What the Minutes Never Captured: A Quarterly Audit of Unrecorded Board Commitments
Boards tend to govern what they can see. The contract register, the delegated authority schedule and the minutes provide a reassuring paper trail. But commitments rarely arrive only through signed agreements. They are made in calls, confirmed in emails, implied in side letters and repeated in procurement conversations. Individually they may look minor. Collectively they can harden into contingent liabilities, disputed obligations or reputational problems that reach the board only when a counterparty presses its case.
The task is not to eliminate informal communication. It is to make sure the board is not the last to know what the company has promised. A quarterly routine, run with discipline and a clear purpose, is more useful than an annual scramble when a dispute emerges.
Why the Contract Register Is Not the Whole Picture
A contract register records what has been executed. It does not necessarily record what has been assured. A customer may have been told that a renewal price will be held. A supplier may have been given comfort that volumes will not fall below a certain level. A landlord may have received an oral indication that a break clause will not be exercised. A director may have said that the group will 'support' a subsidiary's project without approving a formal funding line.
These commitments matter for three reasons. First, they can create financial exposure that is absent from the budget. Second, they can constrain management discretion in ways the board has not approved. Third, they can undermine the authority framework: if people outside the delegated limits can create expectations, the schedule becomes a document of record rather than a control.
For UK directors, the issue is also one of disclosure and judgement. Not every informal assurance is a contingent liability, and not every side letter requires public disclosure. But the board cannot make a sensible judgement about accounting treatment, risk reporting or legal exposure if it does not know the commitment exists.
A Deliberately Broad Definition
The starting point is a separate commitment log. It should not replace the contract register. It should capture items that fall outside it but could require resource, affect rights or limit the company's choices.
The definition should be broad enough to surface near-contracts and narrow enough to remain usable. A workable test is: any assurance, concession or expectation created by or on behalf of the company that is not recorded in the approved contract register, and that could bind or influence future conduct.
That may include side letters, heads of terms, letters of intent, memoranda of understanding, oral variations, procurement waivers, customer concessions, supplier assurances, informal board approvals, commitments made by agents or consultants, and undertakings given to regulators or lenders outside formal documentation. It should also include commitments made by subsidiaries and joint ventures where the group could be expected to stand behind them.
The log itself should be simple. Record the date, source, counterparty, nature of the commitment, estimated exposure, authority claimed, evidence held, current status, accountable owner and next action. A single page per quarter is often enough. The value lies in the questions asked, not the sophistication of the template.
The Quarterly Routine in Four Steps
1. Ask a fixed set of questions
Send the same questions each quarter to commercial, procurement, finance, legal, operations, HR and subsidiary management. Ask directly: has any customer or supplier been given an assurance outside the contract? Has any side letter or waiver been issued? Has anyone promised future work, priority allocation or support? Has a regulator or lender received an informal undertaking? Has an oral variation been discussed?
The most revealing question is often simpler: what would surprise the board if it surfaced in a dispute? Respondents should be asked to surface items even where they believe the commitment was authorised. The purpose is visibility, not confession.
2. Trace the authority
For each item, identify whether the person who made the commitment had authority under the delegated authority schedule or a specific board approval. Record the evidence: an email, a file note, a meeting record or a witness account. Distinguish between commitments that were authorised but undocumented and those that were not authorised at all. The first may need formalisation. The second needs escalation and, in some cases, corrective communication with the counterparty.
3. Assess the consequence
Rate each commitment for financial, legal, operational and reputational impact. Consider whether it affects a customer relationship, a supplier dependency, a covenant, a regulatory expectation or a pending transaction. Where accounting or disclosure judgement is required, involve finance and legal advisers early rather than allowing the log to become a parallel legal file.
4. Decide the disposition
Every item should end with one of four decisions: disclose, formalise, stop or monitor. Disclosure may mean reporting to the board, audit committee or a relevant sub-committee. Formalisation may mean a contract, a board ratification or a revised delegated authority. Stopping may require a clear communication that the commitment will not be honoured and that future requests must follow the authority process. Monitoring is appropriate where the exposure is uncertain but the item should remain visible.
Making the Exercise Safe Enough to Work
An off-book commitment review fails if it becomes a hunt for individual error. People will hide informal assurances if they fear blame. The board should frame the exercise around company exposure and control improvement, not personal reprimand. The sponsor should be a senior director with the standing to ask awkward questions without turning the process into an inquisition.
The review should also be proportionate. Not every email needs legal review. Triage by value, likelihood and strategic sensitivity. Link the log to the risk register where appropriate, but do not bury it there. Off-book commitments have a habit of reappearing at the worst possible moment, usually when a counterparty changes its position or a relationship sours.
What the Board Should See
A one-page quarterly summary is usually sufficient. It should show the number of commitments surfaced, their aggregate estimated value, how many were unauthorised, how many have been formalised, stopped or disclosed, and how many remain open beyond an agreed date. The board should ask which items could become material, whether authority failures are repeating in the same functions, and whether any commitment needs to be reflected in risk reporting or external communication.
As UK companies approach year-end and the 2027 planning round, the routine is timely. It gives auditors, lenders and insurers a clearer view of how the board governs what is not written down. More importantly, it reduces the chance that a casual assurance becomes a board surprise. The discipline is not bureaucratic. It is a practical way of making sure the company knows what it has promised before someone else reminds it.
