Board resolution management for corporate secretaries

Board resolution management for corporate secretaries

Updated: November 10, 2023
11 min read
Board resolution
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Boards are responsible for steering the company and making significant decisions that affect shareholders and the organization. Beyond these crucial responsibilities, an overwhelming 95% of directors and executives consider it their foremost duty to cultivate and protect stakeholders’ trust. .

Building trust among stakeholders significantly impacts how the board makes decisions. Thus, the resolution of the board of directors plays a pivotal role in boosting transparency, which, in turn, creates a more open and trustworthy environment

A board meeting resolution serves to formalize critical decisions made by board members in writing. While arriving at major decisions is often straightforward, the process of drafting a resolution can be a daunting task. 

To simplify it, in this article, we’ll provide a comprehensive guide on how to write a board resolution with efficiency and ease.

What is a board resolution?

A board resolution is a formal document that creates a paper trail for the decisions made by the board of directors’ during a board meeting. This document is also known as a certified corporate resolution or a resolution of the board of directors. It serves as an official record of the approved board decisions. 

Board directors regularly adopt this formal document to record their actions when they anticipate the need for an additional review. Most often, board resolution should be written under the principles and processes outlined in Robert’s Rules of Order.

The task of drafting a board resolution is often associated with corporate secretary duties.

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Types of board resolutions

Efficient corporate management includes understanding the various types of resolutions, their distinctive descriptions, and the fundamental differences between them. Those charged with directing an organization’s strategic goals must also be capable of creating well-structured resolutions and the board resolution format.

There are four main types of board resolutions, each serving specific purposes within the framework of corporate decision-making:

  • Ordinary resolutions

These are also known as circular resolutions, which typically include everyday operating choices. They are frequently passed by a single majority vote, making them appropriate for day-to-day board decisions. 

  • Special resolutions

They address more serious concerns, such as modifying an organization’s documents of incorporation or name. This board resolution example requires a larger majority vote, sometimes 75% or greater, to be approved. 

  • Unanimous resolutions

When the board confronts significant choices demanding unanimous agreement, they invoke unanimous resolutions. If all board members agree, no disagreement is possible.

  • Written resolutions

Written resolutions are a flexible alternative in instances requiring swift board decisions outside of normal meetings. Individual board members signal their acceptance in writing, making it an effective approach to resolving time-sensitive issues.

To help you understand the differences between various resolution settings, we’ve included a comparison chart below:

Resolution typeMajority requiredUse cases
Ordinary resolutionSimple majorityRoutine business decisions
Special resolution75% or moreSignificant changes, like altering articles of association
Unanimous resolutionUnanimous approvalCritical decisions with no room for dissent
Written resolutionFlexibleTime-sensitive matters, decided outside board meetings

When is a board resolution required?

On many occasions inside of organization, board resolutions are necessary to proceed with further actions. However, there is no requirement to submit directors’ resolutions for corporate bank account matters, to a government agency or any other monitoring authority. 

Board members commonly use resolutions to officially document vote outcomes and legally binding documents, such as:

  • A board member’s appointment or removal
  • Approval of financial statements
  • Voting on new corporate officers onto the board
  • Acquiring a new business
  • Getting into long-term leasing arrangements
  • Changing executive compensation, incentives, and additional benefits
  • Assigning duties to senior officers, committees, or third parties

The company keeps it for self-evaluation or if any of the shareholders wish to verify the activities conducted on their behalf by the board of directors. 

Alternatively, as part of their audits and verification procedures, banks, brokerage companies, the IRS, or the court may request copies of a directors resolution. This resolution board may be stored in a digital board book format for convenient access and review.

How to write a resolution for a board meeting

The board secretary is usually tasked with writing board resolutions, although any board director can also take on this responsibility. The effectiveness of these resolutions hinges on their structure, clarity, and official documentation. Hence, it is crucial to maintain conciseness and include only the necessary information. 

There are four key considerations for board members learning how to write a resolution for board meeting:

how to write a resolution for board meeting:

When writing a board of director resolution, it’s important to effectively implement and document meeting decisions. It includes the procedures that follow the board meeting and the creation of a resolution.

Here’s an overview of the key aspects involved:

  • Execution and follow-ups

After passing a resolution, the board must ensure its execution. For this, assign officers or committees to carry out the directives and monitor progress regularly.

