Minute-taking post Banking Royal Commission
February 2020 | Insights | Seak-King Huang and Tina Lee
The Financial Services (Banking) Royal Commission, among many other aspects of good corporate governance, put the practice of minute-taking under a spotlight and, in particular, how detailed should board minutes be.
Since we published this article, the Australian Institute of Company Directors has published their updated guide to board minutes. This updated guide, which is one of the AICD’s excellent “Directors Tools” series, is available here
What does the law require? The law offers no further guidance than that the “proceedings and resolutions” of company directors’ meetings are to be recorded within one month of the meeting.
For registered charities, the Australian Charities and Not-for-profits Commission (ACNC) offers a template for the format of minutes, but does not offer further guidance as to how charities should prepare minutes. The relevant section in the Corporations Act 2001 (Cth) that governs minute-taking (section 251A) is switched off for companies that are registered charities, and so it would be necessary to carefully consult your charity’s constitution to determine whether these provisions have been switched back on and whether the constitution imposes any specific requirements on your charity in respect of meetings and minute-taking. Regardless, it is important to remember that a charity’s responsible persons - meaning its directors - still have certain duties under the ACNC governance standards. Generally, the duties mean that responsible persons should act with care and diligence and in good faith in the charity’s best interests – this would naturally extend to the holding and conduct of meetings and minute-taking.
When it comes to preparing board minutes, there is no ‘one size fits all’ approach. Board minutes are a record of board decisions and the process by which those decisions were made. They are not a transcript, or even a report, of the discussion or debate during the meeting. There is an art to finding the right balance between reporting outcomes of board meetings and recording discussion. While there is no expectation that the minutes record verbatim what was discussed at a board meeting, it is expected that those minutes capture, and therefor are the evidence of, the matters that were discussed in the meeting.
In the context of the Royal Commission, the question raised was: if a director says something happened, but it is not shown in the minutes, does that leave the board exposed? It may not be surprising that the legal answer is both ‘yes’ and ‘no’. As official company records of board meetings, courts place evidentiary weight on the contents of minutes. If the minutes do not record that a particular thing happened, it becomes difficult for a director to assert that it did because a key source of evidence is silent about it.
Post-Royal Commission, it is not sufficient that the board minutes record only the resolutions or “headlines” of what was discussed – it is also imperative that they include
- some detail on how those resolutions were arrived at;
- the key points of discussion;
- questions raised;
- and the broad reasons for decisions.
Board minutes should also note where and why directors questioned management, sought clarification and asked for more information.
The Joint Statement on board minutes published by the Australian Institute of Company Directors and the Governance Institute of Australia in August 2019 is a helpful resource for directors and company secretaries. But in a nutshell, there are three relevant factors to consider when preparing minutes and the level of detail required:
· the nature and importance of, and the risk attaching to, the decision and discussion concerned;
· the regulatory environment that either the organisation generally, or the particular decision, is subject to; and
· any perceived self-interest or conflict of interest on the part of the board or management.
We are grateful for the assistance of Lara Emery in the preparation of this article