Can directors see minutes of meetings they were excluded from?

[eteb3]

Director with conflict of interest can't be present when conflicted matters discussed.

Can they see the minutes of the meeting?

Currently we minute the closed part of the meeting separately and file it in the usual place, but on understanding conflicted director won't read it. Is this ok? Could they insist on seeing the minutes if we filed them somewhere else? What's legal minimum and best practice?

Posting in this forum because it seems like an accountants/co-sec sort of a question. Mods please move to Legal if better. Thanks.

 

[Gyumri]

Director with conflict of interest can't be present when conflicted matters discussed.

Why not? If the conflict of interest is known to all and accepted it would serve little purpose in having a "secret" meeting with the director excluded. It does't seem like it would be acting in the best interests of the company for some directors to start building Chinese walls against others.

The director could not vote at the meeting which would therefore protect the board. Somebody with a good knowledge of company law might be able to provide a more definitive response supported by law or case authority.

 

[fisicx]

You can’t exclude a director from a board meeting. They can’t vote if there is a conflict of interest but they can attend unless they have been suspended pending disciplinary action.

You are setting yourself up for a whole lot of legal issues if you proceed as you suggest @eteb3. Consult a solicitor.

 

[eteb3]

Appreciate your response.

Director with conflict of interest can't be present when conflicted matters discussed

Gyumri: Why not?

Because the articles (quite properly) say so. (Bc it’s human nature not to speak freely about someone in front of them.)

By extension, should they be kept from the minutes of that meeting?

 

[fisicx]

You can't exclude them!

If this is a disciplinary issue you first need to suspend them and then hold a meeting to discuss their removal. But a simple conflict of interest does not exclude them from the meeting.

 

[Ozzy]

You can't exclude them!

Actually, you can if there is a conflict. I've been excluded and I have excluded others when conflicts have arisen.

Can they see the minutes of the meeting?

At the discretion of the rest of the board, but exactly the same as you do. Redacted minutes are kept separate as needed and conflicted directors can be excluded from reading them, but there can be exceptional circumstances. Ultimately it depends on the governance of the company.

 

[fisicx]

Actually, you can if there is a conflict. I've been excluded and I have excluded others when conflicts have arisen.

You might need to get legal advice on this. Conflicts of interest mean you can't vote but you can't normally be excluded. We had this when I was a director of a housing association where they wanted to exclude a property developer (because they had bid to carry out maintenance) and the company lawyer said this would be unlawful.

 

[Gyumri]

(Bc it’s human nature not to speak freely about someone in front of them.)

Then this wouldn't be about a conflict of interest.

Actually, you can if there is a conflict. I've been excluded and I have excluded others when conflicts have arisen.

There has to be some legal basis for being able to exclude a director from a board meeting based upon a perceived conflict of interest. It might be in the articles but unlikely.

I don't see s175 of the Companies Act providing such a basis but others may be able to point the OP in the right direction.

Companies Act 2006

www.legislation.gov.uk

 

[nelioneil]

You can’t exclude a director from a board meeting. They can’t vote if there is a conflict of interest but they can attend unless they have been suspended pending disciplinary action.

You are setting yourself up for a whole lot of legal issues if you proceed as you suggest @eteb3. Consult a solicitor.

I agree with this. Even if there is something in the articles, I’m not sure if it could override legislation in regards to the directors duties and powers.

I would be very careful with this and would consider getting legal advice to confirm what needs to be done.

 

[Newchodge]

Surely, if a group of directors need to discuss their concerns about anther director, they DON'T do it at a board meeting.

 

[fisicx]

@Ozzy, you key need to rethink how you run a board meeting. Conflict of interest just means they can’t vote. It doesn’t mean you can exclude them.

 

[eteb3]

I thought this was a fairly simple question. Evidently not!

Missing context, which may or may not make a difference: the company is a charity, and the conflict of interest arises because the directors are considering whether to commission goods & services from the spouse of a director.

The model articles for charitable companies have a general prohibition on directors or "connected persons" receiving a benefit from the charity of any kind, including a market price for goods & services supplied.

A carve-out in the articles permits an agreement for supply of goods if (among other things):

7(3)(d) The supplier is absent from the part of any meeting at which there is discussion of the proposal to enter into a contract or arrangement with him or her or it with regard to the supply of goods to the charity.

Presumably some company law specialist drafted the Commission's model arts, so we're confident they're legal.

I've scoured the Charities Act(s), and can't find anything that would give a power to exclude the director that isn't already available under the Companies Act.

Which of the director's duties do people think would be infringed by this arrangement? Whatever it is, it may be that CA s. 173(2)(b) covers it? Director doesn't breach their normal duty to exercise their judgment if they are acting in accordance with the articles.

It's possible there's a third way accounting for strong objections above: perhaps the director is not strictly excluded from the meeting, but if they insist on not withdrawing themselves, authorisation for the transaction can't be given. If so, that's pretty neat drafting.

All further thoughts gladly received.

 

[fisicx]

That excludes the supplier not the director. Which means the director husband can still attend.

 

[eteb3]

That excludes the supplier not the director. Which means the director husband can still attend.

Thanks. I realised the same thanks to the close reading this discussion's prompted.

But the supplier might easily have been the director herself, not her husband.
For another time, what then?

 

[fisicx]

They can still attend, they just can’t vote.

 

[eteb3]

They can still attend, they just can’t vote.

Nope, not by the articles: the transaction can't be authorised if a supplier-director is not absent from... any meeting where it's discussed.

 

[fisicx]

I’d check your articles with a solicitor. They may not be legal. Just because an article exists doesn’t mean it can’t be challenged. Exclusion means a director cannot fulfil their duties and responsibilities. It’s complicated and needs legal clarification.

