Corporate Resolution Guidance: Benefit, Outline, Example

The Board of Directors guides the company towards its goals. Every decision they make is crucial, shaping the company’s future. Amidst these strategic choices, corporate resolutions are essential tools that document the Board’s decisions. 

Corporate resolutions are not just paperwork; they are the foundation of effective governance, enabling the Board to lead the company confidently towards a successful future. 

To learn more about the importance of corporate resolutions and how to implement them effectively, read our full article. 

What is corporate resolution?

A corporate resolution is an official document adopted by a corporation’s board of directors that details and authorizes particular corporate actions. It serves as a formal record of the board’s decisions, facilitating the implementation of significant changes while ensuring adherence to legal requirements.

Typically, corporate resolutions address major matters such as financial transactions; like purchasing property or securing loans, or key personnel decisions, including the appointment or removal of executives, rather than everyday operational activities.

Why is corporate resolution important?

Corporate resolutions play a crucial role in organizing and directing business decisions. Here are some of the reasons why these resolutions are important:

1. Create accountability

Resolutions establish the responsibilities and obligations that each party within the company must fulfill. With corporate resolutions, every decision can be traced back to the individual or team responsible.

2. Separate responsibilities

Company resolutions also help delineate roles and responsibilities among shareholders, the board of directors, and executive management.

For example, a resolution can grant the board of directors the authority to make strategic decisions, while operational management is responsible for daily execution.

3. Uphold legality

Corporate resolutions are binding legal instruments. They document decisions that have been formally approved by shareholders or the board of directors.

By adhering to company resolutions, the company ensures compliance with applicable laws and regulations.

When is A Corporate Resolution Required?

A corporate resolution is required whenever a corporation’s board of directors needs to formally approve and document significant business decisions or actions. These typically include:

• Major financial transactions such as purchasing or selling real estate, applying for loans, issuing debt, or approving capital expenditures.
• Strategic decisions like hiring or firing C-suite executives, appointing new board members, or changing executive compensation.
• Corporate governance matters including amending bylaws, approving mergers and acquisitions, issuing new shares, or accepting articles of incorporation.
• Legal and regulatory filings, like registering intellectual property or approving SEC filings.
• Opening business bank accounts or designating authorized signers.

In essence, corporate resolutions are necessary to provide a formal, legal record of major corporate actions and ensure compliance with laws and company bylaws. They are especially critical for documenting decisions that affect the company’s structure, finances, or management, and for enabling the corporation to act independently from its owners

Corporate Resolution Planning in Step-by-Steps

1. Identify the Action or Decision
   The board of directors recognizes a specific corporate matter requiring formal approval or documentation; such as financial transactions (buying property, loans) or strategic personnel decisions (appointing or removing executives).
2. Draft the Resolution
   Prepare the corporate resolution document clearly outlining the proposed action, including relevant details such as the purpose, authority, and any conditions or limits.
3. Board Review and Discussion
   Present the draft resolution to the board. Directors review the proposal, ask questions, deliberate the potential impacts, and make revisions as necessary.
4. Adopt the Resolution
   The board formally approves the resolution, usually through a vote during a board meeting or by written consent, with the outcome recorded in official minutes.
5. Documentation and Record-Keeping
   The adopted corporate resolution is signed by authorized officers and kept in corporate records to provide legal evidence of the board’s decision.
6. Implementation of the Resolution
   Relevant corporate officers and departments take action in accordance with the resolution, such as executing contracts, authorizing transactions, or updating personnel records.
7. Monitor Compliance and Follow-up
   The company ensures that the resolution is properly implemented and complies with any legal or regulatory requirements. Any required filings with government bodies are completed.

Types of corporate resolution

Corporate resolutions record key decisions made by a company’s board of directors, like major financial choices and ownership changes.

They specify which officers can act on the company’s behalf, such as trading securities, opening bank accounts, withdrawing money, and writing checks. Banks, brokerages, asset managers, and title agencies often need this information to verify legal ownership and authorize transactions.

Changes to the company’s dividend policy, including increases or suspensions, also require a resolution. Dividends are payments, in cash or stock, given to shareholders as a reward for their investment in the company.

