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Feb 19, 2015

Rules to Avoid Compliance Issues with Minutes and Conduct of Meetings: Considerations for Minutes of an Adjourned Meeting

This blog, titled “Considerations for Minutes of an Adjourned Meeting,” is the second of a multiple-part series on how boards and their committees can avoid compliance issues. The series focused first on minutes, beginning with “Basic Rules for Minutes,” because minutes should be the official and only record of meetings. The series now focuses on special considerations for minutes and will later conclude with some tips for conducting meetings that produce desirable minutes. The rules presented in this series are intended for boards of non-governmental organizations, because city councils, public school boards and other governmental bodies are subject to open meeting and other laws that are not applicable to non-governmental organizations.

Boards and their committees may take action on a matter only by:

  1. Vote of a majority of members entitled to vote thereon at a duly called meeting at which a quorum is present; or
  2. In lieu of a meeting, written consent of the members entitled to vote on the matter (which in Ohio and many states must be unanimous written).

Occasionally, committees will determine that they do not have all of the information that the committee members believe they need to take action. This is most problematic for oversight committees, such as audit, compensation, governance and compliance, where actions should be taken before the next regular meeting of the committee and without taking the time to call a special committee meeting.

This is not problematic for action being taken at a meeting if the information can be obtained while a quorum of the committee remains present. However, it becomes problematic if a quorum is not present when the information is obtained. One solution is to evidence any action taken based upon this information by written consent of the committee members, which in Ohio must be unanimous, effective on the date of the last to sign. However, having the discussion of a matter in the minutes of the meeting and then a separate written consent taking the action may be difficult to read if in separate documents.

A possible solution that we recommend is for the minutes to be:

  1. Drafted to reflect both the discussion of the matter that occurs at the meeting, the directions to obtained further information, and then the taking of the action based upon those minutes, sequentially as they actually occur, reflecting that the effective date the action that took place after the meeting. For example, with respect to a compensation committee approving the forthcoming year’s personal compensation goals:

    “The meeting was then adjourned so that the committee chair person could obtain, and report back to the other committee members, information from Mr. CEO regarding the compensation targets of Mr. CFO and Ms. COO. Each member of the Committee suggested changes, the Committee approved the revised personal goals with those changes.”

    This result is one document that reflects, sequentially as they occur, the discussion of the matter and decision to obtain further information that occurs at the meeting, and the subsequent taking of the action after the information is received.

  2. Signed by all of the committee members so that there is evidence that there is unanimous written to the actions reflected in the minutes, including those taken based upon information received after the meeting. This results in a valid written consent in lieu of a meeting evidencing the taking of the action. We recommend that this written consent be unanimous even if unanimity is not required by the law governing the organization. For example, the format for the signatures would be:

    Verifying approval by the Committee
    ________________________   ________________________
    Chairperson Date
    ________________________   ________________________
    Committee Member Date
    ________________________   ________________________
    Committee Member Date
    ________________________   ________________________
    Committee Member Date

    We suggest dating each signature on the date of the last to approve of the minutes.

  3. Ratified by the committee by a majority of its voting members at a subsequent (hopefully, the next) meeting at which a quorum is present. This results in the action taken after receiving the information being approved at the subsequent meeting by majority vote of the voting members. For example, the minutes of the subsequent meeting would provide:

    Upon motion duly made and seconded, the Committee unanimously ratified the minutes of the January 1, 2015 meeting in Attachment 3, which were approved for signature on, and signed by the Committee members as of, January 15, 2015 [the date of the last to approve the January 1, 2015 minutes].
Following this solution is helpful with tax-exempt charitable organizations subject to Intermediate Sanctions. To avoid Intermediate Sanctions requires the organization’s compensation committee to (1) document its decisions with minutes or written consents showing decisions free of conflicts of interest, and (2) generally to complete those minutes/consents within 60 days of the meeting, which can be problematic with the period between regular meetings of the committee occur quarterly or more than 60 days apart. Intermediate Sanctions can result in a $10,000 fine on each committee member if the committee does not comply with these (and other) requirements.

The considerations provided in this blog are intended for meeting of committees of the board and not for meeting of the board itself. Rules of procedure, such as Robert’s Rules of Order, generally permit less stringent procedure for committees of a governing body than they do for the governing body itself.

Posted by J. Beavers  in  Governance Best Practices  




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