They seem almost like an afterthought; perhaps they are. Minutes of board of director meetings and member meetings are a chore to prepare, possibly even a drudge. But they are critically important to your subdivision homeowners’ association or condominium association. Without minutes, there is no record of actions authorized or taken by the board or members, as the case may be. And without a sufficient written record, more robust challenges to your actions might arise. And at that point, it is too late to change the records.
Section 355.821.1 R.S.Mo., addressing corporate records for Missouri nonprofit corporations, provides in part:
A corporation shall keep as permanent records minutes of all meetings of its members and board of directors, a record of all actions taken by the members or directors without a meeting, and a record of all actions taken by committees of the board of directors as authorized by subsection 4 of section 355.406.
General business corporations (the “for profit” variety) are governed by Section 351.215 R.S.Mo., which provides similar obligations.
In the case of Higginsville Memorial Post v. Benton, the court stated that “[c]orporate minutes … are ‘prima facie evidence of what occurred at such meeting.'” In the Higginsville case, the VFW post had entered into a sale of its real property (including the VFW post building) because of financial difficulties. As part of the sale agreement, the post reserved the right to repurchase the real property. The VFW post provided notice of the exercise of the option to repurchase the real property, but the Bentons, the couple who purchased the post’s real property, refused and objected that the exercise of the option was not effective. In part, and dispositive in the court’s view, was the fact that the post did not provide notice in accordance with either the VFW post’s bylaws or Missouri law to its members who had to approve any such transaction. The Higginsville court noted that “a non-profit corporation may create bylaws to manage its affairs as long as the bylaws do not conflict with the law or the corporation’s articles of incorporation.”
The VFW post’s minutes reflected that a meeting was scheduled but was adjourned to a later date. The exercise of the option was dated eight days before the date that the meeting of the post’s members was to reconvene. Furthermore, the meeting minutes failed to reflect that a quorum was present and also failed to indicate that the requisite number of members constituting a quorum did in fact vote in favor of the exercise of the option. Without minutes reflecting what in fact had occurred, the Higginsville court could not, and did not, find that the exercise of the option was properly authorized by the VFW post’s members.
In the case of Lake Arrowhead Property Owners Ass’n v. Bagwell, the court overturned a trial court decision and found that a homeowners’ association was without authority to enforce a covenant restriction against homeowners. The court found that “there is insufficient evidence to determine that the required quorum was present at the association meetings to consider amendments to the restrictive covenants that were passed.” The court also noted that a “party seeking to enforce a restrictive covenant bears the burden of proving the extent and application of its restriction. … This burden necessarily entails some proof that the process by which the association adopted the restrictions was valid.”
The Lake Arrowhead court further held that:
As in [Higginsville], the association in this case has failed to furnish proof that it complied with its own rules. The quorum provision in effect at the time that members voted on the contested amendments reads: “A 51% majority of the lot owners or Board of Trustees that are present at their respective meeting shall constitute a quorum to conduct business.” The court reviewed the contested amendments and the corresponding minutes and found no evidence recording the number of people present at each meeting or otherwise reciting that a quorum was present at each meeting. These documents declare only that “the owners of lots in Lake Arrowhead subdivision were present to conduct the business of the Association.” This breezy recital contrasts conspicuously with the recitals contained in some earlier amendments, which unmistakably declare that “the owners of not less than 51% of the lots in the Lake Arrowhead Subdivision were present to conduct the business of the Association.”
Continuing, the Lake Arrowhead court noted that in the somewhat analogous corporate context, “it is presumed that a quorum was present at a shareholders’ meeting” but the “presence of those necessary to make a quorum must appear by satisfactory proof.” Thus, the Missouri Supreme Court has said that “[i]t is the duty of a corporation to keep a record of the minutes of the meetings of its stockholders and directors. Such meetings should show the date when the meetings were held and also who was present.” General guidance from legal writers, which was also relied upon by the Lake Arrowhead court, suggests that corporations have a duty to keep minutes showing the meeting dates, action taken, persons present and similar information.
Concluding, the Lake Arrowhead court held that:
While the minutes corresponding to the contested amendments in this case generally recite the number of votes for and against the contested amendments, this evidence alone is unhelpful in documenting the presence of a quorum. The vote totals at the meetings in question never exceeded 172. There are 2,068 lots in the subdivision. While there is evidence that some people and organizations own more than one lot in the subdivision, there is very little evidence showing how many of them own more than one lot or how many lots they own. There is also no evidence to indicate that a large number of people attended the meetings but simply abstained from voting or that a large number of people attended the meetings but were ineligible to vote for some reason. In short, there is no substantial evidence to establish the presence of a quorum.
Every corporation is required to maintain minutes of members, shareholders and board of directors’ meetings as part of its permanent records. Normally, the secretary of the corporation takes and maintains the minutes by reason of a description of duties in the bylaws. There is no statutory requirement with respect to the format of minutes. Usually, the minutes briefly outline the proceedings and matters discussed and set forth the specific resolutions adopted. It is a good idea, with respect to complex issues or resolutions setting forth amendments to the articles of incorporation or bylaws, to prepare and distribute the resolution in advance and have it read at the meeting and voted on in its written form. Then, if adopted, the resolution as prepared can be incorporated into the minutes.
The extent of the minutes prepared should be sufficient to withstand legal challenge to the situation being discussed. Not every matter has to have a verbatim transcript, but the minimum should, as discussed above, include the date, a list of who is present, eligibility (or non-eligibility) to vote, whether a quorum is present and a description of the action taken.
More fully developed minutes that accurately reflect the minimum requirements set forth, as well as a detailed explanation of the action taken, should be desired by all corporations and organizations. More evidence to buttress the authority for the action taken would, it is imagined, be more desirable than arguing a deficient record before a court.
Conclusion
Homeowner associations and condominium associations present interesting challenges in that the board of directors comprises all volunteers, generally without experience in managing an organization which, while pertaining exclusively to their subdivision or condominium, needs to operate just the same as any “for profit” business by maintaining accurate, permanent records of proceedings.