Board meetings and general meetings - how companies should make decisions

Posted: Tuesday, 14 June 2016 @ 16:21

It is important to make and record company decisions in the correct way as otherwise they can be challenged by a director, shareholder or liquidator and, in some cases, could result in the person who made a decision facing personal liability.  

Who makes company decisions?  

Most decisions need to be made by the board of directors as a whole. The board can delegate certain decision-making powers to a particular director, or group of directors, but otherwise it is the board that needs to make decisions. If any decision-making power is delegated, the decision to delegate and what is delegated should be recorded in a board minute or agreement as otherwise there could be arguments as to whether the particular director was properly authorised to make a particular decision.  

Some decisions need to be made by the shareholders, such as changing the company’s articles, authorising certain transactions such as substantial property transactions where a director has a personal interest, or ratifying decisions wrongly made by a director in breach of his duties.  

There are also some decisions that need to be made by both directors and shareholders, including making loans to directors, issuing shares and declaring dividends.  

You should familiarise yourself with the company’s articles, any shareholders’ agreements and the Companies Act as it applies to decision making. If in doubt, particularly when an important decision needs to be made, you should consider obtaining legal advice on the procedures to follow. Otherwise, there is a risk that any decision made is null and void.  

Where are decisions made?  

Directors’ decisions are made at ‘board meetings’ and shareholders’ decisions are made at ‘general meetings’ unless they are unanimous.  

The company’s articles will say how such meetings should be called and run.  

There is usually more formality involved in calling general (shareholders’) meetings: when notices are sent out and what they should contain, how they are sent out, how much notice must be given and how someone can call a meeting.  

How are votes taken at the meetings?  

At a board meeting, it is the majority of directors who attend the meeting as long as there are enough directors there to form a quorum.  

At a shareholders’ meeting, there can either be a ‘show of hands’ or a vote if requested. Each shareholder who attends, either in person or by proxy, has the same number of votes as their shares. Like in board meetings, there is usually a requirement in the articles as to the minimum number of shareholders who need to attend a meeting to make it quorate.  

How are decisions recorded?  

It is important to record decisions properly as otherwise people can argue as to exactly what was decided.  

At a board meeting, the decisions should be recorded as minutes. When drafting the minutes, you should distinguish between general notes of what was discussed at the meeting and points made, and actual decisions taken.  

At shareholders’ meetings, the decisions are usually referred to as ‘resolutions’ but should also be minuted.  

In both cases, it is best to record how people voted. The minutes or resolutions can be drafted and signed by whoever chairs the meeting but it is better if all those present also sign them, as it is not uncommon for people to change their minds after the meeting.  

Where should decisions be kept?  

The minutes of both shareholders’ meetings and board meetings should be kept in the company’s minute book, as should written resolutions.

Blog by Gary Cousins
Gary has been providing legal advice to shareholders, directors and business owners for over 25 years. Specialising in dispute resolution Gary is based in Birmingham with clients throughout the UK and overseas. View profile
Call Gary on +44 (0)121 778 3212 or by email
This blog is not intended to constitute legal advice, nor is it intended to be a complete and authoritative statement of the law, and what we say might be out of date by the time you read it. You should always seek legal advice to confirm whether or how any information in this article applies to your particular situation. We offer a free telephone consultation to discuss your particular circumstances.

Comments

  • Another good blog, thank you Gary. I can only confirm that the devil is in the detail and if directors get this wrong and things go badly for the company and a liquidator, or similar, is subsequently appointed having all i's dotted and t's crossed will save a lot of heartache/expense.By Peter Windatt29 Jun 16, 10:09am
  • Want to add your thoughts? Click here to comment...

Need legal advice for your business? We can help

Directors

Directors
Practical advice and legal support for company owners and directors.

Disputes

Disputes
In dispute with a customer or supplier? Get practical advice and support.

Your legal advisor

Your legal advisor
Board level legal advice without the costs of an in-house lawyer.

Speak to a lawyer

Speak to a lawyer
Thank you. Your response is great, very straight to the point! Hopefully this will bring an end to the matter. I will certainly be recommending your services as I am very impressed with the prompt dealing of this matter.
Janet Burbidge

Get legal updates

Enter your email address to receive our monthly Blog Newsletter


We will keep your email safe in accordance with our privacy policy.

Get the FREE definitive guide to solving business disputes

Speak to a lawyer

Get legal updates

Enter your email address to receive our monthly Blog Newsletter
The Law Society
Top