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Board meetings and directors' written resolutions

Board meetings and directors' written resolutions

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Contents

The decision-making process in directors' meetings, also called board meetings, is largely regulated by your company's articles of association (the set of rules about running the company). The information below is based on the default, or 'model', articles for private companies limited by shares.

If you're a sole director, the articles of your company should be appropriately modified to allow you to take decisions on your own. You'll still have the obligation to comply with all the Companies Act 2006 requirements for keeping records ('minutes') of your decisions as a director, otherwise you'll commit an offence. These minutes must be kept for 10 years at the company's registered office or other inspection place.

Decision making

Decisions can be taken by directors either in a directors' meeting or by written resolution. If they take a decision in a directors' meeting, this is known as a 'board resolution'. If they take a decision by written resolution, this is sometimes called a 'directors' written resolution', although in practice this is often also referred to as a board resolution.

Under the model articles for a private company, decisions of the directors:

  • must be by majority decision if taken in a board meeting; or
  • must be unanimous if made by written resolution.

This doesn't apply if the company only has one director.

Conflicts of interest

Some transactions involving the company and a director might give rise to a conflict between the interests of the company and the personal interests of the director. An example is where the company gives the director a service contract. The director would have a duty to the company to get the best contractual terms for the company. This would conflict with a personal interest to get terms most favourable to the director.

Certain rules apply to protect the company where there is a conflict of interest. Generally, the director should declare any personal interest before the matter is discussed (although there are some exceptions – see Duties and responsibilities). That director can't vote on that decision or be counted in the quorum (see 'Quorum for directors' meetings' below).

Calling a directors' meeting

Under the model articles for private companies, any director can call a directors' meeting by giving (or authorising the secretary to give) notice of the meeting to all the directors. Notice doesn't have to be in writing unless your articles say it must be. The length of notice given must be reasonable in all the circumstances. Notice isn't necessary if the directors have agreed to have meetings on fixed dates.

Notice of a directors' meeting must state when, where and how (e.g. by telephone or video conferencing) it'll take place. An agenda is also usually included. Notice must be given to all directors, wherever they are, although a director can waive the right to be told. The director can waive this up to 7 days after the meeting. A director who wasn't given notice can demand that another board meeting must be held within a reasonable time.

Attending directors' meetings

Directors don't need to be physically present at meetings. A meeting can take place, for example, over a telephone conference call.

Quorum for directors' meetings

A quorum is the minimum number of directors who must be present at a meeting to make it valid. The quorum is usually specified in the articles. In the model articles for a private company, it's 2 directors, unless there is only one director of the company.

In order for any directors' decision to be valid, a quorum of directors entitled to vote on that decision must be present at the meeting. In some circumstances, a director isn't allowed to be included in the quorum, e.g. where the directors are voting on a matter in which that director has a personal interest (see 'Directors' service contracts' under Appointing directors). There are some exceptions to these rules in the model articles.

If a director's right to vote or be part of the quorum is called into question, the chairperson will decide on the director's rights. The chairperson's decision is final (see 'Chairing of directors' meetings' below).

There will be a problem if there are too many directors with a personal interest and it isn't possible to form a quorum. For example, if a company only has 2 directors and they need to decide whether to grant one of them a service contract.

If the total number of directors for the time being is less than the quorum, the directors can't make any decisions other than appointing other directors, or calling a general meeting for the shareholders to appoint other directors. The directors can't change the quorum required in the articles, but the shareholders can by passing a special resolution.

Chairing of directors' meetings

The model articles for a private company say that the directors can choose a director to chair their meetings, and they can also remove the chairperson at any time. If the chairperson isn't present within 10 minutes of the start of the directors' meeting, the directors can choose another director to chair it.

Casting vote

As long as the chairperson isn't excluded from counting in the quorum, the chairperson will have a casting vote if an equal number of the directors are for and against a proposal. The articles can be changed to take away this casting vote.

If the chairperson's right to participate in a meeting is called into question because of a personal interest, the directors will decide on the chairperson's rights in the meeting.

Directors' written resolutions

Written resolutions give the directors greater flexibility in making decisions, as the directors don't have to be present at a board meeting. Directors' decisions made by written resolution must be unanimous. This means that all eligible directors, i.e. those entitled to vote, must vote for the same view on a matter. Sometimes a director isn't allowed to vote on a matter, i.e. they aren't an eligible director. For example, a director isn't eligible to vote for their own proposed service contract with the company (see 'Conflicts of interest' above).

The minimum number of eligible directors needed to pass a written resolution is the same as the quorum for a directors' meeting (see 'Quorum for a directors' meeting' above). All eligible directors must either sign copies of the written resolution, or otherwise agree to it in writing.

A sole director will usually make decisions by written resolution.

Records of decisions to be kept

The directors must ensure that the company keeps written records of every unanimous or majority decision they take for at least 10 years.