Businesses taking important decisions are being warned to properly document meetings or face the consequences.
Sharon Harrison, solicitor in the Corporate team at North West law firm Napthens, warns that for some companies, a decision of the board of directors often happens informally and without a formal board meeting.
Key decisions are made day-to-day and frequently not formally scheduled or documented.
Sharon (pictured) points out that many companies are unaware that it is mandatory under the Companies Act 2006 for a business to document and keep a record of all the minutes of directors’ meetings.
If a company fails to comply with the act, its officers – directors or company secretary – could be liable to a fine if convicted.
She said: “It is important to understand the purpose of board minutes.
“They provide evidence of what business has been conducted, who was participating in the meeting, and recording consideration of directors duties and declarations of interest. Also, if a company is to be sold, gaps in the historic management of the company can cause real problems in the due diligence process incurring time and costs in order to resolve it.
“The details to go in properly recorded minutes include, for example, such things as, company name and number, time, date and location, attendance, chairperson, consideration of business, approval of documentation and resolutions passed.
“It is important to check the Articles of Association of the company to make sure the business and decisions being made in the meeting are not in breach of the articles or the act itself.
“Typically articles include rules around proceedings of directors, quorum requirements and so on.”