Why Do Boards Write Resolutions?

To give legal force to the decisions made by the board of directors at the meeting, this body draws up a resolution. In this article, we will consider the basic aspects and peculiarities of such kinds of documents.

What is a resolution?

An important task facing the board of directors when processing management documents is, first of all, assessing the situation that has arisen, making some kind of decision, and formalizing it in the form of a resolution. It is a method of administrative influence that organizes the activities of executors. This is an inscription on a document made by an official and containing the decision made. It fixes the order of the head regarding the issue described in the document.

If a motion is presented to the general meeting and the meeting approves it with the required majority, the motion is adopted and becomes a resolution. The resolution may also be adopted by unanimous informal consent of the shareholders. An ordinary resolution can be passed by a simple majority vote. The Companies Act provides for this type of resolution for certain actions, such as removing a director from office. As a general rule, no additional notice period is provided for when a regular resolution is passed beyond the notice period required to convene a meeting.

However, the adoption of an ordinary resolution involves the distribution of special notice in the event of removal from the office of a director or auditor, as well as in the case when a director who has reached retirement age remains in his post or is to be reappointed. In this situation, the company is given 28 days’ notice and must give its shareholders 21 days’ notice.

When an extraordinary resolution of the general meeting of shareholders is adopted, the notice period is 14 days. The document sent to the shareholders must contain an indication of the extraordinary nature of the meeting and the fact that a majority of 75% of the votes is required to approve its decisions. Also, a 75% majority requires the approval of a special resolution of the general meeting of the board of directors. But in this case, the notice period is 21 days.

The type of resolution required to make a decision is determined by the provisions of the company laws or the company’s articles of association. For example, an emergency resolution is required to decide on the voluntary self-liquidation of a company, while amendments to the company’s charter are carried out based on a special resolution.

The structure of the resolution

The most general structure of almost any resolution involves the following elements (parts):

  • an indication of the person (responsible executor) to whom the resolution is addressed;
  • characterization of the essence of the resolution (“what should be done”);
  • indication of the expected performance dates;
  • manager’s signature;
  • resolution date.

Sometimes the manager can give the necessary explanations (for example, what the final decision might look like or how the development of the document should be organized). A mandatory requirement for a resolution is targeting. To increase the executive discipline, it is necessary to establish a person responsible for the decision, who can involve others or determine the degree of responsibility of each.

The content of the resolution from the document must necessarily be transferred to the registration form (magazine or registration and control card). If the execution of the order specified in the resolution is taken under control, one copy of the registration and control card is placed in the control file.

Categorized as Blog