How to Write a Board Resolution: Best Practices & Free Template
Looking for straightforward board resolution advice? This guide breaks down the essential elements, offers best practices, and provides a free template for drafting effective and binding resolutions. NOTE: this website does not provide legal advice. Please consult with an attorney on the ideas and examples provided below before tailoring for your own use.
Key Takeaways In This Blog Post
A resolution is a formal document that outlines binding corporate actions and must be meticulously documented to ensure legal compliance.
Key elements of a board resolution include a title, resolution number, preamble, actionable clauses, and signatures from authorized personnel.
Proper storage and management of board resolutions are crucial for maintaining accountability and compliance, with digital solutions recommended for enhanced security.
Understanding a Board Resolution
A board resolution is a formal document created by the board to outline binding corporate actions. The essence of a resolution lies in its ability to formalize board decisions in writing, ensuring that significant actions and changes in corporate governance are meticulously documented. Think of it as the blueprint that guides important decisions, preserving them for future reference and legal verification.
Once passed, a board resolution becomes part of the corporation’s official records and is legally binding. This means that the decisions captured within the resolution must be adhered to, making it a powerful tool for governance. Certifying resolutions involves having them signed by authorized personnel, thereby verifying their legality and authenticity. This process not only reinforces the board’s decisions but also enhances the corporation’s credibility with financial institutions and potential partners.
Understanding how to draft these resolutions effectively is crucial for anyone involved in corporate governance. Knowledge of this process ensures that writing board resolutions becomes easier and more efficient, ultimately leading to better-managed and legally sound corporate actions.
When to Use a Resolution
Resolutions provide a legal framework that governs how the board can operate under different conditions. They are essential for maintaining accountability to laws, regulations, and fiduciary duties to shareholders. Whether you’re opening a business bank account, voting in new directors, or making significant strategic decisions, a formal resolution is often required to document these actions.
Writing board resolutions is particularly important when the board deems it necessary to document decisions should questions arise later. This proactive approach helps protect the board against potential legal disputes and ensures that all actions are transparent and traceable. Common reasons for drafting a resolution include major decisions affecting the organization, such as acquiring another organization or making a significant financial commitment.
Not documenting crucial decisions with resolutions can lead to missed opportunities and potential legal issues. The board is responsible for making these major decisions, and documenting them meticulously helps in providing proof of compliance for regulatory verification. This ensures that the director board directors are diligent in their duties and are protected from personal liability.
Elements of a Resolution Format
Drafting a board resolution involves including several key elements to ensure it is clear, legally binding, and easy to reference. One of the first steps in crafting a resolution is to include the date and a resolution number, starting with a simple numbering system like 0001. This not only helps in organizing and tracking resolutions but also makes future referencing much easier.
Additionally, a well-drafted resolution should start with a relevant title that clearly relates to the decision being made. Along with the title and resolution number, the document should include meeting minutes and signatures from authorized signatories to validate the outcome of the vote. These components collectively ensure that the resolution is both comprehensive and legally sound.
Resolution Title and Number
Properly titling and numbering resolutions enhance their documentation and make future referencing easier. The title should be directly related to the decision made, such as “Resolution to Allocate Funds for a Specific Initiative.” This clarity ensures that anyone reviewing the document can immediately understand its purpose.
A clear and consistent numbering system is also crucial for maintaining organized records. Starting with a simple system like 0001 and incrementing for each new resolution helps in tracking and retrieving specific resolutions when needed. This systematic approach simplifies the management of board resolutions and supports efficient corporate governance.
Preamble and Recitals
The preamble and recitals, also known as the introductory section, set the context for the resolution by detailing the background information and justification for the decision. Each key statement in this section should begin a new paragraph with the term ‘whereas,’ which helps to clearly outline the rationale behind the board’s decision.
For instance, if the resolution is about funding a new project, the preamble might include statements like, “Whereas the corporation recognizes the need for investment in new technologies,” followed by, “Whereas the board has reviewed the financial implications of such an investment.” These recitals provide the necessary context and support for the decision.
Each ‘whereas’ clause should be succinct and directly related to the decision at hand. This structured approach ensures that the resolution is both comprehensive and easy to follow, laying a solid foundation for the actionable clauses that follow.
Resolution Clauses
The main body of the resolution consists of actionable clauses that clarify the board’s decisions. Each clause must clearly specify the actions taken or approved by the board, ensuring that the decision is unambiguous and can be implemented effectively. These clauses should be concise and capable of standing alone in meaning.
For example, an actionable clause might state, “Resolved, that the board approves the allocation of $500,000 for the development of new software,” clearly delineating the action to be taken. Each clause should be structured to leave no room for misinterpretation, ensuring that the resolution is legally binding and enforceable, backed by legal authority.
