An In-Depth Guide to Corporate resolution:  Everything You Need to Know + sample

In how the law control power of directors of a company I said that company being an artificial person is totally managed by natural people technically called directors.

In day to day activities directors make decisions which impact the company and other stakeholders in one way or another.

Company decisions must be made properly. The proper way to make company decisions is through corporate resolution or board resolutions.

The purpose here is to tell you everything you need to know about corporate resolution.

This post will enable you to understand



    Corporate Resolution Definition

    A corporate resolution is a formal written document drawn from a valid meeting of the board of directors detailing the binding decision made at that meeting.

    In a very simple language corporate resolution is a decision made at a corporate meeting.

    When a corporate resolution is necessary



    A corporate resolution is necessary whenever board of directors is up to make a major binding decision.  

    How corporate resolutions are made/created?

    Corporate resolutions are made/created in the meeting of the board of directors.

    Generally the process of passing a corporate resolution is very simple.

    The process is initiated by the secretary who tables the motion/agenda and the chairperson allows a member to contribute.

    Members discuss and provide their views on the Agenda and what the members agree/resolve is recorded by the secretary as a resolution.

    Sometimes it may appear that members failed to agree. Here the chairman may allow the resolution to be passing through voting. When the vote is 50% /50% the chairman has the casting vote.

    It is worth noting that a valid corporate resolution can only be passed at a valid meeting attended by enough quorum.

    Later I will share with you what are the legal requirements for a valid corporate meeting




    Issues Which Requires Corporate Resolution

    In broad terms it can be said that, depending on the nature of the company business, all company decisions require corporate resolution.

    The following are just example (the list is not exhausted)
    • To authorize a person to act on a certain issue on behalf of the company
    • To issue shares or increase share capital
    • To increase dividends
    • To Merge or acquire another business
    • To buy or sell company properties
    • To hire executive employees
    • To change name of the company
    • To remove or add a new board member
    • To open bank account
    • To issue or take loan
    • To setup new office in a new location
    • Further issues which require corporate resolution may be expressed or implied provided in MEMART of the company.

    Rationale for Corporate Resolution

    I think now it is the right time to tell you why you need corporate resolution in your day to day corporate activities.
    • Authority
    • Transparency and accountability
    • Director’s liability
    • Compliance issues

    Authority

    Authority is the primary aim of corporate resolution. It entails that the issue (s) resolved or the decision made has been made with proper authority.

    Corporate resolution vest the do and the don’t authority regarding certain issues.

    Example when corporate resolution says that X should deal with the opening of a bank account.  When X starts to implement that resolution on behalf of a company, a bank must require proof that they are dealing with a person with the authority to transact. A corporate resolution form can clear that doubt.

    Transparency and Accountability

    Company law requires directors to act in utmost good faith and for the best interest of the company. On the face of it, corporate resolution entails transparence and enhances accountability.

    Directors' liability

    Directors are personally liable for their unlawful acts during company management. It can be criminal or civil liability.

    Corporate resolution can help the court to direct its decision specifically to a person who authorized to act.

    Further, when it comes to corporate liability, corporate resolution act as evidence that a certain unlawful act done by the company was or was not authorized by a board of directors.

    Compliance Issues

    In daily activities, a company must comply with the requirements of the law, MEMART, and external stakeholders.

    Company law requires some of the corporate activities to be resolved as corporate resolution. 

    MEMART may specifically provide issues that require corporate resolution.

    Banks, brokerages, and asset managers may require corporate a resolution before entering into any business transaction with a company just to be sure of the company’s mandate to transact.

    Corporate Resolution Contents

    This section will simplify your work when drafting your corporate resolution form.

    The form and contents of corporate resolution is not the matter of the law but the matter of practice.

    Most of time, the form and contents vary according to company house style.

    The following is the common form and the basic contents of the corporate resolution.



    • Title or name of the document example Corporate Resolution of:
    • Name and address of the company [you may put the address on the footer]
    • Quorum i.e. Member (and their designation) passed the resolution
    • The date and place of passing a resolution
    • A clause stating what was exactly resolved
    • The intention clause
    • Name and Signature of a secretary and chairman of the meeting
    • The certification clause
    • The company seal/stamp

    Requirements for a Valid Corporate Resolution

    For your corporate resolution to be valid it must be


    • Passed in a valid meeting
    • Voluntarily passed
    • Signed, certified and stamped

    Passed in a valid meeting

    Invalid meeting lead to invalid resolution. I can’t emphasize enough on the importance of a valid meeting when passing a corporate resolution.

    Generally I can say that a valid meeting is a meeting which complies with all provisions of company law and articles of association of a company regarding meetings.

    The following must be fulfilled for a meeting to be called a valid meeting



    • It must be properly arranged i.e. it must be planned by an authorized person and the person who invites the member must have the authority to do so.
    • Notice must be given to all who must attend the meeting.  This must comply with the provision of the Articles of Association regarding board meetings.
    • Quorum; it must be attended by enough members (majority number) capable of making decisions.
    • The a meeting must discuss the business/issue valid to be transacted. A valid meeting which discusses an invalid issue is null and void.

    Voluntarily obtained

    The corporate resolution must not be obtained through fraud or duress.  It must be voluntarily and unanimously passed by the majority member.

    Signed, certified and stamped

    The corporate resolution is signed by the chairman and secretary of the board meeting passed that resolution.

    Further, the secretary must certify that is a true copy of the resolution which was passed on the meeting by the present members.

    Company seal or stamp is not just for the resolution which passed for internal use but external use.

    Corporate Resolution Form 



    CORPORATE  RESOLUTION of

    ……………………..COMPANY  LIMITED

    A MEETING OF THE BOARD OF DIRECTORS HELD AT ……………….
    ON THE … … … DAY OF … … … … … 20.. AT … … … AM/PM.

    PRESENT WERE:
    1……………………………….
    2……………………………….
    3…………………………………..
    4……………………………………
    THE CHAIRMAN REPORTED THAT arrangements would be made with ……………………. Limited, to………………………….

    IT WAS RESOLVED that the Company should....................................................

    IT WAS FURTHER RESOLVED that................................... be and are hereby authorized to ................... with ............................... Limited.................................... on behalf of the company.

    The above is certified by the secretary of the meeting as a true copy of the Resolution of the Board of Directors.

    Name___________________________                   _________________ Signature of Chairman        Date

    Name____________________________                   _________________ Signature of Secretary        Date


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