 

[eteb3]

perhaps the director is not strictly excluded from the meeting, but if they insist on not withdrawing themselves, authorisation for the transaction can't be given.

Thoughts on that?

 

[fisicx]

Thoughts on that?

Ask your solicitor. Might be ok but it’s not something I’ve ever experienced.

 

[fisicx]

Just spoke to someone more experienced in company law than I and their answer was a resounding no. Exclusion of a director or excluding themselves isn’t an option. Conflict of interest just means they can’t vote.

 

[Gyumri]

Nope, not by the articles: the transaction can't be authorised if a supplier-director is not absent from... any meeting where it's discussed.

That still doesn't affect the entitlement of a director/supplier to attend a board meeting ie., the article doesn't reserve a power to exclude.

 

[eteb3]

the article doesn't reserve a power to exclude.

That's my reading by now, too. So if the director insists on staying, the transaction can't be authorised. But if they choose freely to withdraw, it can be. Neat way to achieve the intended result.

But I do note @fisicx 's point about asking a solicitor.

 

[fisicx]

They can’t leave the meeting without good reason. Conflict of interest is not good reason. You really need to be careful with this as the director could be in breach of their duties.

 

[Ozzy]

you key need to rethink how you run a board meeting. Conflict of interest just means they can’t vote. It doesn’t mean you can exclude them.

Nope, I'm pretty clear on it. In one example the director was a director of company A and was also a director of another company B, and company A was suing company B through the courts.
When the case was being discussed (and the solicitors were present at the meeting to brief the board on the progress of the case) the director was excluded from the board meeting and the minutes of the case were redacted from the main minutes.

 

[fisicx]

Thanks @Ozzy - that's a pretty good reason for exclusion! But in the case being discussed here it's just a conflict of interest concerning a potential supplier. This isn't a reason for exclusion.

 

[eteb3]

director of company A and was also a director of another company B, and company A was suing company B

Now THAT is a conflict of interest! ?

 

[eteb3]

This isn't a reason for exclusion.

How are you determining the boundary between "enough of a reason to exclude" and "not enough of a reason to exclude"? Surely if exclusion is possible (and I'm still not sure that's quite the right word), then it's possible full stop?

 

[Ozzy]

Now THAT is a conflict of interest!

boundary between "enough of a reason to exclude" and "not enough of a reason to exclude"

These two, which is why my original answer is that it is down to governance not "legal", the directors have a duty and any director can be excluded. That director can also challenge them being excluded, and a court can judge on that but the original decision is governance.

 

[The Resolver]

Nope, I'm pretty clear on it. In one example the director was a director of company A and was also a director of another company B, and company A was suing company B through the courts.
When the case was being discussed (and the solicitors were present at the meeting to brief the board on the progress of the case) the director was excluded from the board meeting and the minutes of the case were redacted from the main minutes.

@Ozzy Surely the answer when discussing legal action involving a director in another capacity is for one or more directors to meet at the solicitors office for the purpose of discussing and taking advice on the legal case. That would not be a Board meeting. I agree with others that he cannot be excluded from what si called a Board meeting. It would be at the latter that referen is made to "following advice from the companys solicitors, I propose that we resolve to .continue the legal action ....(OR WHATEVER)."

 

[Ozzy]

I agree with others that he cannot be excluded from what si called a Board meeting.

We agree to disagree, to a degree. ?. It is not normal, but it is not illegal, imho.
In this case a committee was setup to handle the day to day of the case, negotiate and such, and report back to the board on progress and activities, and for the board to vote on important matters of the case. It was down to conflict of interest as the director sat on both boards of both organisations and the matter too sensitive to be shared.

 

[The Resolver]

We agree to disagree, to a degree. ?. It is not normal, but it is not illegal, imho.
In this case a committee was setup to handle the day to day of the case, negotiate and such, and report back to the board on progress and activities, and for the board to vote on important matters of the case. It was down to conflict of interest as the director sat on both boards of both organisations and the matter too sensitive to be shared.

It is not illegal in this case because we are told by @eteb3 that the company is governed by the model articles for charitable companies which allow for exclusion. This means effectively that directors have agreed to be excluded in the circustnaces set out in the Articles. If however a compnay is governed by the Model Articles (or many other formats) every Director must be given notice and can attend.

 

[fisicx]

Yes, but the supplier in this case is not the director. The supplier is the director's spouse. The question should be: is the spouse a connected person?

And are the articles a verbatim copy of those for a charity (with all the necessary bits filled in)?

 

[eteb3]

Yes, but the supplier in this case is not the director. The supplier is the director's spouse. The question should be: is the spouse a connected person?

As I now realise. I did mention that above, and said it would be good to know for the situation where the director situation arises - so the thread is v. useful.

And are the articles a verbatim copy of those for a charity (with all the necessary bits filled in)?

Yes. So it's bizarre why the regime is as it is:

1. Director or connected person supplying services:
   director present, non-voting
2. Director or connected person providing premises at a rent:
   director must be absent
3. Director or connected person providing goods only:
   supplier must be absent !?!

Feels illogical, but charity law is ancient and weird, and presumably arts are exactly what drafters intended.

I now discover (thanks to @fisicx for the trip to legislation.gov.uk), that Charities Act 2022 means supply of goods is now covered by a more lenient statutory power. But we're stuck with these arts for a while.

 

[eteb3]

This means effectively that directors have agreed to be excluded in the circustnaces set out in the Articles.

This makes sense to me now. You see a similar dynamic in unincorporated associations, where agency flows from the members to the committee under rules that all are bound by.