The conclusion of the resolution should summarize the final actions and decisions made by the board. This summary acts as a clear directive for implementation, leaving no doubt about the board’s intentions and the steps to be taken.
Steps to Drafting a Resolution
Before drafting a board resolution, it’s important to clearly understand the intent. Clarity about the purpose will guide the writing process effectively. Understanding why the resolution is needed helps in drafting a document that is focused and relevant. Once a resolution is proposed, board members should engage in thorough discussion to address any concerns and ensure that all viewpoints are considered before voting.
The introductory statements in the resolution should provide context and rationalize the decision being made. This includes the preamble and recitals, which set the stage for the actionable clauses. After drafting the resolution, it is essential to have it reviewed and signed by the board president to finalize and confirm its approval.
Writing board resolutions is a systematic process that involves careful planning and attention to detail. By following these steps, you can ensure that each resolution is clear, legally sound, and effectively documents the board’s decisions.
Passing a Resolution
Passing a board resolution involves a structured process to ensure its validity and compliance with the organization’s bylaws. The voting method can vary, including options like voice votes or written ballots, depending on the organization’s specific regulations. To validate a resolution, it should include the names of directors who voted and a section for them to indicate their votes.
The resolution must be signed by the board president, with the date of their signature included, to finalize it. This signature acts as a formal approval of the resolution, making it legally binding. Additionally, the meeting minutes should reflect whether the resolution passed or failed, along with a detailed breakdown of the votes.
Proper documentation of the voting process and final decision ensures transparency and legal compliance. It also provides a clear record that can be referred to in future board meetings or legal situations, reinforcing the board’s accountability and diligence.
Storing & Managing Resolutions
Secure storage of corporate resolutions is essential to prevent theft or destruction by disasters. Corporate resolutions serve as evidence during audits or reviews by regulatory bodies and stakeholders, ensuring accountability. Using board management software systems like Diligent Boards is a recommended method for storing board resolutions.
It is advisable to store board resolutions in a formal repository such as Easy Board alongside important books and legal documents. Digital solutions enhance security and streamline access to important documents related to board resolutions. Regular audits of stored resolutions help maintain organizational compliance and accountability.
Backup copies of board resolutions are important to mitigate risks of data loss due to unforeseen circumstances. Incorporating a board resolution template into a board management system allows easy access for board members when needed, making the process more efficient and secure.
Sample Resolution Template
A well-drafted company or nonprofit board resolution formalizes decisions made by the board during meetings. Key elements to include in a resolution are the issue voted on, names and roles of voters, results, and final certification. Including all necessary elements ensures clarity and legal compliance in the resolution process.
Below is an example resolution template. You may use this as a guideline for creating your own.
Resolution Number: 0001 Date: January 1, 2025 Title: Resolution to Allocate Funds for Purchase of Property
Whereas:
The board recognizes the need for investment in new technologies.
The board has reviewed the financial implications of such an investment.
Resolved:
That the board approves the allocation of $500,000 for the development of new software.
Signatures:
Board President: **__**
Date: **__**
This template provides a clear and concise format for drafting resolutions, ensuring that all necessary information is included and easily understood by all board members.
Summary
Drafting and managing board resolutions is a vital process in corporate governance. From understanding what a resolution is to knowing when and how to use them, each step is crucial for ensuring that board decisions are documented and legally binding. The elements of a resolution format, including the title, number, preamble, and clauses, help in creating clear and effective resolutions.
Using the provided template and following best practices can streamline the process, making it easier to draft, pass, and manage resolutions. By incorporating these practices into your board meetings, you can enhance the transparency, accountability, and legal compliance of your organization.
Frequently Asked Questions
What is a board resolution?
A board resolution is a formal document that the board of directors creates to outline and formalize binding corporate actions and decisions. It serves as an official record of the actions taken by the board.
When should a board resolution be used?
A board resolution should be utilized for significant decisions impacting the organization, including the appointment of directors, opening a business bank account, or pursuing acquisitions. It formalizes important agreements and actions within the company.
What are the key elements of a board resolution format?
The key elements of a board resolution format consist of the resolution number, date, title, preamble, actionable clauses, and signatures from authorized signatories. Ensuring these components are included is crucial for the validity of the resolution.
How do you pass a board resolution?
To pass a board resolution, the board members must vote on the matter, ensure proper documentation of the votes, and obtain the final approval and signature from the board president. This process ensures a formal and legally binding decision is achieved.
How should board resolutions be stored and managed?
Board resolutions should be securely stored in a formal repository, such as Easy Board, with regular audits and backup copies to ensure accountability and prevent data loss. This approach facilitates effective management and easy retrieval when needed.