  • Record-keeping and filing

Record and document all board resolutions meticulously, including the date, description, names of board members present, and outcome of the vote. It is vital for legal compliance, accountability, and historical reference.

  • Accountability and reporting

As part of this process, it’s essential to ensure transparency through periodic progress updates and result reviews. To keep the board well-informed,  proactively develop effective reporting methods.

A comprehensive breakdown of what items should be included in a board of resolution letter is provided below.

1. Meeting date

The meeting date is critical in recording and coordinating board actions. It acts as a point of reference for all talks and decisions taken during the meeting. Here are useful tips concerning meeting day: 

  • Make a note of the date of each board meeting to have a chronological record of decisions and debates. 
  • Ensure that the meeting date is correct so board member could avoid any mistake or misinterpretation of the sequence of events.  

2. Resolution numbering

Successful resolution management requires assigning distinct resolution numbers. Thus, every one can simply identify and retrieve certain resolutions.

  • To maintain clarity and order, assign resolution numbers consistently and methodically.
  • Number the resolutions in a way that corresponds to their chronological or thematic order.

3. Title designation

The title of a resolution communicates the subject and purpose of the resolution to the directors. A well-crafted title helps them understand the context quickly.

  • When creating effective resolution titles, keep them concise, clear and reflective of the resolution’s essence.
  • Avoid using vague or excessively lengthy titles, as they confuse and cause misunderstandings.

4. Resolution documentation

It is crucial to document resolutions to maintain a comprehensive record of board decisions and actions.

  • The documentation should include all essential details and provide a clear and concise description of the resolution, specific objectives, and actions.
  • Attach all the relevant supporting documents, reports, and data to provide a complete context.

5. Director votes

Transparency and accountability within the board require recording how each director votes on resolutions. 

  • Document each director’s specific vote (e.g., “for,” “against,” “abstain”) for each resolution.
  • Provide an overview of the resolution’s approval status by summarizing the vote results.

6. Tech integration

Leveraging board meeting technology, such as consent agenda, significantly streamlines the management of resolutions and increases the overall efficiency of board operations.

  • Consider digital tools and applications like virtual data room software. VDRs enable resolution tracking, documentation, and communication easier.
  • Ensure that the technology is safe, user-friendly, and available to all board members.

How to pass a resolution at a board meeting

After drafting a resolution, the board directors must approve it verbally during a meeting and keep a written record of it afterwards. Most likely your company’s policy explains how resolutions at the director level can be passed. In addition, there are usually two requirements: a quorum for board meeting and a certain number of votes in favor of the motion. 

The main reason for requesting more discussion is to give any objectors a chance to explain why the board decides that way. This may even sway the votes of other directors. Finally, the board meeting minutes should state whether the resolution was approved or rejected, as well as the number of voices. If you ever wondered how to write meeting minutes as a secretary, please read our dedicated article. 

The steps in the infographic below will assist you through the process:

How to pass a resolution at a board meeting

Common challenges in board resolutions

The board of directors’ function has gotten substantially more difficult in recent years. The clarity, accuracy, and legal compliance of these documents are crucial whether the board is dealing with major strategic choices, compliance difficulties, or day-to-day operating issues. Writing board resolutions presents three major challenges:

Conflicts of interest

ChallengeSolution
These problems may arise when a board member’s personal interests or affiliations may compromise their ability to make impartial decisions. This raises concerns about the transparency and fairness of the board’s decision-making process.The conflicted party should disclose their conflicts of interest clearly, and they must withdraw themselves from relevant discussions and votes.

Dissent and disagreement handling

ChallengeSolution
Dissent and disagreement among board members can impede decision-making, leading to delays and compromised outcomes.Create an organized debating procedure that includes time limitations, courteous language, and possibilities for compromise.

Ensuring compliance and mitigating risks

ChallengeSolution
To avoid legal and reputational problems, it’s crucial to follow rules and regulations. Equally important is identifying and addressing potential threats to the organization’s success. It includes financial, operational, or reputational risks.Appoint a compliance officer or committee to supervise compliance activities and evaluate and update risk assessments regularly.

Board resolution examples and user cases

The scenarios from real life provide insight for board decision-making, especially in complex situations that impact a company’s success. Below are some of the situations that require board resolutions.

