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One of the officers shall have the duty to record the proceedings of the meetings of the stockholders and directors in a book to be kept for that purpose."
That sentence from section 142 of the General Corporation Law is the only reference to the requirement for corporate minutes contained in the Delaware statutes. There is a lack of significant jurisprudence dealing with corporate minutes, and there are very few treatises on the subject. Nonetheless, following the adoption of the Sarbanes-Oxley Act of 2002 and the recent Delaware Supreme Court case dealing with the Walt Disney Company's termination payments to its president, Michael Ovitz (in re The Walt Disney Company Derivative Litigation, 906 A.2d 27 (Del. 2006)), the significance of corporate minutes and their contents have taken on a whole new level of importance.
A corporation's directors owe a fiduciary duty to the corporation on whose board they serve. Among other issues raised in the Disney case was whether Disney's directors fulfilled that fiduciary duty by properly exercising their constituent duties of care and loyalty. The duty of care, the main issue in the case, requires directors to exercise the level of care that a person in a similar situation would have exercised under the same or similar circumstance. Plaintiff-shareholders argued that Michael Ovitz's board-approved employment agreement that provided for a termination benefit totaling $130 million after he had only been on the job for 14 months must clearly have resulted from a breach of the duty of care by corporate directors.
When evaluating the actions of directors, courts have adopted a standard of judicial review known as the "business judgment rule." Generally stated, the rule presumes that the board acted independently, with due care, in good faith, and in the honest belief that its actions were in the shareholders' best interests. There are two aspects to the rule. First, courts will not substitute their judgment for the boards, and second, the board's action will not be evaluated with the benefit of hindsight, but based on the information that was available at the time a decision was made. Thus, if the boards action was not clearly irresponsible at the time it was made, the business judgment rule should be a complete defense to any...