Although a company has a separate legal personality, it is not a sentient being and so it can only act through its directors. Generally, decisions by a board of directors must be reached collectively and the decision should be documented. Meetings are an important step in proving that the directors’ actions, and therefore the actions of the company, have been properly authorised and are valid.
The board meeting that never was
The importance of a properly convened board meeting was recently highlighted. Here transactions between a company and its majority shareholder were found to be ineffective as it could not be proved that a formal board meeting had taken place to authorise the transactions.
Although board minutes had been drafted by the company’s solicitors, they were then simply signed by the managing director. Despite his claim that he had conducted a board meeting at home with his wife, another director, oral testimony at court cast doubt on this.
However, even if a board meeting had been held with the director’s wife, the director would not have been able to cast a valid vote as he was personally interested in the relevant transaction. The company’s articles of association prevented him from counting in the meeting’s quorum or voting in that situation.
Board meeting procedure
Directors are empowered to exercise all the powers of a company. Usually, the exercise of these powers should be done at a properly convened board meeting. This ensures they are being exercised correctly as well as in the company’s best interests.
There is no legal requirement as to the number of board meetings that must be held. However, directors must meet often enough to ensure they are discharging their duties as directors. The conduct of board meetings is not prescribed by statute and so is governed mainly by the company’s articles of association.
