Making Business Decisions: FAQs

Much like any of your company activity, the most important thing is to record every step that you take, in order to avoid this scenario. Below we have outlined some frequently asked questions about the proper steps that should be taken to cover your back.

Who Should Be Involved?

The majority of decisions made within a business should include the full board of directors. Certain decisions can be delegated to a specific person or department, but this must first be agreed across the board. Any decisions, particularly delegations, should be recorded in a board minute to ensure that it is clear which decisions the deputised individual are authorised to make.

In some cases, shareholders should be in the decision-making seat, such as when company articles are changing, substantial transactions need to be authorised or in circumstances where a director has breached his duties by making a decision without consultation.

There are also some decisions that need to be made between both directors and shareholders, some of which include making loans to directors, issuing shares and declaring dividends.

Your company’s articles should be familiar to you, along with any shareholder’s agreements and the Companies Act (this document is relevant to decision-making).

Where Should Decisions Be Made?

‘Board meetings’ should be held to discuss decisions between directors, and shareholders’ decisions are made at ‘general meetings’ (this is why they are often referred to as ‘shareholders’ meetings’, unless they are unanimous, in which case no meeting needs to be held.

Once it has been decided how such meetings should be called and run, the company’s articles should outline these details.

Shareholders’ (general) meetings are usually organised more formally as all shareholders must be notified properly; various things must be agreed on. These include:

• How much notice will be given

• What these notices should contain

• How they are sent

• How someone can call a meeting

How Should Votes Be Taken at the Meetings?

Again, decisions between directors are simpler, but votes should still always be recorded. A quorum (minimum number of members that must be present to make any meeting valid) must be agreed on initially, and again, recorded in the company’s articles.

At a board meeting (between directors), the majority of directors who attend the meeting must agree on the final decision as long as there are enough directors there to form a quorum.

At a shareholders’ meeting, there can either be a ‘show of hands’ or a vote, if requested. Each shareholder who attends, either in person or by a representative, has the same number of votes as their shares. In a similar way to board meetings, there is usually a requirement in the articles as to the minimum number of shareholders who need to attend a meeting to make it quorate.

Where and How Should Decisions Be Recorded?

The minutes of both shareholders’ and board meetings should be kept in the company’s minute book, as should written resolutions (decisions made by shareholders).

As highlighted above, this point is of utmost importance to ensure that you are able to prove when the decision was made and by whom. This avoids the risk of individuals arguing over exactly what was decided. During the process of recording meetings, a distinction should be made between general notes throughout the meeting, and actual decisions taken.

As mentioned earlier, it is best to record how each member voted, and ask them to sign the minutes at the conclusion of the meeting. It is surprising how many attendees change their minds in hindsight and this process simply prevents them from doing so until further meetings can be held and recorded accordingly.

Remember that taking these precautions is simply best practice to ensure that you cannot be prosecuted for wrongful or fraudulent trading and therefore risk personal liability. It may seem long-winded especially when seemingly insignificant decisions are being discussed, but you won’t regret it in the long run.

About

If you are having any issues with debt or HMRC tax arrears for your UK ltd company we can help. Get in touch today for some FREE advice. 01472 254914 https://www.forbesburton.com