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  • John Reyna

Board meeting minutes: Drafting guidance because minutes are important.

In my experience advising board of directors and participating on boards, I have often observed minutes being drafted in a poor manner. That’s a shame and a big risk. But it’s not a surprise.


For most smaller non-profit organizations, the secretary of the board has not received training about how to properly draft minutes. Thus, the secretary scribbles down a few things, the meeting ends, and then a few days before the next meeting the secretary sends out the minutes for review. By this time, the other board members don’t remember exactly what happened at the meeting a month or two ago so they give a quick glance and a thumbs up to the previous minutes. Those minutes are approved at the next board meeting, and then forgotten about until the day that the organization receives an IRS audit letter. Now, those minutes are a big deal.


In this article, I’ll explain best practices for taking minutes as well as some of the reasons why minute taking is a valuable skill that every board member should know how to do.


What are minutes?


Meeting minutes are the official record of what transpires during a board meeting. They capture the decisions, motions, and key deliberations of a meeting. They also reflect the minutia of a board meeting, including the date, location, attendees, and other things that I’ll discuss in greater detail below.


Texas law requires meeting minutes.


In Texas, every nonprofit corporation is required to keep minutes of the meetings of its members, of its governing body, and of committees of its members and governing body.[1] Minutes may be in written form or another form capable of being converted into written paper form within a reasonable time (e.g., a Word or PDF document that can be printed).[2]


Who can inspect minutes?


Both members and directors of a Texas nonprofit corporation may examine the minutes. A director may examine the minutes for a purpose reasonably related to the director’s service as a director.[3] Texas law provides two avenues for members of nonprofits to examine minutes. First, a member of the organization may examine the minutes to the extent the governing documents provide.[4] Second, and regardless of the provisions of the governing documents, a member, on written demand stating the purpose of the demand, also may examine the minutes relevant to that stated purpose at any reasonable time and for a proper purpose.[5]


The Texas Attorney General also the right to inspect the minutes of a non-profit organization.[6]


Don’t forget about the IRS’s inspection powers.


If a tax-exempt organization has the privilege of being audited, then the minutes become fair game. IRS agents can examine book and records, which includes minutes, of a tax-exempt organization to establish whether: “an organization is both organized and operated for tax-exempt purposes, any related returns have been or need to be filed by the organization; [and] any tax reported is reasonably correct.”[7] Agents review minutes to “substantiate and expand information about the organization’s activities, verify the accuracy of the return, verify that all appropriate returns are filed and taxes are paid, and determine whether taxes (income, employment, excise) are accurately reported.”[8] If everything above didn’t already make you realize that the IRS takes minutes seriously, the Internal Revenue Manual (“IRM”) has an entire section about minutes.[9]


The IRM instructs agents to review minutes from the year of audit plus a minimum of one year before and one year after the return under audit.[10] The IRM also instructs to review the minutes of any subcommittees (e.g., executive, audit, finance, and compensation committee).[11] The IRS will consider all attachments, exhibits, and reports mentioned in the minutes as integral parts of the minutes.[12]


What should be included in minutes?


First, there is no hard-and-fast rule regarding the level of detail or the format for an organization’s minutes. Don’t you just love that. I spent the first few paragraphs trying to scare you into taking minutes seriously, and then . . . BAM! I give you the classic lawyer answer of “it depends.”


Still, minutes should include sufficient detail to reflect what actually occurred at a meeting. Sufficient detail does not mean a verbatim transcript. That is not required nor is it recommended. Rather, minutes should reflect how decisions were made. This includes who participated, who dissented, who recused themselves, and who abstained from the vote. Texas law presumes that a director, who was present at a meeting at which action was taken, assented to the action unless the director’s dissent or abstention has been entered into the minutes.[13] Thus, if a director dissents or abstains, that director should make certain that the minutes accurately reflect the director’s act. Additionally, minutes should reflect when an action was proposed but not adopted. If alternatives are considered for important decisions, the minutes should include those as well to show diligence and reasonable care.


All of the above information is important for two reasons. First, there will be times when the board must reference what actually occurred at a past meeting, and proper minutes will greatly assist in refreshing the directors’ memories. Second, if a board’s action is ever scrutinized, the minutes may be offered as evidence that an action was correctly taken and that directors fulfilled their fiduciary duties.


The following is a list of standard information that should be included in most minutes:

  • Name of the organization;

  • Date and time of the meeting;

  • The type of meeting (e.g., regular or special);

  • When and how notice of the meeting was provided or a waiver of notice signed by all directors;

  • Names of directors in attendance and those not in attendance;

  • If guests are in attendance, their names, titles, and affiliation, as well as a brief reason for attending;

  • The number required for quorum and acknowledgment that quorum was or was not established;[14]

  • Reading or review of the past meeting’s minutes and the vote to accept those minutes;

  • If someone departs during the meeting or reenters the meeting; and

  • Action items for the next meeting with sufficient detail about who is responsible for what.

With all of that being said, the key to good minutes is consistency. I recommend that boards and committees create a template that includes the above standard information and then add all of the more detailed nuances as necessary.


Executive sessions.


Executive sessions are a special meeting, which occurs within a meeting, that provides an opportunity for the board to meet privately to handle sensitive and confidential issues. The topic of executive sessions deserves its own article. For purposes of this article, the takeaway is that the minutes should reflect that the board met in executive session and the topic of the discussion(s). However, the details of that discussion should not be part of the main meeting minutes.[15]


Drafting the minutes and circulation.


This is often where the biggest mistakes happen regarding minutes. Please don’t wait to type up minutes until days or weeks after a meeting because the reviewing board members won’t remember exactly what happened after too much time passes. The result of which may be inaccurate minutes. Instead, and as soon as practicable after a meeting adjourns, the secretary (or whoever else had the responsibility for taking minutes) should type the initial draft of the formal minutes and distribute for review. This isn’t just good practice; IRS Form 990 asks whether there is contemporaneous documentation and approval of board and committee meetings minutes.[16] And your organization wants to answer this affirmatively in good faith.


Retention.


Minutes should be retained permanently.


Final thoughts.


Meeting minutes are important. I can’t stress this enough. Therefore, I recommend that every board spend time creating a formal procedure and template for drafting and reviewing minutes. And dedicate time to teach new board members how to take minutes, even if that person is not the secretary. One day, that skill might protect the board members and the organization.


For further information on this topic, please contact John B. Reyna at info@texashospitalitylaw.com. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-attorney relationship between the Texas Hospitality and Non-profit Law Center, PLLC and any recipient.


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[1] Tex. Bus. Org. Code § 3.151(a). [2] Id. at § 3.151(b). [3] Id. at § 3.152(a). [4] Id. at § 3.153(a). [5] Id. at § 22.351. [6] Id. at § 12.151. [7] IRM § 4.75.11.8 (01-18-2017). [8] Id. [9] See IRM §4.75.11.8.3 (01-18-2017). [10] Id. [11] Id. [12] Id. [13] Tex. Bus. Org. Code § 22.227(1). The dissenting or abstaining director could also file a written dissent with the secretary before the meeting adjourns or send written notice to the secretary within reasonable time after the meeting has been adjourned. See Tex. Bus. Org. Code § 22.227(1), (2). [14] If there is no quorum, then no business should be transacted. [15] Rather, a separate set of minutes should be kept for the executive session. But even those minutes should be sparce because of the confidentiality of the topics discussed. Again, I’ll write more about this in another article. [16] See IRS Form 990, Part VI, Section A, Question 8 and corresponding instructions.

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