What is a Board Resolution?

Most company decisions happen at the board level rather than at the shareholder level. As a matter of company law, directors make their most important decisions collectively through board resolutions. If you are a director, you may appreciate how board resolutions function. This article explains a board resolution and when directors may use it.

What is a Board Resolution?

A board resolution is a formal document containing the board of directors’ decisions during a board meeting. 

In practice, the term ‘board resolution’ can also encompass written resolutions that a company’s board makes. A written resolution is a decision made by a board in writing (instead of a decision made at a board meeting). These two types of decision making are usually equal in validity and authority. Although, a company’s articles of association (i.e. the company’s constitution) can require certain decisions to occur a specific way. 

Often, board resolutions, unlike a written resolution, identifies how each director cast their vote. Further, it is common for each director to sign the resolution before the chair of the meeting certifies it. The company should retain copies of the resolution for at least three years. Additionally, this document may also serve as evidence of a company’s actions.

Typically, meeting minutes will accompany a board resolution, which will contain the points that the directors discuss during the meeting. Board meeting minutes are important because they record the actions of the board and the rationale for why a certain decisions was made. If a dispute later arises, minutes are crucial pieces of evidence. 

How Do You Pass a Board Resolution? 

In most cases, your company’s constitution will generally outline how your company can pass resolutions at the director level. Additionally, there are typically at least two requirements; a quorum and a set number of votes in favour of the motion. 

A quorum is the minimum number of directors that may hold a board meeting with binding decisions in the first place. Your company’s quorum requirement will depend on your business’s size and scale. Moreover, it may also depend on the size of your board of directors. 

Consider that your quorum requirement is three directors. In this case, three or more directors must be present at the board meeting to pass a binding resolution.

Furthermore, your company constitution will also determine the number of votes necessary to pass a resolution. The default position is that all decisions require a simple majority. However, the shareholders can elect to modify this. For instance, they may wish to require the approval of transactions over a certain amount to obtain unanimous approval.

What to Include in a Board Resolution?

These resolutions should: 

• follow a particular pattern; 
• include specific key points; and 
• be written using clear language. 

Often, you can find resolution templates online. These templates will usually indicate that you should include the following points:

• the date of the meeting; 
• the signatories to the board resolution;
• the resolution that the meeting has come to; 
• the direction in which each director votes; 
• the chair’s signature at the end. 

Key Takeaways

As a business with a board of directors, you must understand how to use board resolutions to make certain important decisions. For example, a board resolution may be necessary o make certain decisions. Further, your company’s articles of association will outline the instances in which you will need to use this document. Moreover, board resolutions are a valuable way of keeping track of your company’s actions and decisions. 

If you need help constructing your board resolution, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions