It is common for people in a company, incorporated Society or trust to want to take a “common sense” approach to decision making where legal processes require something more formal that may seem unnecessary. Sometimes the reasons for cumbersome processes are not clear. Surely they do not need to be followed all of the time? Well, yes they do.
The law is not forgiving when procedural rules are flouted especially by officers who have a clear duty to act in the best interests of the organisation. The Courts are very clear that a critical element of good governance and management is the proper observance of the law and constitutional documents no matter how inconvenient that might be.
If the rules in a constitution are not working because they need updating or were inadequate in the first place, then it is better to address that through a formal change than just carry on as if they will be changed later.
If decisions are not made and documented properly, this can cause, or increase internal dispute within the organisation, or it can leave the organisation, and its directors vulnerable in the event of an external challenge, such as from a creditor. If directors’ duties have been breached through taking shortcuts, then this can be very expensive for the individuals involved. Sometimes, a contract or arrangement is simply not legally effective if it has not been agreed to properly. That might leave directors personally responsible when they did not mean to be.
The “never mind we are all good friends here” management approach may sometimes seem to work for a while. The fact is that when there is a disagreement the first thing that people do is to check the rules. If the rules have not been properly followed, then officers become vulnerable to criticism and liability.
Our COMPANY AGENDA AND MINUTES PACK is a set of minutes, agendas and written resolution templates designed to help record important company decisions in a way that demonstrates compliance with the Companies Act and most common constitutional documents. The User Guide explains when the various templates are to be used and the different majorities that can be required to make different decisions. The COMPANY AGENDA AND MINUTES PACK is an essential support tool for running your company in a safe and compliant manner. ALL