Understanding Board Executive Sessions

January 22, 2012

Clients and Friends:

I wanted to follow up on a very well done blog entry by my law partner, Curtis Kimble, in which he discussed HOA minutes (please refer to our prior posts).  This entry will go a bit “deeper” and explore the often used procedure of adjourning a Board meeting into “executive session.”  Two topics will be briefly discussed below:  (1) when is it appropriate to adjourn into executive session, and (2) should minutes be taken during executive session?

Our firm is working towards legislation that gives more guidance on executive session but that has yet to come to pass.  In the meantime, we have to rely upon time-tested common law principles and rules of parlimentary procedure to answer the following questions:

1.  When Should the Board Adjourn into Exective Session?  The Board must not use executive session as a means to simply “excuse” members who have shown up at a Board meeting.  Traditionally, there are only a limited number of issues that qualify you to adjourn into executive session:

(a)  Discussions of threatened or pending litigation;

(b)  Personnel matters, assuming you have employees, such as hiring and firing.  This includes discussions about your managment company, attorney, accountant, etc.

(c)  The formation of contracts with third parties (this is because you don’t want sensitive information about competiting bids to be out in the public just yet).

(d)  Member discipline – such as putting someone into collections, or levying a fine against a particular homeowner for a specified violation.

(e)  Other matters which you sense that by naming a homeowner or homeowners in front of non-Board members, that the information is too sensitive for general knowledge in the community (such as issues that are related to privacy of particular member(s)).

2.  Should Minutes be Taken During Executive Session?  I have a mixed response as to this question.

The minutes kept during your regular Board meeting should indicate that the Board adjourned into executive session.  Typically, executive session works best if held at the end of the meeting so any homeowners in attendance can be excused.  However, a debate rages over whether you should take separate minutes in executive session or not.

Prior to addressing this issue, however, after the executive session is over, the regular Board minutes should reflect which decisions were made in executive session (without any detail of the discussion that occurred) and which action will be taken.  You should not, in your regular minutes or in any records kept during executive session, state any specific advice that your attorney gave you simply because you may lose your attorney-client privilege if you do so.  Regardless of which minutes were kept, you simply note what decisions were made.  Make sure the vote of the Board is clearly reflected in the regular Board minutes.

As for taking minutes or other notes during executive session, I do advise that you keep a record of your actions and disucssions made during executive session.  However, remember (see Curtis’ prior blog entry), minutes should NOT be a verbatim re-creation of what was said and discussed.  You should simply address the issue(s) at hand, indicate that discussion was held, and that a vote was taken.  We maintain, as do many other state laws and general rules of procedure, that executive session minutes are privielged from access by the general membership.  Though you have nothing to hide, please remember that a court of law could still require that you reveal anything kept in written or electronic format from an executive session.  This concern should not chill your discussion, but should keep your focussed on the issue for which you have adjourned into executive session and help curtail and tendency to make any inflamantory, defamtory or otherwise insensitive comments that sometimes come out “behind closed doors.”

As always, please contact us for a follow up if you have any questions about executive session meetings and minutes.  This entry is intended to give some general guidance only and each factual situation may result in more detailed advice.

Next time, I’d like to have a discussion about requring Board meetings to be open to the membership by announcing them in advance and encouraging attendance.  Presently, in Utah, there is no express requirement for ‘open Board meetings’ but I have found, probably like many of you, that nothing creates more suspicion in a community than when members have no idea how their Board is acting, when they are meeting and what issues are being discussed.  MORE TO COME!!!

Until then, best regards, John Richards.   john@rkw-law.com

Minutes Can Make The Difference – Taking Proper HOA Meeting Minutes

October 22, 2011

To know where you’re going, you have to know where you’ve been.  This famous saying is all too applicable to HOAs where institutional memory can be as short as the terms of board members and boards can unwittingly address the same issues over and over again.  This is one reason why minutes are so valuable.  Unfortunately, a common problem we lawyers see is improperly prepared minutes, or worse, no minutes at all.

