Tag Archives: board of directors

A Minute about Minutes–Part II

A few years ago we highlighted on this blog an opinion where the Court of Chancery’s analysis turned, in part, on its impression of the quality of the corporate minutes at issue.  As we also noted in that post, the drafting of corporate minutes is an art rather than a science.

While counsel to Delaware corporations may debate the level of detail that should be included in minutes of meetings of the board of directors or committees of the board, the Court of Chancery has recently noted that for the minutes to be deemed an accurate portrayal of the conduct of such meetings, there must be evidence that they were created, reviewed and approved roughly contemporaneously with the meeting.   In FrontFour Capital Group LLC, et al. v. Taube, et al., C.A. No. 2019-0100-KSJM, at p. 25, n. 98 (March 11, 2019), the Vice Chancellor did not view the minutes of the meetings of a Special Committee reviewing a transaction “as contemporaneous evidence or give them presumptive weight” where there was evidence that the minutes were not finalized until months after the meetings occurred and after litigation was filed.

As this opinion makes clear, when judicial officers are asked to review minutes as a contemporaneous memorialization of the actions taken at meetings of boards of directors, they will look to see whether the minutes were, indeed, created contemporaneously with the actions–when memories are fresh and likely unclouded by later events.  Therefore, it remains a worthwhile practice for boards (or their committees) to ensure that their minutes are drafted, reviewed and approved by the next meeting of the body.

Director Access to Corporate Books and Records

The Court of Chancery recently affirmed the long-standing principle that directors of Delaware corporations are vested with “virtually unfettered rights to inspect books and records” of the company they serve.  Schnatter v. Papa John’s Int’l., Inc. C.A. No. 2018-0542-AGB (Jan. 15, 2019).  The Chancellor went on to reiterate that a director of a Delaware corporation that makes a demand to inspect the books and records of the corporation pursuant to Sec. 220 of the Delaware General Corporation Law should generally have “access at least equal to that of the remainder of the board.”

Directors of a company make a prima facie case for a statutory inspection of books and records where they show that: (a) they are a director, (b) they have demanded an inspection, and (c) the demanded inspection has been refused.  Upon that showing, the company will then bear the burden of proving that the director making the demand for inspection was for an improper purpose–that is, the director’s “motives are improper, or that they are in derogation of the interest of the corporation. . . .”