This month we launch the first in a new series of articles looking at the practical skills and knowledge company secretaries need to acquire. Anthony Rogers GSB QC JP FCIS FCS, former Vice-President of the Court of Appeal of Hong Kong and a Senior Member of the HKICS, looks at a skill which has been an essential part of the company secretarial function for as long as the profession has been around – minute drafting.

 

In many ways, minute drafting for company secretaries is back to basics. For convenience, in this article the company secretary will be referred to simply as the secretary. As the person responsible for administrative duties, it has always fallen to the secretary to be responsible for the minutes. Increasingly, the secretary has many other important duties and responsibilities, but the preparation of minutes remains a crucial part of the secretary’s role.

Quite simply, the minute is the official record of a meeting. The minute may be of a company’s general meeting, a board meeting or a committee meeting; in all cases the basic facts of the meeting
which have to be recorded in the minute will include:

  • the persons present – whether the persons were there for all or part of the meeting and note can be taken of the apologies for absence
  • the time and place of the meeting
  • what was discussed (not what was said)
  • any conclusions reached
  • any resolutions passed with the exact wording, and
  • the date of the next meeting (if agreed).

The golden rule in preparing minutes is to keep them concise and precise. Sometimes, what passes for a minute is simply a verbatim transcript of everything said at the meeting – such a record is a transcript not a proper minute.

The secretary will normally be responsible for the initial draft of the minutes of all company meetings, including annual general meetings or any extraordinary general meetings and also for the initial drafting of the board meeting minutes. In respect of committees and panels there will usually be a secretary appointed for such committees. In each case, the chairman of the meeting will be responsible for the final version of the minutes.

Before turning to some thoughts about the practicalities of drafting, it is as well to remember that there are legal requirements governing the preparation and retention of minutes. Many of the procedures which are regarded as natural are, in truth, required by statute. In this article, reference will be to the Companies Ordinance Cap 622. For example all companies must keep records, which include minutes, of all general meetings for at least 10 years (see Section 618). Those minutes are required to be kept at the Registered Office or a place designated by the company (see Section 619) and may be inspected by members of the company (see Section 620). It can also be noted that written resolutions appointing an auditor must be sent to the retiring and incoming auditors (see Section 401) who also have a statutory right to attend the meetings and have copies and inspect the minutes.

Care also has to be taken now in respect of one-member companies. These are becoming more common following the change in the law. If such a company takes a decision which can only be taken in general meeting, or has the effect as if agreed by the company in general meeting, the member must provide the company with a record within seven days unless the decision was taken in writing (see Section 617). It should also be remembered that a single shareholder must solemnly remind himself of any conflict of interest and that, of course, must be minuted.

When it comes to resolutions taken at company meetings, the minutes become crucial. The minutes should record the names of the proposer and seconder and whether the resolution has been passed or not and whether by a particular majority. Once the chairman of the meeting has made declarations in respect of those matters and there is an entry of that declaration in the minutes of the meeting, the minutes become conclusive evidence of that fact without further proof (see Section 590).

Where there is a poll, things have become slightly more complicated under the new Companies Ordinance. Now the company must record in the minutes of proceedings of the general meeting not only the result of the poll, which includes the number of votes in favour of the resolution and the number of votes against the resolution, but also the total number of votes that could be cast on the resolution (see Section 594). That last figure can be a little bit complicated because it may depend on how many proxies attended the meeting.

The importance of minutes of a general meeting is highlighted by the fact that, if the minutes purport (whatever that means) to be signed by the chairperson of that meeting or by the chairperson of the next general meeting, they are evidence of the proceedings at the meeting and are prima facie proof that the meeting was duly held and convened, that all proceedings at the meeting duly took place and that all appointments made at the meeting are to be regarded as valid (see Section 621).

There are corresponding provisions in relation to minutes of board meetings. For example the proceedings have to be recorded and the minutes kept for 10 years (see Section 481). There are similar provisions regarding the authenticity of the minutes and regularity of the conduct of the meeting once the minutes have been signed by the chairperson of the meeting or by the chairperson of the next directors’ meeting (see Section 482).

One further point in relation to companies where there is a sole shareholder and director is that if the company makes a contract otherwise than in the ordinary course of the company’s business, and that contract is not in writing, then the terms of the contract have to be set out in a memorandum which has to be delivered to the company within 15 days (see Section 482).

Note taking

When it comes to taking notes from which the minutes will be prepared, preparation is vital. At this stage the secretary, or other person, is the note taker but is not yet the minute drafter or taker. The note taker has to be familiar with the background to the meeting. That will inevitably entail reading previous minutes, knowing who will be attending the meeting and knowing the details of the agenda items. It is always wise to be familiar with any technical terms which are likely to be used, otherwise it may be difficult to follow and note the effect of any discussion. Audio recording of meetings is now almost universal but it is no substitute for note taking. It is time-consuming to go back to recordings and, at the end of the day, the sense of the discussion still has to be distilled.