Perhaps the most important thing to understand about keeping proper minutes is that minutes are the record of the official actions taken by the board or the members and that an official action requires a vote.

What should minutes look like?

Anyone reading the minutes should be able to easily understand, at a minimum, what actions were taken and how they were approved. There is no hard and fast rule regarding the level of detail to be included in minutes, but minutes should reflect what was done, not what was said.  Minutes should not record every detail or statement said at the meeting and they should not reflect conversations. However, there should be enough information to make the minutes useful when they are used for reference or offered as evidence that an action was properly taken or that directors fulfilled their fiduciary duties.  Boards and secretaries tasked with recording or approving the minutes must understand the purpose and eventual use of minutes, and then use their best judgment about the degree of specificity provided in the minutes.

Boards should also be mindful of how they handle confidential or sensitive information. For example, if the board holds an executive session to discuss confidential or sensitive matters, the minutes of the meeting should indicate that the board met in executive session and the topic of the discussion, but the specifics would likely be confidential and appear only in a set of confidential-to-the-board minutes or other notes.  A separate recordkeeping system should be established for such confidential information to easily distinguish it from records that a member would otherwise be entitled to view.

What should minutes not look like?

Minutes should not record discussions or contain owner comments and should never be a transcript of every statement made by directors and others. Doing so creates potential defamation claims, becomes evidence for other claims against the board and the association, and can dissuade potential purchasers and lenders who may believe that a negative issue is much more serious than it really is.  Minutes should reflect decisions and reasons for those decisions, not discussions or specific conversations.

 At a minimum, board meeting minutes should include:

  1. Name of the association (always use the exact legal name).
  2. Date, time, location and type of meeting (regular, special, emergency, executive session).
  3. Names of directors in attendance and directors not in attendance, including the office they hold, if any (president, secretary, etc.), and names of guests in attendance who were invited to speak to the Board (contractors, attorney, accountant, etc.).  Members in attendance should not be listed.
  4. Whether a quorum was established.
  5. Any board actions (e.g., approvals, delegations of authority, directives).  It’s not necessary to show the names of those voting in favor, abstaining and in opposition to a motion, but it’s sometimes not a bad idea, especially to show those dissenting, in order to limit personal liability for the consequences of an action they disagree with.  Also include any actions (decisions, votes) taken between meetings and include details documenting that proper procedure was followed.
  6. General description of matters discussed in executive session.
  7. Once the minutes are approved by the board, they should include the signature of the secretary signifying that the minutes constitute the official record and minutes of the meeting

Once approved by the board, the minutes should be signed by the secretary or other person responsible for authenticating records of the association (See Utah Code 16-6a-818(3)). By signing the minutes, the secretary is signifying that the minutes constitute the official record and minutes of the meeting and the votes by the board occurred as recorded in the minutes.  Minutes then become proof that a vote occurred as recorded.

The official minutes should be included in the minutes book and should also be scanned and kept as electronic files, as a form of backup, among other reasons.

Additional Suggestions:

  • Include alternatives considered for important decisions to show diligence and reasonable care.
  • Consider attaching reports given to the board (so long as they may not be misconstrued to be prejudicial to the organization or to the board).
  • Record recusals from discussions and abstentions from voting;
  • Prepare a list of action items separate from the minutes, what people commit to do.
  • Include whether notice was given and/or attach the notice of the meeting or waivers of notice to the minutes.  That way all the documents relevant to noticing the meeting are also in the minute book.
  • Use a format that clearly indicates when a board action has been taken (e.g., “Resolved,” “Action”).

It’s crucial that minutes are prepared so as to document actions of the board now but without creating problems in the future.  Additionally, with the turnover experienced in association boards, it is critical to have good, complete but concise minutes so that future boards do not find themselves “reinventing the wheel” on issues that have already been addressed.

You can find sample minutes here and a sample list of action items here.

Curtis G. Kimble

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