A board resolution is a document that formalises important decisions made by the board of directors and the actions relating to them. It is legally binding and functions as a compliance record to provide evidence of decisions made by the board regarding pivotal company matters.
Types of board resolutions
There are three types of board resolutions:
Ordinary resolutionAn ordinary resolution involves routine company matters and can be approved by a simple majority vote. To pass, the votes cast in favour should exceed 50% of the total votes.
Special resolutionA special resolution involves major decisions, such as changing the company name, and usually necessitates a higher threshold to pass. For example, a company might require at least 75% of the members to vote in favour in order to pass the resolution.
Written resolutionA written resolution can be either special or ordinary depending on the nature of the decision. It can be voted for in writing rather than at a meeting. Written resolutions are useful when the matter is time-sensitive or does not require much debate between directors.
Adoption of a board resolution
To adopt a board resolution, the following matters need to be considered:
Quorum requirementsEvery organisation has a different criterion as to what constitutes a quorum. A quorum is required to be present for all board resolutions before casting votes.
Chairperson and vote castingThe final draft of the board resolution has to be certified by the chairperson. In case of a tie, they have the authority to cast the deciding vote.
Record keepingAn accurate, detailed record of the resolution should be made so it can serve as proof of a decision in the case of an investigation or audit. For example, in the UK, the record should be kept for at least ten years starting from the date on which the board passed the resolution.
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