Minutes of meetings are a major factor in today’s commercial activities but, due to the absence of an explicit legal boundary or formal acknowledgment of their legal force, minutes have become the subject of numerous civil and commercial disputes.
Associate
DOCVIT Law Firm
Minutes are a type of highly summarised and streamlined document, signed by all attendees with the purpose of recording the basic agenda, issues discussed and decisions reached in meetings or conferences. Common examples include minutes of shareholder and board meetings.
There are numerous instances where parties intended to establish a contract in the form of minutes, only to have them ultimately denied as valid contracts or agreements. There have also been situations in which minutes were merely used to record the content of a meeting, but were later recognised as contracts demanding to be performed. So, a proper system to ascertain the nature of minutes in civil and commercial meetings and the criteria for determining their legal force is sorely needed.
In judicial practice, only when minutes satisfy certain procedural and substantive requirements can they be recognised as contracts or supplementary agreements, thus making the minutes legally valid and binding on the attendees. If minutes do not satisfy these requirements, it is considered that there was no intention to create a contract and the minutes should revert to their original purpose as meeting records.
Associate
DOCVIT Law Firm
Procedural requirements
The creation of a contract requires authentic signatures and/or seals of all parties. Article 490 of the Civil Code specifies: “Where the parties conclude a contract in the form of a written agreement, the contract is formed at the time when the parties all sign, stamp, or put their fingerprints on the memorandum.” The prerequisite for minutes to acquire legal force is that they be signed or sealed by the attendees in confirmation.
In practice, if the minutes do not bear the company’s official seal, as is often the case for one reason or another, but the legal or authorised representative has affixed his/her signature, the document shall be deemed properly sealed with no prejudice to its legal force. Article 170 of the code specifies: “A civil juristic act performed by a person for fulfilling his responsibilities assigned by a legal person or an unincorporated organisation, within the scope of authority and in the name of the legal person or the unincorporated organisation, is binding on the legal person or unincorporated organisation.” This was the basis of the Supreme People’s Court’s judgment in Zhou Jianjun v Zhejiang Wanda Construction (2015).
When the minutes lack the signatures/seals of attendees, they clearly do not satisfy the extrinsic requirement of a contract and thus cannot be regarded as such in the civil context. Accordingly, no relation of civil rights and obligations was established between the parties. The Intermediate People’s Court of Yueyang Municipality, Hunan province rendered its final judgment based on this view in the case of Tianzou Breeding v Tianzou Jingyuan Husbandry (2019).
Substantive requirements
The creation of a contract also requires provisions on the establishment, modification and termination of the relation of rights and obligations between the parties. Article 464 of the Civil Code stipulates: “A contract is an agreement on the establishment, modification, or termination of a civil juristic relationship between persons of the civil law.” Minutes can only be recognised as a contract and have legal force as such when they expressly provide for rights and obligations in the legal sense.
Under usual circumstances, minutes are merely used to record the proceedings of meetings or negotiations and the principled opinions arrived at in the process, which do not fall within the definition of contracts. When minutes do not establish relations of rights and obligations in a legal sense, they likewise are not legally binding, even if bearing authentic signatures/seals of the attendees. In practice, some minutes are signed with opinions along the lines of “approved by the board of directors. Consequently, if not recognised by the board of directors, the minutes are unlikely to be determined as contracts or become binding on the attendees. The Supreme People’s Court endorsed this view in the case of Shenzhen Construction Decoration v Haikou Lawton International Tourism Development (1998).
However, when the minutes do meet the definition of contract under the code, they satisfy the substantive requirements for being a contract. If all parties to the minutes unanimously express a true intent in respect of the minutes in a manner that is clear, specific, enforceable, and all parties agree to be bound by them, such minutes may qualify as a civil contract and thus becomes a contract as recognised by law. The Supreme People’s Court rendered its findings based on this principle in Shanxi Zhangze Electric Power v Shanxi Guangjian Real Estate (2013) and Gezhouba Group v Hainan Zhonghui (2016).
As for whether the minutes have the validity of a contract, all attendees must be unanimous and authentic in their intent, and the content must not violate any laws, regulations, mandatory provisions or “good order and public custom”. Meanwhile, the actual performance of the minutes also calls for attention. Unanimously recognised performance could on some level serve as interpretation, supplementation or revision to imperfectly worded minutes. In such case, minutes may also be recognised as a supplementary agreement.
Practical advice
At present, the use of minutes is growing in popularity, and it is more important than ever for them to be properly prepared. To accurately determine the nature and legal force of minutes, both the procedural requirement of bearing signs/seals and the substantive requirement for establishing rights and obligations in the legal sense must be prudently reviewed, so as to best safeguard one’s own interests.
It should be pointed out that the practice of creating a contract in the form of minutes is not recommended. This is because that deeming minutes as contracts is still a controversial act lacking a legislative basis. Formal written contracts should still be the go-to option whenever possible in daily operations, to avoid the legal risks arising from using minutes to establish the legal relation of rights and obligations.
Hou Xinkai and Wu Jing are associates at DOCVIT Law Firm
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