply does not work.

Conflicts and declarations

A director with an interest in a proposed transaction must declare it under section 177 before the company enters into it, and the declaration belongs in the minutes. A director's loan, a contract with a company a director also owns, or a property let by a family member all fall into this, and recording the declaration at the time costs nothing and answers the question a buyer will ask.

Keep the minute book

Minutes must be kept for ten years. Filing them properly as you go is the difference between a two-hour diligence exercise and a two-week one.

Where the transaction is significant, or the shareholders are not all in agreement, the resolution is the last step rather than the first. Our commercial solicitors handle the approval path as well as the paperwork.