How Do I Run a Board Meeting as a Director?

Are you a company director? Do you know the exact purpose of a board meeting and how to run them? This article will explain the decision-making powers of the board of directors and when you must take formal steps to vote on certain measures. It will also explain the distinction between board meetings and shareholder resolutions.

Shareholder Resolutions vs Board Meetings 

Companies exist as separate legal persons. Since they are not natural persons, they cannot make decisions for themselves. 

Broadly, directors are responsible for the company’s daily activities, such as entering into contracts and paying suppliers. Shareholders have the right to vote on certain substantial matters like issuing new shares and appointing new directors to the board. 

Directors’ Decision-Making Powers 

Importantly, not all companies will have the same rules regarding how directors make decisions. This is because a company’s articles of association can be flexible. Indeed, it is possible to tailor your articles of association to best fit your company. Alternatively, you can refer to the model articles of association. 

In general, any measure not reserved to the shareholders will need the directors’ approval. Common examples include:

• entering into contracts; 
• purchasing property; 
• paying off debts; and 
• taking out loans. 

Directors make decisions collectively at a board meeting or through written resolutions. Likewise, some companies may permit certain directors to make certain decisions unilaterally. 

Nonetheless, a company’s articles may require board meetings for certain measures like large property transactions. 

A Board Meeting 

A board meeting requires the director to follow certain procedural rules. We will explore these in detail. 

Calling a Board Meeting 

As a general rule, most articles permit any director to call a meeting at any time. To call a meeting, a director must summon all the other directors to convene to vote on the matter. This process is called giving notice. 

Notice

A director must give the other directors sufficient warning before calling the meeting. This is called reasonable notice. What is reasonable depends on the particulars of a company. 

Additionally, you can give notice orally because it is unnecessary to give written notice of the meeting. A text message would also suffice. The law does not obligate you as a director to provide an agenda of the meeting, though you should circulate one to ensure a productive board meeting. 

Further, you will not need to give notice if you have regular board meetings, such as the first of every month or at 5 pm each Friday. 

Quorum 

A quorum refers to the minimum number of directors that must be present to vote on a decision. Your company’s articles will set out this number. If your company uses the Model Articles, this number is 2. 

Voting 

Provided you can establish a quorum, the directors can then discuss the matter at hand and vote on it. 

Under the Model Articles, each director has one vote at a board meeting. Therefore, the measure will pass if it receives a majority of votes. 

Directors usually vote by a show of hands or orally during an in-person meeting. If the votes are split, such as if there are eight directors and four have voted for a measure and four against it, the measure will not pass. An exception is if there is a chairperson with the power to cast a tie-breaking vote.

Exclusions on a Director’s Ability to Vote 

Importantly, there are certain instances where a director will not be able to vote, nor will the director’s presence contribute to the quorum. This is usually the case where there is some conflict of interest. For example, one director may have an interest in a proposed transaction with another company. 

The Chairperson 

Depending on the company’s articles, the directors may nominate one director to be the board’s chair. In some cases, the shareholders must approve this nomination. 

Chairpersons are the individuals that can determine if a director is entitled to vote on a matter or not. They can also determine if there is a quorum to hold the vote. They can also cast a tie-breaking vote if there is a deadlock. 

Record Keeping

Additionally, you must ensure that someone takes minutes of the board meeting. This is a legal obligation under the Companies Act 2006. If you do not comply, each director will have committed a criminal offence. 

Best practices dictate that the minutes should include the reasons why a decision was made and the outcome of the decision itself. Notably, the minutes do not have to be verbatim. 

For instance, suppose you are voting on buying a piece of property. In that case, you would want to ensure that all the directors have together considered the impact it will have on:

• the company’s finances; 
• to what extent it will benefit the shareholders; and 
• if it will have any effect on certain key third parties, including:
  • the company’s employees;
  • any creditors; and
  • the environment. 

Key Takeaways 

Directors are responsible for making decisions on behalf of the company. Your company’s articles of association should set out the full extent of these decision-making powers. In general, directors make decisions collectively through board meetings or written resolutions. However, there might be exceptions where decision-making powers have been delegated to a single director like a CEO. Board meetings are formal meetings that require a quorum. Therefore, you should ensure that you are keeping minutes of the meetings that include the vote’s outcome and the reasons for the decision. 

If you need help asserting your rights as a shareholder, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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