Every business, whether small or big, makes important decisions, which have to be documented. This documentation happens in the form of corporate resolutions, which aim to keep a business’s leadership team, or specifically the board of directors, accountable for the actions taken. Below, we answer some frequently asked questions surrounding corporate resolutions.
Frequently Asked Questions about Corporate Resolution
Are corporate resolutions required only under state law, or does the SEC require them as well?
The SEC does not per se address corporate resolutions. The SEC protects investors and mainly governs publicly traded corporations, not privately held corporations (with some investment-related exceptions).
There are several situations where a board resolution is required. As a founder/CEO of a company, if you’re unsure whether you need board approval for something, how should you proceed?
The CEO should review the bylaws that may contain information for which actions corporate resolutions are required. The bylaws usually set forth the authority of the various officers for which no corporate resolutions are required.
While it is impossible to list all actions that require board approval and resolutions, here are a couple to keep in mind:
- Hiring or terminating executive employees
- Establishing pension, profit-sharing, and insurance plans
- Selecting directors to fill vacancies on the Board or a committee
- Issuing shares of stock
- Establishing a fiscal year
Who needs to sign a board resolution?
The board members need to sign the board resolution. The President and Secretary only need to sign when the resolution is certified. But they can sign an uncertified board resolution as well, but it is not required.
What’s the process for certifying a board resolution?
A corporate resolution must be verified by the Secretary of the board meeting and approved by the President of the corporation.
What are the differences between board resolutions and shareholder resolutions?
Both shareholder and board resolutions are written documents. However, a shareholder resolution describes the shareholders’ actions while a board resolution explains the board of directors’ actions.
Since most corporate actions are effectuated by the board of directors, board resolutions often cover a wide range of actions. For example, the board needs to act when a new board member is voted in, when the company wants to hire employees, sell shares of the corporation, approve a major contract, acquire a line of credit, declare a dividend, execute a lease agreement, or deal with a lawsuit, among other big decisions. Also, see your response to question 2 above.
Under California law, California corporations must hold an annual shareholder(s) meeting to elect the board of directors. Special shareholder meetings must be called when the board of directors has a corporate item that needs shareholder approval. These special meetings may be called when it revolves around revising the articles of incorporation or bylaws, and selling or transferring all of the corporation’s assets. These items require shareholder and board resolutions.
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