Ultimate Guide to Board Meetings

#1. What are Board Meetings?

A board meeting is an important event where the company’s Board of Directors discuss issues that will have a significant impact on the business. These issues might involve decisions to hire/fire the CEO, acquire a new company, divest a portion of the company, declare dividends, and many more key actions.

#2. Why are Board Meetings held?

Some common reasons why board meetings are held include:

1. Board meetings, with their meeting minutes, provide a written record of the discussions held and reasons in support of key business decisions. This documentation is important for compliance purposes. Having a written record can also protect Board directors from potential lawsuits later on (e.g. lawsuits filed by shareholders) if the Board decisions negatively impact the company.
2. The Board wants to declare dividends.
3. The Board wants to review major strategic plans by management that will significantly affect the business as a whole.
4. The Board wants to set specific KPIs for management to meet. These KPIs may come with incentives for meeting those goals, and clawbacks for failing those goals.
5. The Board wants to set compliance and reporting standards that the business must adhere to.
6. The Board wants to fire the CEO.
7. The Board wants to select a new CEO.
8. The board wants to adjust compensation for the CEO.
9. The Board wants to acquire or merge with another company (M&A activity).
10. The Board wants to acquire or sell IP (intellectual property) rights.
11. The Board wants to raise additional capital by selling some of the company’s shares.
12. The Board wants to approve annual budgets and contracts (typically large contracts).
13. The Board wants to expand the company, e.g. into overseas markets.
14. The Board wants to implement or adjust the employee stock option plans (ESOPs).
15. The Board wants to downsize the business/conduct retrenchment, as the company is performing poorly.

If the Board has made a decision on an issue and they want to formalize this decision, they will pass what’s known as a Board resolution. A Board resolution is basically a proposal to do something (e.g. hire a new CEO). The directors will then cast votes on whether to support or reject the resolution. If a majority of the directors vote in favour of the resolution, the resolution passes. The Board will then take the steps outlined in the resolution.

#3. Can shareholders attend board meetings?

Yes, but only if the shareholders are invited to board meetings. If shareholders are not invited, then they do not have a legal right to demand entry into a board meeting. Shareholders have a legal right to shareholders/general meetings, but they do not have this same right to board meetings.

#4. How should I hold a Board Meeting? What are the procedures?

Board meetings are governed by your company’s Constitution. The company Constitution is a document that sets out the responsibilities, rights, and powers of the company’s directors and shareholders. It also specifies procedures on holding board meetings.

Unlike many other aspects of running a company, board meetings are not governed by the Companies Act. The Companies Act is the law governing all companies in Singapore. The Act does not specify regulations on board meetings. Therefore, the procedures, powers, and other obligations of directors in Board meetings will be ruled by your Constitution. This gives companies maximum flexibility in conducting their board meetings as they see fit.

We’ll outline how to hold board meetings in accordance with the Model Constitution. This will apply if your company has adopted the Model Constitution, which is one of the most commonly used company constitutions in Singapore. The steps here can also be found in paragraphs 83 to 94 of the Model Constitution.

Step 1: Director requests for the company secretary to schedule a board meeting

Any director may command the company secretary to hold a board meeting. Unlike with shareholder meetings, board meetings do not need to be held at least 14-21 days in advance. Board meetings can be held anytime, as long as directors are given ample advance notice of the meeting, along with sufficient time to prepare and review the agenda and any documents for the meeting.

Can a director be excluded from board meetings?

No. By law, you must notify all directors of upcoming board meetings. If you don’t, any decisions made during that board meeting will be invalid. The Singapore Courts have previously ruled that board meetings are only valid if notice is provided to all board directors. If you fail to notify to notify some directors, whether deliberately or not, that would be against the law, and that board meeting would be void.

Step 2: Board meeting must satisfy quorum requirement

A quorum of 2 directors is mandatory (unless your company’s constitution requires a higher quorum). A quorum is the minimum number of company directors who must be present at a board meeting, in order for the meeting to be considered valid.

If the number of directors who show up at the meeting is less than the quorum, then no decisions can be made. Any actions taken by directors at a meeting where a quorum is not met is invalid.

Who serves as chairman for the board meeting?

Usually, the chairman of the meeting is the chairman of the Board of Directors. However, if the chairman of the board is not present, the directors may elect another person to serve as chairman solely for the meeting.

