This Article will provide you with the basics of how to conduct a properly constituted meeting of the directors.

Understanding Statute Requirements for Conducting a Directors Meeting

When conducting meetings of the directors the reference for the rules and laws respecting holding meetings will be found in the statute of incorporation and the by-laws. You can determine the statute of incorporation by referring to the articles of the corporation.

Most governments now put statutes online. Once you know the name, doing a search of that statute will pull it up quickly.

The by-laws of a company usually mirror the statute requirements but in some cases statute requirements can be varied and in cases such as this the by-law may be modified to suit the specific purposes of the company. Therefore, it is important to first determine the statute requirement and second review your articles and by-laws to determine if any variations to the requirements of the statute have been implemented.

An example of a clause in a statute that can be varied is:

“Quorum
(3) Subject to the articles or by-laws and subsection (4), a majority of the number of directors or minimum number of directors required by the articles constitutes a quorum at any meeting of directors, but in no case shall a quorum be less than two-fifths of the number of directors or minimum number of directors, as the case may be. R.S.O. 1990, c. B.16, s. 126 (3).”

The above clause provides the legal requirements for determining a quorum for conducting directors meetings. The first line of the statute indicates “Subject to the articles or by-laws”. This means that this section of the statute can be varied and changed if the articles or by-laws of the corporation indicate so.  If the section had been worded as follows:

“(3) A majority of the number of directors or minimum number of directors required by the articles constitutes a quorum at any meeting of directors, but in no case shall a quorum be less than two-fifths of the number of directors or minimum number of directors, as the case may be.”

This would mean that this section of the statute cannot be varied and in order to conduct a meeting of the directors a quorum for conducting a meeting could not be less than two-fifths of the number of directors.

 

Notice of a Directors Meeting

The first step to holding a meeting is to provide the directors with notice of the meeting.

In order to call a directors meeting proper notice of the meeting must be sent to all of the directors of the corporation. It is not possible to hold a legal validly called meeting of the directors unless every director has been invited to attend. If all of the directors have not been given proper notice of the meeting then the matters approved at the meeting would be null and void.

The proper manner in which notice is given to the directors is defined in the statute of the corporation. In most statutes, the following will need to be included in the notice of meeting:

Date and Time of the Directors Meeting (including the date and time of the meeting).

Place of Directors Meeting (which in most cases, and subject to the statute and by-laws) is frequently the registered office address of the corporation. Some statutes will require that a certain number of meetings be held in the jurisdiction of incorporation (i.e. province, state, country, as the case may be). As well, there may be restrictions in conducting meetings outside of the jurisdiction in that director approval may be required before meetings can be held. The statute of incorporation will clearly outline these requirements but you should also refer to the operating by-law of the corporation.

Matters to be Discussed at the Directors Meeting – Describing the matters to be discussed at a directors meeting is not in most cases necessary in accordance with the statute requirements, however, it is a good idea to have a clear outline of the proceedings to be conducted so that matters are proceeded with timely and in the proper order.  Any resolutions that are going to be submitted to the directors should be prepared for them to review.

No special form is required with respect to preparing a notice. As long as you include the above-noted criteria then the notice will be legally valid.

 

Timing of Calling a Directors Meeting and Delivery of the Notice of Directors Meeting

There are two aspects to providing the directors with proper notice of a directors meeting. First, you need to know how many days’ notice the directors need to receive. Secondly, you need to know how the notice should be delivered.  An example of a clause in a by-law that sets out how much notice a director must be given before a directors’ meeting is called is as follows:

“Notice of Meeting – Notice of the time and place for the holding of a meeting of the board shall be given to every director of the Corporation not less than two clear days (excluding Sundays and holidays as defined by the Interpretation Act) before the date of the meeting. Notwithstanding the foregoing, notice of a meeting shall not be necessary if all of the directors are present, and none objects to the holding of the meeting, or if those absent have waived notice of or have otherwise signified their consent to the holding of such meeting. Notice of an adjourned meeting is not required if the time and place of the adjourned meeting is announced at the original meeting.”

