Drafting minutes of meetings—particularly for meetings of boards of directors or special committees of boards—is an art rather than a science, and while there are certainly many ways to accurately record the proceedings, understanding the ways minutes might be used later is very important.
In the world of Delaware corporate law, minutes of board meetings often play a pivotal role in shareholder litigation challenging the acts of the directors. Indeed, in a recent high-profile decision in which the Court of Chancery refused to enjoin the annual meeting for Sotheby’s in the face of a vigorous proxy fight, the Vice Chancellor’s opinion remarks upon the contents of board minutes on several occasions, and in a manner that provides some practical tips for consideration when drafting minutes. See, Third Point LLC v. Ruprecht, et al., C.A. Nos. 9469-VCP; 9497-VCP, Mem. Op. (Del. Ch. May 2, 2014).
In discussing an August 6, 2013, meeting of the Sotheby’s board, the court noted that the minutes described the board’s receipt and consideration of presentations about shareholder activism activities by “stat[ing] only that ‘there was an extensive discussion among the directors about the presentations that were made.’” Later in the opinion, in describing a March 19, 2014, meeting of the board, the court included a fairly lengthy block quote from the minutes, but only after observing: “According to the meeting minutes, which not unexpectedly appear to have been prepared by Sotheby’s lawyers and which were finalized after this litigation began . . . .”
That the court in the Sotheby’s litigation noticed and commented on a perceived change in the way minutes conveyed information, shows the importance with which minutes of board meetings should be crafted—at all times, and not solely when the board is considering actions that might later be the subject of litigation. Thus, when drafting minutes, keep in mind the following:
1. Give serious thought to how detailed the recitation should be. There is no one answer, but for minutes to be helpful to both the board (who may look to them later to recall the action taken) or a court reviewing the acts of the directors, there should be enough detail that the consideration by and actions of the board are accurately conveyed.
2, It is helpful if there is a continuity in the “style.” The Court noted in the Sotheby’s litigation the change from a fairly brief description to a more robust description.
3. Finally, it is important to complete, review, and approve minutes on a timely basis. It’s human nature for memories to fade as time passes. Thus the best opportunity for accurately recording the activities of the board at a meeting are shortly after that meeting when the events are fresh in the minds of both the person drafting the minutes and the directors who will be asked to approve them.