Board Meetings

Overview

The main function of a board member is to take part in board meetings. All major decisions are made at the ordinary meetings so it is impossible to be an effective member if you are not a regular attendee.

The primary reason for holding meetings is to allow the board to make decisions. However, meetings also serve a range of other important functions, providing a forum where:

  • Board members are regularly brought together to focus on their roles and responsibilities, identify problems and plan for the future.
  • Members are encouraged and motivated.
  • Ideas are shared and discussed and then discarded, improved or implemented.
  • Tasks are allocated and reported on.
  • Regular updates about relevant issues are provided.
  • Members can get to know each other, professionally and personally.

Organisations must conduct meetings in accordance with legal requirements that apply to the type of meetings being held, and also follow requirements set out in organisations rules (but note that if requirements in rules are inconsistent with the law, the legal requirements apply).

Board Calendar

A well-planned meeting schedule identifies the year’s key issues and helps directors to ensure that matters requiring their attention are addressed in a timely and logical manner.

A strong board calendar, unique to the organisation,  is a valuable planning tool to help a board govern more effectively. Ensure that sufficient meetings are scheduled; it is easier to cancel a meeting and move its business into the next one than to call an extra meeting. If a board meeting is scheduled in January as a standby only, no significant matters should be included

Most directors have a wide range of commitments. The earlier the dates of meetings are scheduled and confirmed the more likely it is that directors will be free to attend.

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Sample Board Calendar from the AICD Director Tools

AICD Director Tools Meeting Effectiveness – Annual Board Calendar.

 

Types of Board Meetings

  • General Meetings
  • Special Purpose Meetings
  • Committee Meetings

Procedural Requirements for Board Meetings

A company’s constitution or shareholders agreement will usually set out the minimum amount of board meetings that directors need to hold each year.

Certain procedural requirements must also be met for a valid board meeting, such as:

  • How the board meeting will take place (i.e. in person, over the phone or by using other methods of technology including audiovisual);
  • The minimum number of directors that will need to be present (quorum);
  • What will happen if a quorum is not present (delaying or postponing the meeting); and
  • The appointment of a director to chair the meeting.

The chair is responsible for ensuring the agenda is followed, and decisions are recorded in the company’s minute book.

Meeting Structure

Meetings can vary considerably from board to board. Some are quite formal, adhering to strictly defined rules and ensuring all members are addressed by their correct titles (“President Smith,” “Madam Chair,” and so on). Others are far less formal – usually it will depend on the make-up and function of the board, how it was set up and how it has evolved.

  • Meetings can be held in a boardroom, or in a more social setting such as a member’s house or even a local restaurant.
  • Decisions may be made through a range of means, by formal voting or a more informal show of hands or verbal agreement.
  • Some meetings are held behind closed doors and are subject to strict rules of confidentiality; others are fully open to the public. Even open meetings may sometimes move into confidential mode, asking observers to leave while certain sensitive issues are discussed.

A Meeting Code of Conduct or Procedure can provide guidance to board members on the acceptable conventions within the organisation that will; improve efficiency, decision making, and board dynamics.

Board Agenda

meeting agenda is a list of items that participants hope to accomplish at a meeting. The purpose of a board meeting agenda is to improve the effectiveness of board meetings. It is the tool the chair uses to keep boardroom discussions focused and along with board papes, provides notice to directors as to the purpose and desired outcomes of the meeting so that they can adequately inform themselves in order to participate effectively and contribute to board discussions and decision making.

Although each board will have an agenda that reflects specific topics of relevance to a company at that time, a number of general items will be included on most agendas. The following board agenda example illustrates an acceptable standard for Board Meeting Agendas. The AICD publication AICD Director Tools – Board Agenda  provides a useful detail about Board Agendas.

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AICD Director Tools Agenda Example.

Board Paper

A Board Agenda is often accompanied by Board Papers prepared by subcommittees, executives within the organisation,  specialist outside resources and other nonboard members.

Board members gain a great deal of information about the decisions they need to make through the papers they receive prior to a board meeting. Papers cover a variety of functions, from providing general information to a call for action.  Due to the variety of types of information that can be presented and individuals preparing board papers, it is useful for boards to set a standard for how they would like information to be presented. This improves the effectiveness as those preparing the board papers are more likely to be mindful of the information that they are preparing and board members are more effective as they do not have to interpret or make assumptions due to variations of standards and quality.

Below is an example of a Board Paper. The AICD Tool for Board Papers is a useful guide for more information on board papers.

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AICD Director Tool: Board Papers

 

Meeting Minutes

Board minutes are used to record the decisions of the board. They are used to convey board decisions to the executives who will implement the decisions and serve as a reference for the board if it wishes to revisit a decision. Board Meeting Minutes are an official company record.

In public companies, the company secretary is the usual minute taker. Although not required by law to have a Company Secretary, most proprietary companies will have a company secretary (who is the usual minute taker), although proprietary companies are not required by law to have a company secretary. It is acceptable for proprietary companies in the absence of a company secretary to ask another person such as someone from within the organisation or an independent minute taker such as a solicitor or accountant.

