Board Meeting

What is a Board Meeting?

A Board Meeting is a formal meeting that the Board of Directors of an organization conduct in a regular drumbeat to discuss policy issues and key topics relevant to the organization.  A corporation is not considered a natural person and hence it cannot make decisions on its own.  Therefore, the organization selects a Board of Directors to act as agents and make decisions for the organization.

A chairman of the Board leads and presides over these meetings.  The Directors’ primary responsibility is to provide oversight and strategic direction to the business.  There are certain rules of quorum required in order to make the meeting official.  Directors are expected to attend all meetings unless there is a valid reason for their absence.  Section 173 of the Companies Act 2013 describes that for Private or Public Limited Companies, the first Board meeting needs to happen within 30 days of the date of incorporation.  It also requires a minimum of 4 meetings per fiscal year with no more than 120 days gap between two meetings.  In the case of Small Companies, at least 2 meetings should be held per fiscal year.

The different discussions held in these meetings are recorded in a document called minutes.  As part of their deliberations, members review the past performance of the business, the discuss plans of action and discuss how to continue to support the organization.  In order to have continuity of the discussions, they might also review the prior minutes to commence the meeting.   Every state requires organizations to take and distribute the minutes of the meetings and these minutes are supposed to be maintained for record purposes.

Another requirement for a proper Board Meeting is to ensure that a proper presiding officer is present to lead the meeting.  There also needs to be a proper agenda that should also be included in the notice.  No new matters should be addressed in a meeting, unless everyone is present and willing, if it wasn’t prescribed in the notice.  Having an established and focused Board meeting agenda helps the Board maximize accuracy, efficiency, and productivity.  Many if not all the topics discussed could be lengthy and this tries to respect everyone’s time and set the meeting up for success.

A notice of Board meeting needs to be sent to inform Board members about the meeting venue, date, time, purpose, and pre-read documents.  This notice needs to be sent at least 7 days in advance.  Quorum for the meetings is the minimum number of Directors required to hold a valid meeting.  As per section 174 of the Companies Act 2013, quorum is 1/3 of total strength or two Directors whichever is higher.

Depending on the security needed for the meeting, Directors can join in person or via conference tools.  There are certain discussions that can only be exercised at a Board meeting.  Some examples are: borrow monies, invest funds of the company, approve financial statements, acquire a company, among others.

The Value of Board Meeting Minutes

Besides the legal, fiduciary and liability reasons of maintaining minutes, there is a lot of value for taking and recording these.  The most important reason is to have a record of what was decided in the meeting.  Board members are making decisions about the money invested in the organization and they need to be able to prove that their decisions were wise and taken in the best interest of the organization.  It is very important to prove that the decisions were made without any conflict of interest. The third reason is for tax purposes as a corporation is a separate entity from the shareholders.  Because a corporation should be a separate entity from the Directors, the Board meeting minutes provide a record that business is treated seriously and separated.  The IRS could audit any business and if the organization is not able to provide this documentation, it can lose its tax status.

Topics to Discuss in a Board Meeting

Previous Minutes

The first order of business in a Board meeting is to review the previous minutes.  This enables continuity of discussion and allows the Board to close any loops necessary from the pending agendas.   Reading the previous minutes is necessary so that the Board can record the discussion on the minutes and account for all matters they discussed.  If there are unfinished topics due to time constraints of the prior meeting, these topics can be closed as part of this discussion.

Past Performance

The Board of Directors reviews previous reports or financial statements to assess the business health and effectiveness.  They can review key indicators like profits, sales, and expenses.  They are responsible for the direction of the organization so having a broad understanding of the organization’s performance is very important.

Future Strategies

Perhaps the most important part of a Board meeting discussions is strategizing about the future direction of the company.  Once the Board reviews the past performance it is time to discuss and make decisions on the strategies that should guide the organization going forward for continuous improvement.  The Board will make plans both on a short-term and long-term basis and these are then assessed with actual performance once the decisions are implemented.

Approved Actions

The Board members proceed to make recommendations and approve plans of action for the management and employees of the company to implement.  Once the Board has had thorough discussions on an issue, members will highlight the top recommendations or plans of actions, they vote on them and come to a final decision.  This gets recorded in the minutes.

Quiz

1. Why is it so important to capture minutes at a Board Meeting?

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D.

2. As per Section 173 of the Companies Act 2013, Private or Public Limited Companies need to have their first Board meeting within ________ of their business being active?

A.
B.
C.
D.

 

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