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The Importance Of Actually Holding Board Meetings

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The Importance Of Actually Holding Board MeetingsRegulation of Board Meetings

The broad principles of Irish and UK legislation are very similar in terms of the proceedings of directors. 

In Ireland, Table A, Part 1, Companies Acts 1963 to 1990, regulation 101 states that the directors may meet together for the despatch of business, adjourn and otherwise regulate their meetings as they think fit.  This is a lot less prescriptive than the legislation governing the meetings of members which is quite specific.

Where the Articles of Association prescribe a particular format for the convening and holding of meetings, then, of course, this should be followed, unless otherwise agreed in advance by all Directors entitled to attend the said Board meeting.

Holding of Board Meetings

In The Law of Private Companies, by Thomas B. Courtney, it is suggested that where directors’ meetings are held in informal circumstances a difficulty can arise when there is uncertainty as to whether a meeting was in fact a directors’ meeting.

This point is illustrated by reference to the High Court case of Re Aston Colour Print Ltd.  It was claimed that the directors’ petition to have the company placed under the protection of the court had not been authorised by the company’s board of directors because there had neither been a board meeting nor an authorising resolution.

It was heard that meetings were indeed held on a weekly basis, attended by the two formally appointed directors, two shareholders and the financial controller.  The meeting under question was to consider the company’s financial difficulties subsequent to which an examiner was appointed. 

One of the directors did not consider the meeting to be a board meeting and did not believe that a decision had been taken to appoint an examiner.  Kelly J concluded that the meeting in question was not a board meeting:

  1. The directors must at least appreciate or have a basis for appreciating that they are attending a board meeting; the meeting was not so described.
  2. If it was a board meeting, why was it not chaired by a director; it had been chaired by a shareholder that was present.
  3. The financial controller told in evidence that he did not believe he was attending a board meeting.
  4. The shareholder chairing the meeting believed he was presiding over a meeting of the company in general.

The above highlights the importance of observing some of the basic the formalities of a board meeting.

Minutes

In addition to actually holding board meetings, section 145(1) of the Companies Act 1963 requires that minutes of any proceedings of directors be entered into the minute book of the company as soon as possible.   Specifically, Table A, Part 1, Companies Acts 1963 to 1990 regulation 89 specifies that the directors shall minute:

(a)   all appointments of officers made by the directors;

(b)  the names of the directors present at each meeting of the directors and of any committee of the directors; and

(c)   all resolutions and proceedings at all meetings of the company and of the directors and committees of directors.

Minutes, duly signed by the chairman shall be evidence of the proceedings. 

The directors may find themselves exposed if say board decisions become the subject of judicial scrutiny and the motive behind a particular course of action cannot be established.

An interesting case is Re Sugar Distributors Limited [1995] 2 IR 194, which involved failure to hold the necessary company meetings and pass required resolutions prior to an issue and allocation of shares.  Although board minutes had been prepared by the company secretary, and signed by the chairman, no such meetings took place and no such resolutions were ever proposed, seconded or carried.

An affidavit was sworn by the company secretary in which he deposed that he had been told by a company director to back-date the Minutes in question to a particular date, despite no meeting having taken place.

The application that the above mentioned minutes be declared valid or alternatively that the minutes were validly ratified by the company was refused.

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