The protection that Board Minutes can provide
Our client was an incoming director of a company that he was acquiring using finance. The other parties in the case were the outgoing directors and were selling their shares in the company.
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Our client was an incoming director of a company that he was acquiring using finance. The other parties in the case were the outgoing directors and were selling their shares in the company.
Our client was procuring finance for the company as an incoming director and as part of a share acquisition. However, until he was appointed as a director he would not have the authority to execute the necessary documentation.
The Board Minutes were carefully drafted so that the first resolution passed appointed our client as a director. The finance was considered whilst all directors were still appointed and one of the outgoing directors was appointed as chairman throughout and ultimately signed off on the board minutes as a part of the transaction. They were therefore fully appraised of the finance being procured, terms of the finance and agreed to the same. This was evidenced by the signing of the board minutes.
The minutes were agreed as a part of the transaction. At a later stage the outgoing directors sought to challenge their knowledge of the finance that had been procured, approval of it and that our client had the requisite authority. Ultimately, they alleged that our client had committed fraud. However, due to the structure and drafting of the board minutes this argument was quashed during litigious proceedings and our client was cleared of all allegations.
 “During the acquisition of a business I arranged a loan against the company to be paid to the outgoing shareholders on completion. On the sale of the business back to the shareholders they accused me of fraud in that I had taken out a loan against a company that I did not own at the time.Â
Holly Threlfall, Partner at Franklins, who had acted for me in the acquisition, produced a set of minutes that had been completed by the Directors prior to the acquisition. These minutes stated that the Chairman proposed to the Board that their company borrow the money from the lender and lent it to my company to pay the Shareholders. This Chairman was the main protagonist in the false accusation and the minutes were signed by all of the Directors.Â
The Solicitor acting for the company, had this information available to him and was in full knowledge that the accusation was false. He invented his accusation in the hope that my solicitor had missed the importance of board meeting minutes, an expensive waste of time for their client and a stressful and unnecessary attack on me.“
Board minutes may seem like a draconian formality, but if properly and carefully drafted you can rely on them to evidence proceedings and decision-making. Our team have an intricate knowledge of the Companies Act 2006 as well as an understanding of the commercial reality of business that enables them to support you in preparing the right documentation for your transaction and protect you from unfounded allegations.
For more information on board meeting minutes, decision making factors or Director’s duties please contact holly.threlfall@franklins-sols.co.uk or call 01908 660966/ 01604 828282 and our Business Services team will be happy to advise.Â