Board meetings and general meetings - how companies should make decisions

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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.

For free advice on this topic please call us on 0845 003 5639.