A board's decisions have far-reaching consequences for the firm and its stakeholders. Board decisions must be clearly and transparently recorded in a board resolution to ensure decisions are apparent to all stakeholders.
Boards hold governance authority to make decisions on behalf of shareholders and the organization. These decisions must be documented accurately and clearly through board resolutions to make the board’s actions transparent among stakeholders.
With a pre-made board resolution template stored in a secure board portal, board members can quickly write resolutions. Read on to discover valuable tips and tricks for improving the board resolution writing process.
What Is a Board Resolution?
A board resolution is a formal, legally binding record of the board’s essential decisions. Board resolutions are sometimes called corporate resolutions.
As the highest authority controlling an organization, the board’s decisions have far-reaching consequences for the firm and its stakeholders. For this reason, board decisions must be clearly and transparently recorded in a board resolution to ensure decisions are apparent to all stakeholders.
Boards implement formal resolutions for almost every decision, especially if they anticipate future scrutiny. Typically, reaching a decision can be done by following rules and procedures outlined in Robert’s Rules of Order. Directors commonly use board resolutions to officially record voting results and legally binding decisions, such as:
- Appointing or removing a board member
- Approving financial accounts
- Distributing dividends
- Assigning roles to individuals, committees, or third parties
Types of Board Resolutions
There are three types of board resolutions, including:
- 1. Ordinary Resolution: It requires just over 50% of directors to pass a decision. For instance, if there are 10 board members, the board will need the approval of at least six directors to pass a resolution.
An ordinary resolution is commonly used to pass simple decisions like appointing or removing directors. Your company’s governing documents will show you which decisions require an ordinary resolution.
- 2. Special Resolution: It requires 75% of the directors’ votes to be in favor of the resolution. Most boards use special resolutions to pass sensitive decisions, like modifying the company’s constitution. Check your organization’s governing documents to identify matters that require a special resolution.
- 3. Unanimous Resolution: All board members must agree to the resolution. Just like ordinary and special resolutions, your organization’s governing documents determine matters that require unanimous resolution.
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How to Write a Board Resolution (Step-by-Step)
Your board resolution document should be clear and precise. It should show the director’s decisions and only include details related to the matter. Follow the simple steps below to write clear and detailed board resolutions.
1. Capture Board Meeting Date
The date goes at the top of the resolution. The date shows when the board directors held the meeting and passed the resolution.
2. Assign Resolution Number
The resolution number can go to the top right corner of the document. The number differentiates board resolutions, usually by the order they are approved, so it’s easy to reference them. There’s no fixed way of numbering your resolutions. However, consider numbering them chronologically.
3. Establish Resolution Title
The resolution title should capture the board’s name and a concise statement about the issue you want to record. It should appropriately reflect the intent.
Here’s an example: “Board Resolution of [Your company’s name] Approving the [statement of the issue to be managed].”
4. Document Resolution
Use formal language to record the resolutions. You will write your board resolutions using “whereas” and “resolved” clauses. “Whereas” statements show the reason for the resolution while “resolved” clauses state the action that will be taken. Your “whereas” statement should lead the reader to the “resolved” clause.
Suppose your company requires online marketing services and the board decides to hire a marketing agency. The example below shows how you would record the resolution:
WHEREAS, [Your company name] requires professional assistance to market online; now, be it
RESOLVED, to hire [name of the marketing agency] to provide online marketing services.
5. Document Board of Director Votes
The resolution document includes a tally of the votes, showing how many directors voted in favor and against the resolution. At the bottom, list board members who voted on the resolution and whether they voted in favor or against the subject matter.
Include a section where the board chair can sign to approve the resolution. Ensure the date of approval is indicated and the meeting location included.
6. Leverage Board Meeting Technology
Board meeting technology allows directors to collaborate and communicate digitally. It also enables boards to share and vote on initiatives on a secure platform. You can use board management software to store, organize, and manage board resolutions and other critical documents.
Board management software eliminates the need to keep records in cabinets, which saves space and simplifies retrieving documents when necessary. Most importantly, the technology keeps board documents safe from accidental loss and unauthorized access. Board members can also access any board information at any time virtually.
Frequently Asked Questions
What Are the Parts of a Board Resolution?
A board resolution has three main sections: the heading, pre-ambulatory (Whereas) statements, and operative (Resolved) clauses. The preambulatory clause addresses the issue, while the operative statement offers solutions to the addressed topics.
What is a Formal Board Resolution?
A formal board resolution is a legal document that records a board’s decisions concerning specific issues. It’s sometimes called a corporate resolution.
How Do You Pass a Board Resolution?
A board resolution is passed after gaining approval by a majority of board members with voting rights. Your organization’s governing documents will determine the votes necessary to approve a resolution formally.
Do Board Resolutions Need to be Signed?
Like any legal document, board directors must sign board resolutions to signify official approval.
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The board is the highest authority governing an organization. No matter how frequent, its decisions must be appropriately recorded through board resolutions to make the board’s decisions and actions transparent to stakeholders.
Writing a board resolution isn’t difficult as it may seem. Following the procedure above will help you create a clear and accurate board resolution.
Remember to leverage board meeting technology, which is foundational to the success of modern boards. Use it to store and manage board documents like a board resolution, contractor agreement, operating agreement, partnership agreement, bylaws, and social media policies for board members.
However, not all board technologies achieve the same results or offer key features and functionality. Download our Board Management Software Buyer’s Guide to help you choose the right board technology.
Ready to level up your board communications? Start your free trial of OnBoard today.
About The Author
- Josh Palmer serves as OnBoard's Head of Content. An experienced content creator, his previous roles have spanned numerous industries including B2C and B2B home improvement, healthcare, and software-as-a-service (SaaS). An Indianapolis native and graduate of Indiana University, Palmer currently resides in Fishers, Ind.
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