Those taking notes for the minutes will often find it convenient to sit next to, or close to, the chairman of the meeting. This will be important on occasions, for example if the person does not recognise a particular speaker. Attendance sheets are particularly important so that there is no doubt as to who attended the meeting.

Note takers have to ensure that they clearly understand what is discussed and should not be afraid to ask then and there if they find it necessary to clarify things. It is often highly unsatisfactory to ask afterwards what has been said. It is too easy to be given a one-sided view, even if the person giving the information has time after the meeting.

In taking notes it is important to concentrate on what is discussed and on the focus of the discussion. The note taker records the points that are raised but should avoid trying to take verbatim notes because they are generally not useful. They tend to be incomplete because the conversation usually goes too fast. What is more important is to get the sense of what is being said.  Accounts and figures often present difficulties for note takers. Accountants and those going through accounts tend to rattle the figures off and it is difficult to get specific numbers down accurately at that time. The note taker should attempt to get the meaning of what the accountant or other person is saying and should keep pointers as to the particular figures, for example particular expenses. It is easier to make marks on the accounts so as to know where to find the specific figures. Then an accurate reference can be included in the minutes.  One of the dangers to be avoided during a meeting is for the note taker to fail to stay focused. When the discussion becomes repetitive and boring there is a temptation to start tidying up the notes. It is important that the note taker maintains concentration on what is being said otherwise something might well slip by. Another danger is that, if the note taker is a participant in a discussion, objectivity may be lost.

Turning notes into minutes

It is highly advisable to produce the first draft of the minutes within 48 hours of the meeting. As with other tasks, it is often the case that what seems to be a daunting or tedious assignment turns out to be not too difficult. The danger of delaying the preparation of the first draft is, of course, that memory lapses. Moreover, other people will also forget important points. Experience has shown that there is nothing worse than having to piece together what must have happened at a previous meeting when the next meeting is looming.

When minutes are prepared, the format should follow the format of the previous minutes. The third person style is preferable and it is prudent to keep names out of the minutes wherever possible. By concentrating on what was discussed rather than what was said by whom, it is more likely that the relevant facts will be recorded. There is another good reason for not mentioning names – once a name is mentioned, requests to be named will almost inevitably be made by others which will lead, increasingly, to the inclusion of verbatim notes of discussions.

There are some occasions when it is necessary to include names. As mentioned earlier, the minutes should record the names of the proposer and seconder of resolutions at company meetings. The minutes also need to record who is expected to act upon a board decision. Usually follow-up action by board members is noted at the right-hand side margin so that it is easily visible as to who has to do what before the next meeting.

Similarly, directors will need to be named where they request their dissention from a board resolution to be noted, or where their conflicts of interests need to be disclosed in the minutes. The record of a dissention or a conflict of interest are crucial for any future questions of liability. The record of a conflict of interest may have to be accompanied by a record of the action taken to mitigate such a conflict, for example withdrawing from the meeting while the matter is discussed and/or abstention from voting.

It is not every point that has to be minuted. For example, not all the pros and cons of a particular matter need to be minuted. What should be minuted are points that would be useful in the future. In this respect the purpose of the minutes should always be borne in mind. Minutes may be there simply to record resolutions. In that case the exact wording of any resolution should always be set out. Minutes may also be important to show the sequence of how different matters have progressed. This will help those who need to know why certain decisions were taken or were not taken.

Minutes may be important to show what matters have been considered in coming to a conclusion. This is becoming increasingly important with the ever increasing resort to litigation. Board minutes may be required at some stage to show that there has been no unfair treatment of minorities. In one case the minutes of a health authority were important to show that rational consideration had been given as to what treatments could be offered to special patients.

Minutes should always be drafted on the basis that they may be subject to production in court as evidence although they may find their way onto the front page of the newspaper. Minutes should be written so that they are easily comprehensible to anybody. That will require that jargon is avoided wherever possible. Abbreviations also can be annoying to the reader. Paragraphs should be numbered. There is no need to keep the exact order of any conversation. It is far better to group matters in a way that will make it more comprehensible.

Where possible, cross-references can be inserted in the minutes to where any other documents can be found. Nowadays, with every company having its own website, lengthy items and speeches can be made easily available for those who want to, or need to, have reference to them.

Signing the minutes

Once the draft minutes are ready, they should be sent to the chairman of the meeting for his approval. Minutes are usually signed at the next meeting after they have been formally approved. As noted, the minutes become official when they have been signed by the chairman of the meeting or by the chairman of the next meeting.

After the minutes have been signed, they cannot be amended. If mistakes are found after the minutes have been signed, then they should be acknowledged in a subsequent meeting and the minutes of the subsequent meeting should make that clear. The only exception might be a minor typographical error, in which case the original minute should be clearly altered and the amendments initialled and the matter noted at the next meeting.

Anthony Rogers GSB QC JP FCIS FCS
Senior Member, HKICS
Anthony Rogers is a former Vice-President of the Court of Appeal of Hong Kong, Chairman of the Standing Committee on Company Law Reform and a member of the Basic Law Consultative Committee. He was awarded the 2015 HKICS Prize for his leading role in the Chartered Secretarial profession in Hong Kong.

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