A corporate resolution is an official decision or action taken by a board of directors and authorized by the company’s shareholders. It is a formal, legally binding agreement that outlines the terms and conditions of a certain transaction or action. It can include decisions relating to a variety of matters such as company mergers, fundraising activities, changes to corporate structure, and more.
Why Is a Corporate Resolution Important?
Having a corporate resolution is important to ensure that the decisions and actions taken are well documented and legal. It clarifies roles and responsibilities, sets and enforces operational policies, and provides a framework within which the business can operate. Without a corporate resolution, a business may be vulnerable to a number of legal issues, such as breach of contract or failure to fulfil its obligations.
What Should a Corporate Resolution Include?
A corporate resolution should include a clear description of the decision or action, an explanation of the reasons for the decision or action, a set of agreed principles to guide its implementation, and a list of signatures of those voting in favour of the resolution. It should also set a timeline for any actions taken. A corporate resolution should be drafted clearly to ensure a legally binding agreement that all parties are able to understand and agree to.
How to Draft an Effective Corporate Resolution
There are a few key steps to ensure an effective corporate resolution:
- Define the purpose of the resolution: Make sure you have a clear goal in mind and that the resolution is written in a way that reflects that goal.
- Ensure accuracy: Thoroughly read and review the draft resolution to make sure all the facts are correct and the language is unambiguous.
- Fully document the resolution: Include all the details, such as items voted on, voting results, dates the resolution goes into effect, and signatures of those voting in favour.
- Keep the resolution up to date: As decisions or actions change, be sure to update the resolution to reflect any new information.
Conclusion
Having a corporate resolution is essential in a range of commercial and corporate situations. It is important to ensure that such resolutions are drafted with accuracy and detail to reduce the risks associated with non-compliance and legal issues. By following the steps outlined above, you can ensure that your corporate resolution is drafted correctly for maximum effectiveness.