BOARD MINUTES

I recently read an exceptional article written by the former Chief Justice of the Delaware Supreme Court, in the United States of America, Leo Strine, discussing corporate minuting and documentation processes.?

Without detracting from the brilliance of the article as a whole, what struck me as being so important, and what I want to share with the readers, is that Strine observes that, recently, there has been an increase in books-and-records demands, as well as an expansion of these requests to include director and management texts and “management-level drafts and informal communications regarding matters that either did or, in some instances, did not go to the board.” Strine contends that the existence of “formal, board-level documents that adequately cover what the board did, when, and the basis for its actions” can affect the “scope of access that is awarded to petitioners.” That is, if a company can “timely produce the minutes, resolutions, and advisor presentations for a transactional process or special investigation, the Delaware courts have made clear that those formal documents” will typically suffice.? On the other hand, he contends, “when the formal record is full of gaps and it is plain that the board and management conducted much of their decision-making outside the boardroom, by means of texts and emails, the Delaware courts have granted access to that information because that information was in effect the books and records essential to determine what the board eventually did and why.”

What is set out above is critically important for all organisations, their directors, prescribed officers, committee members, in-house legal counsel and company secretaries.

If the brilliant advice of the former Chief Justice is not followed, organisations can find themselves on the wrong side of court orders directing them to give access to information other than that to be found in minutes, books and records in order to determine what the board eventually did and why.

The former Chief Justice lists several US judgments to support what he has said and as I have repeatedly said in previous articles, our Constitution permits (and in fact directs) our courts to take cognisance of foreign law and judgments, where appropriate and resulting in same become part of South Africa’s common law.?

So, quoting the Chief Justice, very well prepared minutes are an “unquestionably essential, corporate governance task”.