Economic crises often lead to increased regulator activity. For example, between 1 January 2009 and 30 November 2010, the Australian Securities and Investment Commission (ASIC) commenced 323 new investigations, many of which related to matters that arose as a result of the Global financial crisis of 2007-2009.
All organisations will have legal record-keeping obligations. Even where there is no legal obligation, good record-keeping remains a key element of modern governance and corporate practice and one of the most effective means of managing regulatory and litigation risk.
It is crucial that key decisions made to manage the impact of COVID-19 or any other crisis – whether it be to alter employment contracts, hold an annual general meeting online or delay payouts – are properly documented.
Obligation to keep minutes of meetings and resolutions
Under section 251A(1) of the Corporations Act 2001 (Cth) all companies must keep minute books and all companies have one month within which to record in the minute books:
- proceedings and resolutions of meetings of the company’s members and directors' meetings; and
- resolutions passed by members or directors without a meeting.
Companies must ensure that minutes of a meeting are signed within a reasonable time after the meeting by the chair of the meeting (or the chair of the next meeting). Similar obligations apply to the signing of resolutions by a director.
It is an offence to fail to comply with these requirements.
Beyond this statutory obligation, it is good practice to prepare and finalise other meeting notes and minutes as soon as possible: a record made within a month of an event occurring is likely to be more reliable than a record made at a later time and a court will usually prefer a record of events made earlier in time over a later record or recollection of those events. The ability of a witness to remember events is likely to diminish over time and may more comfortably be assumed to be unreliable if recorded long after the occurrence of an event, particularly if the event occurred in a time of flux.
It is an offence under the Act to falsify books (including minute books) (section 1307) or to make or authorise the making of a statement that is knowingly false or misleading (section 1308): that is, if you have not met the one month deadline for compliance with the section 251A requirements for the entry of minutes, you cannot later fix this default. In such a scenario, companies should nonetheless prepare minutes of meetings and resolutions as soon as possible (with the date of preparation clearly indicated).
Similarly, in other situations, while it is best practice to make contemporaneous minutes or notes of meetings and decisions, it will often still be better to have an accurate minute or note prepared shortly after the events in question than to have to rely months or years later on the recollection of attendees and half-scribbled entries in a diary.
If you did not make proper notes or minutes of meetings and decisions in the heat of the moment (or in the busy weeks since), you should take the opportunity to do so now.
What is good minute-taking?
It is timely to reconsider the key principles for taking minutes identified in the joint statement issued last year by the Australian Institute of Company Directors and the Governance Institute of Australia on this topic:
- minutes serve as a record of board decisions and the process, or proceedings, by which those decisions were made;
- minutes should not be a transcript of a meeting: such detail is not required by law and could stifle healthy boardroom debate;
- minutes should include key points of discussion and the broad reasons for decisions;
- minutes should record significant issues raised and the responses received or the action promised;
- minutes should be clear, succinct and in plain English;
- directors must properly evaluate draft minutes and ensure additions, clarifications or corrections are made where necessary;
- courts place evidentiary weight on the contents of minutes. Minutes can serve as crucial evidence that directors have complied with their duties in respect of decisions that are later challenged; and
- it is important to carefully consider the level of detail to include about matters which carry legal professional privilege. Any privileged information included in minutes should be clearly identified.
The dos and don'ts: notes and minutes of other decision-making processes
In addition to the guidance above, for meetings other than board or member meetings, it may be helpful to consider the following, depending on the circumstances:
- meeting notes should include a list of attendees and it may also be appropriate to note who contributed to a particular discussion; and
- where a decision was not made by consensus, you may wish the notes to reflect this (even if there is no formal voting mechanism).
- In all circumstances but particularly where the responsibility of preparing meeting notes falls to a more junior employee, key decision-makers should ensure that the notes are complete and accurate.
At the risk of stating the obvious, the following is to be avoided:
- notes that are excessively detailed: too much information can result in a lack of clarity and detract from targeted issues and decisions (or create "red herrings" leading to unwarranted regulatory attention and investigation);
- notes that are simply an assembly of incomplete fragments of a discussion;
- notes that include information that is incorrect, ambiguous or misleading;
- notes that use emotive or impartial language; and
- notes that are drafted in terms that could compromise legal professional privilege.
Potential issues to bear in mind
When preparing minutes and documenting decisions during a crisis, it is important to be aware of ancillary issues that might be faced, such as:
- a rapidly changing legislative and regulatory landscape could result in decisions being made and amended multiple times within a short window of time. Documenting the process and why a decision was made or changed should be front of mind;
- when decisions are made on the fly to manage a crisis, it can be difficult to assess the import of that decision in real time. What may have appeared at the time as a minor decision could have major and potentially long-lasting and far reaching effects; and
- the added complexity of working from home could present challenges to usual note taking practices. To the extent possible, steps should be taken to mitigate such challenges.