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In a company, members must make a number of decisions to ensure the business runs smoothly. Some decisions require that directors or members of the company undertake a formal process before a decision is made. For example, the board of directors will unlikely need to discuss what brand of snacks is stacked in the employee break room. However, changing the name of the business or modifying the company constitution, for example, would be matters that requires the board pass a special resolution.

A board resolution or directors resolution is an official decision of the directors of a company. For a decision to be effective, certain procedural requirements must be followed before, during and after a board meeting. A company’s corporate documents, including the constitution and shareholders agreement (if there is one), will typically set out the procedural requirements for holding board meetings. Some matters may need to follow the procedures set out in the Corporations Act 2001 (Cth) (the Act) to be valid.

Procedural Requirements for Holding Board Meetings

A company’s constitution or shareholders agreement will usually set out the minimum amount of board meetings that directors need to hold each year. In reality, directors will likely meet more frequently. Any director may call a board meeting if they give reasonable notice to the other directors. The director will also need to notify the other directors what matters they will discuss at the meeting by way of an agenda. 

Certain procedural requirements must also be met for a valid board meeting, such as:

  • How the board meeting will take place (i.e. in person, over the phone or by using other methods of technology including audiovisual);
  • The minimum number of directors that will need to be present (quorum);
  • What will happen if quorum is not present (delaying or postponing the meeting); and
  • The appointment of a director to chair the meeting. 

The chair is responsible for ensuring the agenda is followed, and decisions are recorded in the company’s minute book. In some company’s the chair may also have a casting vote where there is a deadlock for or against a matter. A casting vote means the chair will decide whether the matter goes ahead or not.

Key Takeaways

Board meetings are crucial to managing the day to day functions of a company. Well drafted constitutions and shareholders agreements will set out which matters for a board to consider will require which type of resolution – whether it be an ordinary resolution, special resolution or a unanimous resolution. If you need help drafting a constitution or shareholders agreement or if you have any questions, get in touch with our commercial lawyers on 1300 544 755.

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