An example of a clause in a by-law that sets out the method for mailing notices for a directors meeting is as follows:

“Method of Giving Notices – Any notice, communication or other document required to be given by the Corporation to a shareholder, director, officer, member of a committee of the board or auditor of the Corporation pursuant to the Act, the regulations, the articles or by-laws or otherwise shall be sufficiently given to such person if:
a) delivered personally to him, in which case it shall be deemed to have been given when so delivered;
b) delivered to his recorded address, in which case it shall be deemed to have been given when so delivered;
c) mailed to him at his recorded address by prepaid ordinary mail, in which case it shall be deemed to have been given on the fifth day after it is deposited in a post office or public letter box; or
d) sent to him at his recorded address by any means of prepaid transmitted or recorded communication, in which case it shall be deemed to have been given when dispatched or delivered to the appropriate communication company or agency or its representative for dispatch.

If a notice or document is sent to a shareholder by prepaid mail in accordance with this paragraph and the notice or document is returned on three consecutive occasions because the shareholder cannot be found, it shall not be necessary to send any further notices or documents to the shareholder until he informs the Corporation in writing of his new address.”

 

In order to determine the notice requirements for YOUR company, you must review the general operating by-law AND the statute requirements to ensure you are following the proper procedure. It is possible to have provisions in a by-law that are contrary to law. If this is the case, then the statute will override.

Waiver of Notice of Meetings

If some of the directors of a meeting did not receive a notice of that meeting but they attended the meeting, then by virtue of their attendance at the meeting they would be deemed to have been given notice.

In some cases, where a director has not been given proper notice and does not attend the meeting, he can provide a form of waiver. By providing this waiver of notice, the matters approved at the meeting will be legally approved.   An example of a form of waiver of notice is as follows:

Directors Meetings Held by Telephone or Other Electronic Means

Meetings of directors can be held by electronic means such as telephone, etc., however, it is important that the statute and by-laws of the company be reviewed to determine under what basis these types of meetings can be held. Frequently, all the directors of a company must approve any meetings being held electronically and therefore if a meeting is held without proper approval it means that ALL matters approved at that meeting are null and void.

The statute will govern the manner in which meetings by telephone or other communications can be conducted. The by-law may contain a summary of these provisions. Normally, all directors must consent to the holding of telephone meetings. An example of the consent that can be agreed to by the directors is:

However, it is cautioned to review the corporate statute governing the corporation and the by-laws in place to ensure the wording of the consent to be signed by the directors is in accordance with the statute requirements.

 

Who Calls a Directors Meeting

The general operating by-law and the statute will govern who can call a directors meeting. Normally a quorum of directors may call a directors meeting.

Residency Requirements of Directors in Attendance at a Directors Meeting

Residency requirements of directors relates to the statute requirements for having a certain number of directors be living in the jurisdiction where the company was formed. In some cases there are no residency requirements. It is important to check the by-law and statutes just to ensure that there is no legal requirement for a certain number of directors resident in that jurisdiction to be in attendance for a properly formed meeting to commence.

Further, there could be a requirement that certain members of the board of directors must be in attendance at the meeting as well although this is rare to see and if there such requirements, they would be contained in the by-law or in a shareholders agreement.

Quorum Requirements for Directors Meetings

Not only do all directors need to be provided with notice of any directors meeting, there must also be a quorum in attendance before the meeting can be validly called. A quorum is the number of directors that must be in attendance in accordance with the by-laws, or if the by-laws are silent, the statute under which the company acts. The statute requirement is normally a majority of the number of directors but you may be able to vary that requirement, if your statute provides for this, you may be able to have less than a majority or more than a majority. Therefore, if there are five directors and a quorum to conduct business is a majority, then all fie must receive notice and three must be in attendance at the meeting.

 

Conflicts of Interest of Directors and Officers

If a matter is being brought before the directors at a meeting and one of the directors is an officer or director of another company involved in the same transaction then this might create a conflict of interest and that director has an obligation to let the other directors know of his involved.

