What is a Board Resolution?
A board resolution is a formal document of a resolution taken by the company’s board or its board members. It can also be called a corporate resolution or a director’s resolution. Board resolutions are legally binding and consist of all the details regarding the decisions accurately so that there is no ambiguity later. It can be used to track details of every significant board decision, including who voted, their role, etc.
How is a Board Resolution Passed?
A Board resolution serves as a formal certification and documentation of a decision made by a company's Board of Directors. All key decisions are recorded through the passage of resolutions. However, for a resolution to be valid, certain prerequisites must be met:
- A quorum must be present, which is the minimum number of directors required for the meeting.
- The resolution must be prepared on the company's letterhead.
- The resolution must be filed in the company records within 30 days of the Board meeting.
- A chairperson must be appointed to oversee the meeting.
When is a Board Resolution Required?
The board of resolution is required to be written in the following cases -
- Retaining a new member of the board
- Selling shares of the corporation or increasing dividend amounts.
- A real estate purchase
- A merger or Acquisition
- Giving a loan to a business
- Filing a patent or purchasing an existing patent
- Delegating funds to a specific project
- Hiring a new employee
Types of Board Resolutions
Board resolutions can be categorized into three types -
1. Ordinary Resolution
An ordinary resolution addresses routine company matters and requires a simple majority to pass. This means that more than 50% of the votes cast must be in favor of the resolution.
2. Special Resolution
A special resolution is reserved for significant decisions, such as changing the company’s name or amending its articles of association. It typically requires a higher voting threshold, often at least 75% of members voting in favor, for approval.
3. Written Resolution
A written resolution can be either ordinary or special, depending on the nature of the decision. Instead of being voted on at a meeting, it is approved in writing. Written resolutions are especially useful for time-sensitive matters or decisions that require minimal discussion among directors.
The board secretary typically handles filling out the board resolution. Below are the key details to include when drafting a resolution for the board of directors:
- Date, Time, and Location: Record when and where the meeting took place.
- Resolution Title: Include a concise title summarizing the board’s decision.
- Decision Statement: Note whether the decision was made by majority or unanimously.
- Resolution Details: Clearly outline the decision and any actions required to implement it.
- Responsible Officers: Identify the officers tasked with executing the resolution.
- Director Details: Include names, signatures, and voting records of the directors.
- Secretary/Chairperson Details: Add the secretary or chairperson’s name and signature.
Board resolutions are vital for documenting key decisions made by a company’s board. Understanding their format, requirements, and types ensures accuracy and compliance in corporate governance. With this guide, drafting and handling resolutions can become a straightforward process for businesses.
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