Step 3: Discuss issues and, if needed, pass board resolutions

The Board of Directors can pass board resolutions during meetings. A board resolution is basically a formal decision undertaken by the Board of Directors. For instance, board resolutions are passed to declare dividends. To pass a resolution, simply hold a vote amongst the directors. If a majority of the directors agree, then the resolution is passed.

Some company constitutions may specify different voting thresholds to pass board resolutions. For instance, some constitutions may require 75% of all directors to support a resolution before it can be passed. Refer to your company constitution when in doubt about the exact % of votes needed to pass a resolution.

Important: Directors must declare vested interests/conflict of interests

If a director has a vested interest in any transaction, or proposed transaction, they must declare their interests. They also cannot vote on that matter in which they have a vested interest.

For instance, let’s say you are a director of Company A. A board meeting is held to discuss the possibility of Company A acquiring of Company B. You happen to own shares in Company B. Since you have an interest in this proposed transaction, you must take the following actions:

• Declare to the board that you own shares in Company B
• Abstain from voting on any board resolutions related to acquiring Company B

It is a crime for directors to not declare an interest in transactions. Under the Companies Act, offenders can be jailed and/or fined!

What happens if there is a tie in votes?

If the votes for the board resolution come to a 50-50 stalemate, then the chairman of the meeting will cast the final vote. This will be the tie-breaking vote.

What happens if there is only one director in the company?

Sole directors can simply hold board meetings themselves, and pass board resolutions by themselves.

Constitutions other than the Model Constitution

If you’re using a company constitution that’s different from the Model Constitution, you’ll have to follow your own procedures to conduct board meetings as outlined in your constitution.

However, any well-drafted constitution will almost always set standards on the following points for conducting board meetings:

• Giving proper notice of board meetings to all directors
• Specifying the quorum required for valid board meetings
• Voting threshold required to pass board resolutions
• Procedure to appoint a chairman for the board meeting
• Recording minutes of board meetings

#5. Keeping minutes of board meetings

Minutes are a summary of the key issues and actions taken during a meeting. Keeping a comprehensive and accurate list of minutes for all your board meetings helps to provide clarity into what decisions were made, who made those decisions, and why they were made. Minutes therefore serve as important tools for ensuring compliance, and also help to protect boards from legal action if other parties were to make accusations that improper decisions were made.

Keeping minutes of board meetings is a legal requirement in Singapore. Under Section 188 of the Companies Act, all board meetings must have minutes recorded. These minutes are to be recorded and filed within 1 month of the board meeting. The company secretary is usually the one responsible for recording minutes. After minutes are recorded, they will be signed off by the chairman of that meeting, and then entered in the company’s records for safe-keeping.

It is a crime to not record minutes for board meetings. Both the company itself and company directors can be fined up to S$2,000 each.

Sample board meeting minutes template

#6. What are some good ways to limit potential legal liabilities of board directors during board meetings?

#1. Directors should perform due diligence before board meeting and when reviewing proposals:

Prior to the board meeting, all directors should conduct due diligence on the issues set out in the agenda. This is to ensure that directors have the depth of background knowledge on the set of issues being discussed to make good decisions. Making decisions without having done proper due diligence can lead to lawsuits against the directors, if those decisions turn out poorly for the company.

#2. Director must declare potential conflicts of interest:

It’s critical that directors declare any potential conflicts of interests they have in matters that come up in board meetings. Conflicts of interest are a real legal minefield. You don’t want to fail to disclose (whether deliberately or accidentally) a potential conflict of interest, only to have it surface later. This can be cause for lawsuits (e.g. from shareholders alleging that you were serving your own interests, rather than the company’s interests). It also happens to be a criminal offence, with penalties including a prison term of up to 2 years, or a fine of up to $100,000.

What legal consequences can directors face if board meetings are not conducted properly?

If board meetings are not properly held, and mistakes are made by the directors that cause the company to suffer losses, then you can expect to get hit by lawsuits. Such lawsuits are often filed by shareholders, who ultimately are the ones who elect and remove directors. When directors are sued personally, there is no limitation of liability (that means that even if you’re a director at a Private Limited, limitation of liability protections will not apply). Directors who are sued personally will have their all personal assets (e.g. your house, car, money in your bank) fully exposed to legal claims.

#7. Protecting your business and board directors:

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