  • Dividend declaration

A company has a pile of profits, and now the board needs to decide how much of it to distribute as dividends to shareholders. This decision requires a delicate balance, as it’s important to reward the investors while also retaining sufficient funds for future growth. In this case, the resolution outlines the company’s financial decision.

  • Corporate governance policies

An organization is committed to ethical conduct and transparency. In this case, board resolution outlines how the board and the company should operate. It’s like setting the rules of the game, ensuring everyone plays fairly.

  • Board committee formation

A board realizes that handling all responsibilities directly is too complex. To address this, they create specialized committees such as audit, compensation, and nomination committees. These committees function as problem-solving teams that focus on specific areas.

  • Mergers and acquisitions

A company is considering a merger with another firm. The board resolution outlines the terms, benefits, and impact on business. This decision will determine the future of both organizations.

  • New product launch

A technology company is ready to launch a game-changing product. In the resolution, the board has approved the budget, timeline, and marketing strategy. This resolution serves as a green light for innovation and growth.

Board resolution: tips and best practices

Understanding how to make a board resolution may appear a challenging task since it addresses crucial corporate matters. However, it matters most to ensure that the resolution is clear and full, especially in terms of the specifics. Here are some best practices to follow to make the writing process less intimidating:

  • Build consensus and collaboration

Building consensus and encouraging collaboration among board members is the first step toward successful board resolution management. Open and productive conversations ensure that resolutions represent the board’s collective wisdom and competence. 

  • Stay informed on legal updates

To maintain compliance with resolutions, the board must be diligent in comprehending shifting legal requirements and rules. On the other hand, business attorneys should analyze your board resolution template or, where feasible, the text of your board resolutions.

  • Keep transparent communication

Communication must be open and transparent since it fosters trust and ensures that all shareholders are on the same page. It is critical for a resolution to pass successfully.

  • Use virtual data room software 

All board resolutions should be securely stored. For example, board portals provide a room for easy reference and organization. Board members can use boardroom software to submit votes, e-sign board resolutions, and access them at any time and from any location. 

How iDeals Board can help in drawing board resolution

The market for board portals has grown 70% from 2020-2023. It is unsurprising that over half of the 400 surveyed companies are seeking technological innovations, given the current trend. Moreover, Deloitte identifies three main advantages of board portals: improved information access, centralized communications, and enhanced data protection.

iDeals Board comes with a set of features that simplify the process of drafting and passing board resolutions:

  • Document drafting and collaboration

Multiple participants can collaborate in drafting and editing documents related to resolutions, ensuring that they create well-structured and up-to-date board materials.

  • Template library

Creating new resolutions is made easy with pre-defined templates that adhere to established formats and standards. Users can customize the selected template to fit their needs.

  • Version control

Tracking changes and maintaining versions ensure transparent and accountable resolution creation. Users can review and revert to previous versions as needed.

  • Digital signatures

Enables board members to sign resolutions electronically, eliminating the need for physical signatures or scanned documents.

  • Custom workflows

Organizations can create custom workflows for resolution creation, review, and approval, defining the steps and roles involved in the process.

Key takeaways

  1. Board resolutions are necessary for formalizing and recording major decisions taken during board meetings.
  2. Understanding the format for board resolution is crucial, as it applies to the four primary forms of board resolutions: ordinary, special, unanimous, and written
  3. Effective resolution management necessitates precise record-keeping, open reporting, and the application of technology to speed the process.

FAQs

What is a board resolution letter?

A board resolution letter is a board resolution document that outlines decisions made by the board members during formal meetings. It is critical for corporate governance.

Who signs a board resolution?

The board chair and the corporate secretary usually sign a board resolution, based on the specific signatories mentioned in the company’s bylaws and other terms for a board resolution.

Can a board resolution be signed digitally?

Many jurisdictions now accept digital signatures for board of directors resolution, but it’s important to ensure compliance with legal requirements and company policies.

Where should the board store a board resolution?

Corporate board resolution should be stored securely in the corporate records, whether in the corporate or stored in virtual data rooms.

Why is a directors resolution required?

Corporate resolution formalize critical decisions made by the board of directors, serving as a legal record and ensuring regulatory compliance.

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