What Is a Corporate Resolution?
A corporate resolution is an internal document that records important decisions made by a corporation’s board of directors or shareholders. Resolutions are used to record and confirm major decisions made by the company and can be used to ratify past actions or pre-approve future ones.
Unless otherwise stated in the bylaws, resolutions typically require a quorum (a majority) of the board or shareholders to be present and vote in favor of the resolution for it to pass. Some decisions, such as those involving mergers or acquisitions, may require a supermajority (usually two-thirds) vote.
Corporate resolutions typically cover topics such as:
- Approving corporate bylaws or amendments thereto
- Electing or removing corporate officers
- Opening a corporate bank account
- Approving the sale of corporate assets
- Authorizing the lease or purchase of real estate
- Authorizing the issuance of shares of stock
- Declaring dividends
- Approving mergers or acquisitions
- Authorizing the incurrence of debt
- Establishing employee stock option plans
- Creating committees, such as an audit committee or compensation committee
- Adopting corporate policies
When Should You Use a Corporate Resolution?
A corporate resolution should be used whenever the board of directors or shareholders need to make a formal, binding decision on behalf of the corporation. Boards often use a corporate resolution as legal documentation for compliance purposes, however, a resolution could be for routine matters, such as approving a new bank account, or for more significant decisions, such as authorizing a major purchase.
Whenever an important decision needs to be made, every state requires the use of Corporate resolutions to preserve the limited liability of its owners.
Corporate resolutions can also be used to ratify past actions that were taken without prior approval, such as entering into a contract or hiring a new employee. In these cases, the resolution retroactively gives the necessary approval to the actions that were taken.
What Are the Steps for Creating a Corporate Resolution?
The first step in creating a corporate resolution is to determine who needs to approve the decision: the board of directors, the shareholders, or both. Once that has been determined, you will need to give proper notice of the meeting where the resolution will be voted on.
At a meeting of the board of directors, the resolution should be formally introduced and a vote should be taken. If the resolution passes, it should be signed by the appropriate parties and filed with the corporate records.
What Should Go in a Corporate Resolution?
The easiest way to write a corporate resolution is to use a template. There are many different templates available online, or you can create your own.
When creating your resolution, be sure to include the following information:
- The name of the corporation
- The date of the meeting
- The type of meeting (regular, special, annual, etc.)
- The purpose of the meeting
- The text of the resolution
- The names of the people who introduced and seconded the resolution
- The vote tally
- The signatures of the corporate officers
Download a Free Corporate Resolution Form
What Are the Different Types of Corporate Resolutions?
There are many different types of corporate resolutions, depending on the purpose of the resolution. Some of the most common types of resolutions include:
- By-law resolutions: These resolutions are used to approve or amend the bylaws of the corporation.
- Elective resolutions: These resolutions are used to elect or remove corporate officers.
- Asset sale resolutions: These resolutions are used to authorize the sale of corporate assets.
- Stock issuance resolutions: These resolutions are used to authorize the issuance of new shares of stock.
- Dividend resolutions: These resolutions are used to declare dividends.
- Merger and acquisition resolutions: These resolutions are used to approve mergers or acquisitions.
- Debt resolutions: These resolutions are used to authorize the incurrence of debt.
- Budget resolutions: These resolutions are used to approve the corporate budget.
Corporate resolutions can be either special or ordinary. Special resolutions require a higher threshold of approval than ordinary resolutions and are typically used for more significant decisions, such as amending the bylaws or authorizing a major purchase.
Ordinary resolutions are often used for less significant decisions, such as ratifying past actions or approving the corporate budget.
