So what goes into the Minutes? That depends. You don’t need to document everything. Routine business decisions are just that – routine business decisions. You don’t need to document that you bought a new cell phone for the office, or bought a new computer. On the other hand, if you bought cell phones for the entire office, or installed a full network with workstations, then yes, you do want to document that purchase.
It also depends on which meeting you’re holding – Shareholder, Director, Manager, Member, General Partner Limited Partner, etc. Each group is responsible for deciding slightly different things.
Shareholders: Shareholders are usually passive and don’t get involved the day-to-day running of the business. That’s left to the Officers, who are in turn supervised by the Directors. But there are times when Shareholder approval is required before things can move forward.
For example, Shareholders have the exclusive right to approve the items listed below. So, if your corporation needed to do any of these things, a Shareholder’s meeting (or a Consent Resolution, signed by all of the Shareholders) would be required:
- Elect and remove Directors
- Amend the Articles of Incorporation and Bylaws
- Approve changes to the Share structure of the Corporation
- Approve major asset purchases and sales (major is defined as anything you are buying or selling that makes up 10% or more of the Corporation’s value)
- Approve Mergers and Reorganizations
- Substantially change the Corporation’s business, and
- Dissolve the Corporation
Directors. Directors are the people the Shareholders elect to run the business. They actually run it indirectly, by appointing Officers – the Presidents, CEOs, Chairpersons, Vice-Presidents, Secretaries, Treasurers and so on. The Officers carry out the daily tasks, but it’s the Directors who set the policy for the Corporation and make the major financial decisions. Among other things, a Director’s Meeting is required to:
- Authorize the sale of stock, repurchase of stock or issuance of stock
- Initiate changes to the Share Structure of the Corporation
- Elect or remove the Officers of the Corporation
- Set officer and key employee salary amounts
- Adopting business policies and plans,
- Designating committees and allocating authority to them
- Initiate major asset purchases or sales
- Initiate Mergers and Reorganizations
- Initiate changes to the Corporation’s business
- Approving the sale, lease, conveyance, exchange, transfer, or other disposition of all or substantially all corporate property and assets
- Approving corporate borrowing and loans
- Entering into joint ventures
- Entering into most contracts and leases for vehicles, equipment purchases, etc.
- Approving mergers and reorganizations, and
- Approving the adoption of pension, profit-sharing, other employee benefit plans and stock-option plans
If the Directors are voting on an item that needs shareholder approval, their meeting is typically followed up by a second meeting of the Shareholders, to formally approve those decisions. That means you’ll usually wind up with two sets of Minutes – one for each group – that often look very similar.
In a small company, there’s not much room for separation. You could very well be the Shareholder, Officer and Director. That doesn’t mean you can cut corners, though. Even if it seems like duplication and a waste of time, take the steps and prepare both sets of Minutes.
Limited Liability Companies
The same practices generally hold true for LLCs. If you have an LLC that is Manager-Managed, you can follow the same rules set out for Corporations, substituting Members for Shareholders and Managers for Directors. Double check your LLC’s Operating Agreement though, to make sure. You will often find a specific list of things that require Member approval. And, if you have a Member-Managed LLC, where everyone participates equally, then your Members will need to vote on ALL the actions set out above before the LLC proceeds.