It is not advisable for the CEO or chair to take the minutes, as they should be participating in the meeting rather than creating a record of it.

Companies are looking closely at the level of detail in their board minutes from two angle. First, they are examining how they reflect the care and diligence directors exercised in their discussions and decisions. Second, how they may be viewed in hindsight and from an external perspective

“The Royal Commission has raised the possibility that if something isn’t included in the minutes, then whether it occurred at all can be questioned. That turns the approach to minutes, established by the James Hardie case, on its head. Minutes aren’t just evidence of what did happen, but can also be evidence of what didn’t happen.” https://aicd.companydirectors.com.au/membership/company-director-magazine/2019-back-editions/june/board-minutes

The following Director Tools produced by the Australian Institute of Company Directors provides a good overview of the legal requirements for meeting minutes and things that boards and directors should be mindful of.

AICD Director Tools Meeting Minutes

Other Resources

A guide for directors and officeholders on running a charitable company limited by guarantee

Institute of Community Directors: Overview of Board Meetings

Annual General Meetings for Charitable Organisations

 

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Director Duties

Introduction

The role of a company director is to govern a company on behalf of the shareholders or members of that company.

The role of the director is important and challenging. Increasingly, directors are subject to a range of legal duties and increasingly held criminally liable for failure to fulfill those duties. Passive directors or ignorance is not tolerated and can not be used as an excuse for not meeting the duties as a Director.

General Duties

General duties imposed by the Corporations Act on directors and officers of companies include:

  • the duty to exercise your powers and duties with the care and diligence that a reasonable person would have which includes taking steps to ensure you are properly informed about the financial position of the company and ensuring the company doesn’t trade if it is insolvent
  • the duty to exercise your powers and duties in good faith in the best interests of the company and for a proper purpose
  • the duty not to improperly use your position to gain an advantage for yourself or someone else, or to cause detriment to the company, and
  • the duty not to improperly use information obtained through your position to gain an advantage for yourself or someone else, or to cause detriment to the company.

Fiduciary Duties

A legal obligation of one party to act in the best interest of another. The obligated party is typically a fiduciary, that is, someone entrusted with the care of money or property. Also called fiduciary obligation.

The fiduciary status of directors reflects the position of trust and confidence held by directors. These fiduciary duties are in addition to the director’s duties imposed by the Corporations Act 2001 (Cth)

Directors must not place themselves in a position where they are unable to make decisions in the best interests of the company.

A list of the fiduciary duties owed to the company follows:

  • the duty to act in the interests of a company as a whole;
  • the duty not to act for an improper purpose;
  • the duty of care and diligence;
  • the duty to retain discretion;
  • the duty to avoid conflicts of interest;
  • the duty not to disclose confidential information.

Insider trading is a common example of the duty to not misuse any confidential information of which a director has knowledge due to their position of power.

An important note is that the duty of care and diligence is not diminished by delegating responsibility. Directors should question information that is supplied to them and ensure it is accurate. Directors should not merely accept or rely on information provided by specialists within a particular field, such as accountants.

Fiduciary duties overlap with statutory duties of  the Corporations Act 2001 (Cth) (“Act”):

  • Section 184 of the Act makes it a criminal offence for a director to commit an offence if they are reckless or intentionally dishonest in breaching a director’s duty.
  • Section 588G of the Act establishes a duty not to trade while insolvent. Directors have a duty to ensure that a company does not trade if it is insolvent. To use the most basic definition, a company will be insolvent if it cannot pay its bills as and when they fall due (or if a reasonable person would suspect that this is the case). A breach of this provision can result in the director becoming personally liable for debts accrued while the company was insolvent.
  • Sections 191 through to 195 of the Act establish a duty to disclose material personal interests.
  • Sections 285 through to 318 of the Act impose financial reporting obligations. These provisions relate to a directors duty to exercise powers with care and due diligence.

Contemporary Issues

The complex business and legal environment along with increasing demands upon directors mean that it is important that Directors stay up to date with emerging trends, legal case studies, and principles of good practice.

  • ASIC v Healey (2011) – The  ‘Centro’ case
  • Fodare Pty Ltd v Shearn (2011)
  • Cassegrain v Gerard Cassegrain & Co Pty Ltd (2012)

Continuous Development

Continuing education is an important responsibility for informed Directors. Governance Organisations such as the Australian Institute of Company Development require their members and graduates to demonstrate their currency of director knowledge through continuous professional development programs. These programs include participation in forums, readings, attendance at conference and courses as ways in which directors can ensure that they are continuously developing their skills as a director.

Code of Conduct

The Australian Institute of Company Directors is considered to be the gold standard for directorship in Australia.

The Code of Conduct for directors was introduced in 1996 to promote the highest ethical standards in directorship of Australian companies and other bodies. The Code provides guidance to directors to assist them in carrying out their duties and responsibilities and defines the standards of professional conduct expected by the AICD.

AICD Code of Conduct

 

Additional Readings

General Duties of Directors (AICD)

Role of the Board 

What is my role as a Director (ASIC)

Small business Company Directors