Other typical actions requiring a corporate resolution include:

• Purchasing real estate
• Applying for loans or credit
• Issuing debt, like corporate bonds, to raise capital
• Voting in new board members
• Changing the executive management team, such as hiring or firing a CEO
• Deciding executive compensation, including salaries and bonuses
• Issuing new equity shares
• Filing for patents
• Mergers and acquisitions
• Forming joint ventures or strategic partnerships
• Altering retirement plans, like issuing stock options to employees
• Modifying employee health benefits
• Leasing equipment or purchasing major assets, like factories

Example of corporate resolution

The board of directors of Company A plans market expansion; the company requires an additional capital injection. Shareholders of Company A need to hold a General Meeting of Shareholders to discuss and make decisions regarding the fundraising plan.

Resolutions serve to approve the agenda of the meeting prepared by the Board of Directors. The agenda typically includes discussions on financial reports, future business plans, and fundraising proposals.

Each separate action has a corporate resolution, and the board completes them by ensuring that the information in each document is accurate.

The essential outline of corporate resolution

The proper form of a corporate resolution is determined by your state’s business services department, but generally, a corporate resolution should include:

1. Date of the resolution.
2. State in which the corporation is formed and under what laws the corporation acts.
3. Signature of the officer appointed to sign the corporate resolution. Typically the chairman of the board of directors or the corporate secretary.
4. Document title with its purpose. For example, “Resolution to Apply for a Bank Loan.”
5. Statement indicating the resolution has the approval of the board members. If the resolution is approved unanimously, this statement needs to be included. If the approval is not unanimous, you need to include a list of board members and their “yes” or “no” votes.
6. Statement indicating the board’s intention in making this resolution. For example, “Through this resolution, the intention of the board of directors is to appoint a bank account….” As a note, this statement is optional. You can include it or not.
7. “Therefore” or “resolved” statement to specify the action to be taken. For example, “Therefore, with the written approval… the appointment of bank XYZ as the company’s fund depository has been approved.

How to Write A Corporate Resolution Draft

After knowing the essential outline of corporate resolution, the following are the detailed steps to draft a corporate resolution.

1. Title the Document Clearly
   Start with a clear heading such as “Corporate Resolution” or “Board Resolution” including the company name and date.
2. Begin with the Preamble (Whereas Clauses)
   Include introductory statements explaining the purpose and background of the resolution, starting with “Whereas,” to provide context.
3. State the Resolution
   Use clear, concise language beginning with “Resolved that…” to specify the action or decision the board is authorizing.
4. Include Specific Details
   Outline important particulars such as names, amounts, dates, locations, authorities granted, or conditions related to the resolution.
5. Assign Authority
   Identify officers or agents authorized to execute or implement the decision, specifying their roles.
6. Provide for Approval and Adoption
   Include a statement about the approval of the resolution by the board of directors during a meeting or by written consent.
7. Leave Space for Signatures
   Provide lines for signatures of the board chairperson, secretary, or other authorized officers validating the resolution.
8. Reference the Meeting or Consent Date
   Mention the date on which the resolution was adopted to ensure proper record-keeping.
9. Keep the Language Formal and Legal
   Use formal, professional wording appropriate for legal documentation.
10. Review and Proofread
    Ensure clarity, accuracy, and compliance with company bylaws and relevant laws before finalizing the draft.

Conclusion

Corporate resolutions are more than just formalities; they serve as the foundation for long-term growth and success. By embracing these essential governance principles, businesses can make decisions confidently and transparently, promoting accountability and safeguarding the interests of stakeholders.

To focus more on implementing good corporate governance, you need digital solutions to streamline business operations. With integrated SaaS solutions from Mekari, companies can free up valuable time and resources to focus on strategic decision-making and achieving business goals.

We believe that combining good corporate governance with the right SaaS solutions can help companies achieve long-term success. Contact us today to learn more about how our SaaS solutions can help your company reach its goals.

Reference

Investopedia. ‘’Corporate Resolution: Definition, How They Work, and Types’’
Legal Zoom. ‘’Corporate resolution guide: Examples, tips, and how to write one’’