When you run a business, it is important to understand that there are an array of rules, regulations, and corporate formalities that must be followed. When those formalities are neglected, it can lead to significant legal problems down the road. For example, if you neglect to keep minutes of corporate board meetings, this oversight can lead to potentially costly and contentious litigation.
Why is There a Requirement to Maintain Minutes?
A for-profit corporation operating in California is required to perform certain tasks to maintain its good standing with state and federal authorities, avoid penalties, and preserve its status as an independent legal entity (i.e. avoiding the risk of having the “corporate veil” pierced by a court). One of the requirements is for a corporation to maintain “good” meeting minutes. Specifically, Section 1500 of California Corporations Code expressly obligates a corporation to maintain minutes of the proceedings of the board of directors. Why is there a requirement to maintain minutes? Because those meeting minutes are considered to be the official record of the actions taken by a Board of Directors for a corporation. They are also considered to be an overview of the discussions held, decisions made, and actions taken by the board of directors.
The meeting minute requirement is not exclusive to California. In fact, many other states have similar a requirement to maintain quality meeting minutes.
How to Maintain “Good” Meeting Minutes
It is important to note that there is no standardized method for taking quality meeting minutes. Nevertheless, there are certain pieces of information your corporate meeting minutes should include to ensure they provide you with the strongest legal protection possible.
A good rule of thumb is for whomever is tasked with taking the meeting minutes to presume that those minutes will, at some point, need to be produced in litigation. Here are certain elements that should be included when drafting corporate meeting minutes:
- Clear and detailed information related to any delegation of authority from the Board of Directors to a corporate officer for a particular project or initiative.
- Details pertaining to any approvals provided by the Board, such as approving transactions with third party vendors, contractors, and so forth.
- Information that would satisfy the business judgment rule, including documentation that would substantiate a duty of care defense by the directors. This would include evidence of information that was presented to the Board and they discussed the matters in depth.
Generally, for a corporation’s board of director meeting minutes, the following pieces of information should be included:
- Date and time of the meeting;
- The name of the individual taking the meeting minutes;
- Location of the meeting (e.g., in person, telephonic, Zoom);
- Whether it is a regularly scheduled meeting or a special executive session;
- Whether there were a sufficient number of directors to achieve a quorum;
- Whether the Board approved the minutes of the previous meeting;
- An overview of the topics to be discussed at the meeting; and
- An overview of decisions rendered by the Board during the meeting.
Have Questions? Consult with an Experienced Business Lawyer in Los Angeles Today
Hakim Law Group represents a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in numerous sectors of the economy. We possess the experience, knowledge and professionalism to help our clients attain the best possible outcome. To schedule a consultation or for further information please contact HLG at (310) 993-2203 or visit www.HakimLawGroup.com to learn more.