More simply said, if ABC Company is holding a directors meeting to approve a contract between ABC Company and DEF Company, and one of the directors of ABC Company is also a director of DEF Company then he might have an interest in having the contract approved. Therefore the other directors have to be forewarned of his interest so they can make an unbiased decision on whether to approve ABC Company entering into the contract.

Chairman and Secretary of the Directors Meeting

There must be a Chairman for the meeting and in most cases there will also be a Secretary. The Chairman of the meeting is frequently the President and the Secretaryof the meeting is frequently the Secretary of the Corporation.

The Chairman of the meeting should not be confused with an appointed Chairman of the Board of Directors. The directors of a company can appoint a Chairman, Chairperson, Chair or Chairman of the Board from amongst themselves. If so appointed the Chairman would also act as Chairman of all meetings of the board. In the case where there is no appointed Chairman of the Board, then the President or Chief Executive Officer normally acts as Chairman of the directors meetings.

The Chairman of the meeting will present facts, information and documentation to the board for their review and approval. The Secretary of the meeting will record everything that happens at the meeting and document same in the form of Minutes of the Meeting.

The Chairman and the Secretary can be the same person. The minutes must reflect who acted as Chairman and who acted as Secretary.

It is a good idea to refer to the general operating by-law to determine what it says about who has authority to act as Chairman of the meeting. This can be found in the description of the officer positions of the Corporation.

How to Approve Resolutions at a Directors Meeting

The Chairman of the meeting should be prepared prior to the meeting to explain the purpose of the approval. He or she should also prepare the form of resolution that needs to be approved.

For example, if the directors are approving a change of the registered office address then a resolution can be prepared in the following form:

“BE IT RESOLVED THAT the registered office address of the Corporation should be changed to….”

The Chairman would explain to the directors that a resolution needed to be approved to reflect the change of address and provide them with a copy of the proposed resolution to review.

After the resolution has been reviewed by the directors, one director will move to approve the resolution, a second director will second the motion and the resolution will be carried. The wording will be as follows:

“It was moved by John Doe, seconded by Rick James and carried that the following resolution was approved:

BE IT RESOLVED THAT the registered office address of the Corporation should be changed to…..”

Ratifying Matters that Should have Been Approved in the Past

Sometimes it comes to the attention of the directors that a certain matter should have been approved previously and they need to ratify the approval. In this cases, the directors would use the language:

“BE IT RESOLVED THAT the entering into of the agreement between the Corporation and John Doe, dated the 15th day of January, 2015, is hereby approved, ratified and confirmed.”

How Many Directors at a Directors Meeting are Needed for an Approval

The by-law of the Corporation determines what percentage of the number of directors must approve a resolution. In most cases it will be a majority. However, a review of the by-law should be done to determine this to be true. As well, the by-law can provide for the Chairman to have what is called a casting vote. If the Chairman has this right it means that in the case where there is a tie on the issue in question, the Chairman has the right to add an additional casting vote to make the final determination.

How to Terminate a Directors Meeting

When all matters have been presented to the directors, the meeting can be terminated. A director will move for the termination, another director will second the motion and the Chairman will confirm the approval to terminate the meeting has been carried.

Who Signs the Minutes

Both the Chairman and Secretary should sign the minutes or, in the case where the Chairman and Secretary of the meeting are the same person, the Chairman should sign.

Preparing Minutes

Subsequent to the meeting, minutes must be prepared to document the proceedings and all approvals that took place at the meeting. The minutes should document the proceedings as follows:

• Date, time and location of Meeting
• Confirmation of the Chairman and Secretary of Meeting
• Confirmation of Notice having been sent to all the directors and approving all waivers of notice to be annexed to the meeting
• Confirmation of a Quorum being in attendance
• Approve the moving, seconding and carrying of all resolutions approved at the meeting including the complete text of all resolutions being included in the minutes.

Termination of the meeting

The Secretary of the Corporation normally prepares the minutes.

Distributing Minutes of the Directors Meeting to the Directors for their Approval

All of the directors of the Corporation should be provided with an opportunity to approve the form of minutes. Once approved, the minutes should be executed inserted into the minute book along with all attachments.