A board resolution is a legal document that records the decisions made by your company’s board of directors. But why are board resolutions meaningful, how do you write one, and what should a board resolution include? Do not worry; we will answer all these questions in this article.
What is a Board Resolution?
It is essentially a formal document that serves as a record of the critical decisions and actions that your company’s board of directors has taken. The point is to hold the board accountable for their choices if someone tries to change their mind.
Additionally, a board resolution is necessary to show state and federal regulators your company’s board and responsibilities. It means that the board is doing everything it can to make sure the company is profitable.
However, it is not necessary for all actions of the board to be recorded in a board resolution, only the things that will significantly impact its direction.
It could include situations like:
- Board member changes
- Issuance of new shares on the stock market
- Acquisition of new assets or companies
- Repurchase of shares
- Apply for new corporate loans
- Expansion to a new state
In contrast, day-to-day activities, such as hiring new employees or landing new clients, do not need to be recorded in a board resolution.
When is a Board Resolution Needed?
When a board of directors supports a company to sell specific properties or assets, it can create a corporate resolution. The document acknowledges that the company has the necessary approval to proceed with the transaction. Board resolutions related to real estate sales must also have some witnesses involved in filing the documents. In addition to the witness, the organization’s top executives also sign corporate resolutions.
A company must obtain specific provisions from creditors throughout a bankruptcy process if that business returns to solvency. Board resolutions transpire to outline the arrangements that may have been made with creditors before or after a bankruptcy filing. Also, plans to exit bankruptcy protection in these types of board resolutions.
If a company needs to obtain financing for an event, such as a project, expansion, or purchase of equipment, it may be necessary to obtain debt financing. Board resolutions transpire by declaring the parameters approved for any debt financing if restrictions on the interest rate applicable to the loan in a board resolution document.
Types of Board Resolutions
Following are the three major types of board resolutions:
Ordinary resolutions
They are passed by 50%+ of board members’ votes. They are used for all types of decisions unless the Companies Act specifies the need for a different resolution.
Special resolutions
They were passed by a 75% majority of board members’ votes at a general meeting. They are used for extraordinary business decisions that cannot be given by an ordinary resolution.
Written resolutions
They are used when a meeting is not obligated to pass an ordinary or extraordinary resolution. Written resolutions require a 75% majority vote. Board members cast their votes by signing the written resolution or indicating their decision via email or online.
What to include in a Board Resolution
Board resolutions are legal documents that must always you must compose in the same way. The exact structure of your company’s corporate solutions depends on your state’s department of business services. Be sure to check your state’s requirements.
That said, a board resolution typically has the following elements:
- The legal name of the company
- The date, time, and place
- The governing body responsible for making the board resolution
- Title and objectives of the resolution
- Signatures of the individuals (s) designated to sign solutions (usually the chairman of the board of directors)
- Details about any decisions made during the meeting
- The state in which the company was founded
Indication of whether the resolution agreed was unanimous or not (if it is not unanimous, the number of votes in favor and against must be recorded)
Actions to be taken next
Board resolutions are primarily intended for internal use; that is, they should not be filed with the federal government. Despite this, it must be detailed enough so that there are no misunderstandings.
How to write a Board Resolution
If writing a board resolution seems a bit intimidating. The same can happen with a business plan if you’ve never written one before.
But by following these steps, you can quickly write your board resolution:
Format
Write the solution by putting the date, time, place, and board resolution number at the document’s start.
In the case of your first resolution, you can use a number like ‘#01’.
You can also enlist the board members and others present, but it is optional.
Add the title
The title should be clear, concise and should clearly state the purpose of the document.
For example, “board resolution of the Board of Directors of Company A to acquire Company B.”
Legal identification of the company
You should also include the detailed legal designation of the organization.
For example, “Company A or organization was incorporated in the State of California on January 1, 2015.”
Problems and solutions
The board resolution must, of course, indicate all the decisions that were made throughout the meeting.
Notwithstanding example, “TO DISCUSS: That the Company will acquire Company B.” Then you can write: “RESOLVED: Company agrees to buy Company B for $ X.”
Each detail of the decision made during the meeting should be a separate paragraph and resolution.
You can also indicate details of each resolution and the vote count for each one.
Signature and Date
Each board resolution must end with a legal statement of the accuracy of the solution.
It must also be dated and signed by all necessary parties, such as the board’s chairman, the treasurer, the corporate secretary, the vice president, and others.
Resolution is a document that sets out the company’s board of directors’ decisions and when those choices were made. By following these steps, you can quickly write your board resolution.
Board Resolution Template (For Meeting),
Board resolutions are essential but different from other documents. They are also legally binding, so it is essential to be careful when writing one. The good news is that you can download it from our website. These templates are usually perfect for standard resolutions and can save you a lot of time and effort
Board Resolution Format,
Board Resolution Sample Letter,
Board Resolution Sample Philippines,
Tips for Writing a Board Resolution
While writing a board resolution may seem complicated, it is very straightforward and easy to understand.
But to make you feel more content when writing your board resolution, we share some tips that can make your job easier.
Internal or external use?
Board resolutions are often for internal use only. But in some cases, third parties need them for specific business transactions.
Board resolutions written for external use should be simplified as much as possible. In these cases, the third party only needs to know that the board of directors agrees on the transaction to be made; that is, they do not need all the details.
Be concise
As I already mentioned, a board resolution is a legally binding document: it is essential to be clear and concise.
It’s your turn; write a board resolution. Board resolutions are essential documents for any company. And while they may seem intimidating, they are relatively simple documents to write.
FAQs
A board resolution describes the actions taken by the board of directors of a corporation. The minutes are a written document of actions taken and resolutions passed during a regular board meeting.
A resolution that is verified by the secretary of the meeting or by the CEO of the company is called a certified corporate resolution.
We hope that our guide and template will help you. To summarize, board resolutions reflect the significant decisions taken by a company’s board of directors. They establish policies for managing a company. They can handle many forms and authorize hiring decisions, officer compensation, dividend distribution, or any critical issue facing the business. That is why it is essential to write a clear and concise board resolution.
