After your startup is incorporated in Delaware, the company is governed through its board of directors. The board is appointed by the incorporator, e.g. the person who filed the articles of incorporation, after the company’s articles of incorporation are accepted by state officials.
The board is responsible for approving any stock issuances and stock option grants, financing through equity fundraising, loans or other arrangements, as well as documenting their decisions pursuant to the company’s charter and bylaws.
It is extremely important to maintain excellent records of the board’s decisions. Over the course of the company, you will likely be asked to provide evidence of board approval for various actions, from securing a line of credit to approving stock awards to employees over the years.
Failure to maintain proper documentation may cause your startup to fail the due diligence process when trying to raise funds from VC firms or sell the company to an acquirer. Having up-to-date, well-organized records of the decisions made by your startup’s board is essential, along with a comprehensive document room of all the legal agreements your company has entered into.
Startups that fail to maintain accurate records of board approvals and other legal agreements will often pay huge legal fees to fix these problems after the fact.
What are “Minutes” and When Are They Created?
The notion of minutes may seem a bit dated in its origins. The basic idea is that, at each board meeting, one person will be designated secretary and be responsible for taking written notes, or “minutes”, to document the discussions by the board members and any formal resolutions adopted at the meeting. These minutes will then be reviewed and approved by the board at a subsequent meeting, signed by the designated secretary, and put into the company’s “Minute Book”.
In practice, today in 2021, most companies do not go through the trouble of having formal, in person board meetings. Instead, they do their board meetings on video conference calls using Zoom or some other service. That is if they have formal board meetings at all—some startups interact with their board members via WhatsApp group chat and send out contracts for board members to sign electronically to approve financing arrangements and stock option awards.
However, despite board governance keeping up with the times, the laws on the books say that corporations in most states (including Delaware) are still required to keep “minutes” to document what matters the board discussed. Failure to do so can cause negative legal consequences and also cause the company to fall out of good standing with state officials.
How Do You Maintain Your Startup’s Corporate Minutes?
If you have actual board meetings, someone can take down notes on a laptop during the meeting. Try to get in the habit of maintaining written notes of all board meetings and updating your company’s document room right away to avoid having issues getting your corporate records up to date later when you are going through due diligence to raise funds or sell the company.
When you are first getting started, your board is typically just you and one or more of your co-founders. At this stage, companies rarely have formal board meetings since the founders are typically collaborating closely together on a daily basis. However, you will want to make sure to document board approvals of any actions you take, such as raising funds using convertible notes or SAFEs, as well as any shares issued to advisors, consultants or employees. Capbase makes it easy to keep your company compliant as you build your startup. Our software sends out the required board approvals for signatures before you raise money from outside investors or issue any equity.
What to Include and Not To Include in Corporate Meeting Minutes
Every official entry in the company’s minute book should include certain, specific information. At bare minimum, the minutes will include:
- Date the meeting took place
- The location of the meeting
- The time of the meeting
- Names of attendees
- Names of any board members who are absent
- If there was a quorum of board members present at the meeting
- Who was the chair of the meeting
- The purpose of the meeting and agenda items
- A detailed account of who voted and how
- The time the meeting adjourned
- The minutes should also note if any board members or board observers arrived late to the meeting and, similarly, if anyone left early
Typically, it is not appropriate to include minute details of the meetings or verbatim discussions in the corporate meeting minutes. The purpose of meeting minutes is to document any important decisions made by the board of directors.
To make the minutes official, the board usually approves the meeting minutes, as they’re an official and legal record of the prior board meeting. The board should get the board to vote on approving the meeting minutes as soon as possible after the meeting.
Since they provide a historical record of the company, corporate meeting minutes should be preserved in the company’s document room for future review in due diligence. Well-prepared meeting minutes will help protect board members from liability as well as future legal problems. Accurate meeting minutes are also necessary to keep the company in good standing with state officials.
- Minutes are an official log of decisions taken by a startup’s or corporation’s board of directors
- Typically, a secretary will be designated to take minutes for any board meetings
- The board and secretary must approve the minutes of any meetings in order for them to become official corporate record
- Failure to keep accurate records of company board meetings may cause a company and its board members to face legal problems in the future