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Board Resolution

A Board Resolution is an official written statement issued by a corporate board of directors explaining major corporate decisions. full description

Uses

  • A board of directors makes a decision that changes the structure, operations, or management of a corporation.
  • Notifies company employees and shareholders about an impending change.

Overview

A corporate board of directors is responsible for making major decisions on behalf of the company. The board’s specific duties are determined by the terms of the company’s formative documents (typically, Articles of Incorporation and by-laws) as well as by state law. Boards of directors are typically not involved in day-to-day operations, which are typically left up to corporate officers. However, in all U.S. jurisdictions the board of directors is the highest authority when it comes to corporate management.

Each director on the board has a fiduciary duty to act in a manner that protects the interests of the companies and its shareholders. Sometimes, this requires a major change in company policy, such as the removal or appointment of a new executive or a change in dividends provided to shareholders. At each board meeting, directors consider whether any major decisions must be made in order to ensure the company continues to operate in the best interest of its shareholders. If the directors agree that a change is necessary, they will pass a Board Resolution detailing the decision. If the Board Resolution receives the requisite number of votes, it is noted in the meeting minutes and becomes binding upon the company. Resolutions can address a wide range of issues relevant to the operations and structure of the company from changing the dividends provided to shareholders to naming which officers are authorized to make daily operational decisions for the company. Because board resolutions are some of the most powerful instruments in corporate governance, all corporations should have a solid structure and policy regarding how and when these documents should be issued.

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