CA's Budget & Nonprofits: Part Four
05.25.2023 | Linda J. Rosenthal, JD
Seriously? You were expecting fun facts about minutes?
We’re more interested than the average law firm in drafting effective corporate documents, but even we don’t think minutes are fun.
But they are important.
Corporate minutes are much more than meaningless formalities or mere note-taking; they are legal requirements of substance that have important consequences.
That’s what we wrote in “Breach of Fiduciary Duty by Ogling the Doughnuts,” our introductory post on the exhilarating topic of nonprofit corporate minutes.
Well – whether or not this is your idea of a good time – wake up, smell the coffee (o.k., grab a doughnut), and reevaluate your organization’s minute-taking practices and procedures.
The average person’s knowledge of parliamentary procedure is little more than a vague notion that a meeting is called to order, minutes of the prior meeting are read and summarily approved, motions are made and seconded, votes are taken, and the meeting is adjourned – so the more important business of schmoozing can begin.
Most people view minute-taking as an amusing custom. It’s not.
Board meeting minutes comprise the official history of the organization: They are presumed to be correct and are legal evidence of the validly of the meeting and the actions taken.
Especially in recent years, both state and federal regulators have taken a keen interest in corporate minutes. In the current Form 990, there are probing questions about corporate governance including minute-taking practices. IRS agents are directed to review the meeting minutes of an organization’s board and subcommittee (executive, audit, finance, and compensation) to glean important information about the organization’s eligibility for continued tax exemption.
And “whenever a nonprofit is named in a lawsuit” – by outsiders or because of disgruntled insiders – “the minutes of Board and other meetings are sought and closely scrutinized.”
How to Do It Right: Some Tips
There is no one-size-fits-all formula; no “hard-and-fast rule regarding the level of detail …”
A corporate secretary should take a page from the three bears’ forest-cottage playbook: Draft meeting minutes that are not too long or too short, but are just right.
But what does “just right” mean?
It means just right under the specific facts and circumstances of each situation. Experts and observers have chimed in with useful examples – check them out: here and here. The samples here, here, and here, are good, too.
The best length and level of detail for corporate minutes are judgment calls that should be based on careful thought and input by the experienced corporate secretary and other officers and staff, along with the board of directors, and – in some cases – legal counsel.
At a minimum, the minutes should always be “clear, accurate, and sufficient to reflect what actually occurred at the meeting, how decisions were made, who participated, who dissented, and what actions were proposed but not adopted.” They should be written “with an awareness of third parties. It’s likely they will be read by important outsiders who were not at the meetings, but are trying to understand – after-the-fact – what occurred.”
Minutes of board meetings and other key committee meetings should be drafted with care and deliberation. Poor or hastily written minutes can be harmful to an organization in the event of litigation or government investigation, but well crafted minutes not only avoid harming the organization, but can actually be highly beneficial.
Agenda Items, Point by Point
Taking corporate minutes has “evolved from a ministerial practice to more of an ‘art form.’” It requires skill, care, and – especially – understanding of how regulators, other third parties, future boards, and the public may use or review these important documents.
A final, gratuitous observation from the trenches: If it’s a luncheon or dinner, the corporate secretary should eat before the meeting; it’s just not possible to juggle taking reliable minutes with enjoying the meal.