BOARDROOM BEST PRACTICES

Sample Board Resolution: A Template for Recording Board Decisions

When the board makes a decision that significantly affects the future of the organisation that it serves, the decision must be officially recorded through the passing of a board resolution. This is a legally binding document that forms part of the organisation’s corporate record, so it is essential that it is drafted and implemented correctly. For this reason, boards often use a sample board resolution when composing resolutions, to ensure the right format and process is followed. To understand the importance and function of board resolutions it is useful to look at what they are intended to do and the power they designate.

Board resolutions are designed to formally record the decision the board has made and give individuals or organisations authority to follow the specific course of action decided on. They can be used to assign roles or actions to individuals, committees, or external organisations, or to change certain aspects of the functioning of the business. They may also be necessary as proof of compliance with regulations.

Why Are Well-Drafted Board Resolutions Important?

Making decisions in the best interests of stakeholders and transacting on behalf of the organisation are primary functions of all boards. Naturally, as the highest authority governing the organisation, the issues within the scope of the board’s decision-making powers have far-reaching consequences for the organisation and its stakeholders, who range from shareholders and employees to government regulators and the wider community in which the organisation operates. That is why the board’s decisions must be transparently and clearly documented, so the effect of the decision is apparent to all parties with an interest in the organisation.

Affected parties are permitted to request copies of board resolutions as evidence of the board’s decisions. For example, shareholders may wish to see resolutions to understand decisions made in the past.

Certain types of board resolutions may require that copies be shared with relevant parties. For example, a shareholder’s resolution to offer additional shares in a company, or a resolution to change the registered address of a business must be lodged with Companies House within 15 days. Other examples of parties that may ask to see copies of board resolutions are banks, regulators, brokers and investors.

Board resolutions also provide evidence that directors are discharging their duties in the proper way. The board is accountable and liable for the actions it takes. Therefore, properly recorded resolutions can offer directors an element of protection from liability should the activities and performance of the board come into question. Well-drafted resolutions demonstrate a commitment to good governance.

When Does the Board Use Resolutions?

The board can opt to implement a formal resolution for almost any decision it takes, particularly if it feels there may be future scrutiny of the issue in question. However, common reasons include: the appointment of a new board member or the removal of a director; the approval of financial accounts; the distribution of dividends; the decision to implement a large redundancy programme; or the decision to expand into new markets or geographies.

Resolutions may also be used to confirm operational issues, such as the appointment of auditors or changes to the company’s reporting period. Again, these underpin transparency and indicate sound governance.

Resolutions are usually drafted in advance of the board meeting at which the issue is to be discussed and the vote taken. Using a sample board resolution as a starting point is good practice to ensure that the essential elements are included.

Brevity and Clarity in Board Resolutions

Brevity and clarity are the hallmarks of a good board resolution. It should describe the action the board has agreed to authorise and the date the resolution was passed. It should also name any other parties to the resolution, such as companies contracted as a result, for example. Additionally, for regulated organisations, it may also refer to relevant guidelines, standing orders or agreed best practices to explain the reason for the resolution and, if necessary, any variance from them.

Retaining Board Resolutions

Board resolutions must be included in board meeting minutes and the Companies Act 2006 stipulates that records of resolutions are retained for a minimum period of ten years. However, it is best practice to retain them for the lifetime of the organisation. Ideally, they will be retained and archived in a way that makes them easily accessible in the event of future requests to view them.

Sample Board Resolution

This sample board resolution template can easily be customized to your board’s needs:

BOARD RESOLUTION

At a meeting of the Board of Directors of [company name], held at [meeting location] on [date]

WHEREAS, [company name] requires [statement of issue to be managed e.g. requires professional assistance to manage Human Resources matters] be it:

RESOLVED to retain [company name] to provide [describe services to be provided e.g HR consultancy and operational HR support]

FURTHER RESOLVED to authorise [individual name] of [company name] to act on matters relating to the provision of these services on behalf of [resolving company name].

 

Approved: [date]

——————————
[insert name],
Chair, Board of Directors

 

——————————
[insert name],
Member, Board of Directors

Location: [add location]

——————————
[insert name],
Member, Board of Directors

 

——————————
[insert name],
Member, Board of Directors

(Some board resolutions – such as those needed for compliance purposes or issues such as adding new signatories to corporate bank accounts – require certification by the Company Secretary. In this case, the Company Secretary should also certify, sign and date the resolution.)

Facilitate Board Resolutions and Voting

Digital options such as the Voting & Resolutions tool in Diligent Governance Cloud provides a secure method of recording board resolutions and managing the voting process in accordance with sound governance principles.

Diligent Voting & Resolutions also enables boards to vote on resolutions when it is not possible for directors to meet physically, a more common scenario since the global coronavirus crisis. Sample board resolutions may be stored as templates so resolutions can be quickly formulated, voting is straightforward wherever directors are located, and the passed resolution is securely stored for easy retrieval if necessary.

Making and correctly recording decisions is a critical element of board business. It is a pillar of good corporate governance that board decisions are fully, clearly and transparently documented. The sample board resolution above is a good starting point to ensure that resolutions contain the necessary elements to certify that board decisions are correctly taken and recorded in line with the principles of sound governance.

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