What is a corporate resolution form?
So, what are corporate resolutions? A corporate resolution is a document that formally records the important binding decisions into which a company enters. These decisions are made by such stakeholders as the corporation's managers, directors, officers or owners. Corporate resolutions are necessary business documents for corporations, whether they be for-profit or nonprofit. Limited liability companies (LLCs) are not required to create corporate resolutions, but oftentimes do so in order to document their decisions in a formal way. Maintaining corporate resolutions is essential, as it allows financial institutions to obtain a transparent understanding of the company as they consider providing financing.
Occasions for Corporate Resolutions
We've mentioned some of the reasons that may need to be documented through the use of a corporate resolution, but let's take a look at the full range of utility of these documents. When a corporation is initially conceived, the board may opt to use corporate resolutions to approve new board members, accept initial bylaws, set up the corporate bank account at a specific bank and designate signers for those accounts.
Throughout the life of the corporation, there are many other instances that may require this sort of documentation. For example:
- Buying or selling corporate real estate
- Designating corporate officers
- Agreeing to enter into a joint-venture with another company
- Adapting a new trademark or purchasing a patent
- Taking out a loan
- Establishing a location in a new state or country
- Obtaining a license or a governmental approval
- Hiring a specific employee
- Negotiating a contract
- Approving the annual budget
The Details of a Corporate Resolution Form
For the exact details of your corporate resolution, consult your state's business service department, as there can be minor variations, depending on your business's location. That said, common factors on most corporate resolutions include:
- The date and location of the resolution
- The state in which the resolution is formed and under whose laws it is bound
- The signatures of the officers who are designated to sign corporate resolutions. This is typically the board chairperson, but it may be someone else under certain circumstances.
- The title of the document, along with a succinct statement of its purpose. So, for example, it may read 'Resolution to Purchase 607 West Parkland Street Property...'
- A phrase that reflects the notion that the resolution has the assent and agreement of the board members. If this particular resolution passed by unanimous decision, then the resolution should note that. If the final agreement was not unanimous, then the resolution form should include a tally of the votes indicating how many 'yea' votes and how many 'nay' votes there were.
- A 'whereas' statement or statements that indicate(s) the intention of the board in creating this resolution. For example, 'Whereas it is the intention of this board to purchase the property at 607 West Parkland Street...'
- A 'therefore' or 'resolved' statement that reflects the action to be taken. For example, 'Therefore, by written unanimous consent...the purchase of 607 West Parkland Street has been approved.'
Bringing the Resolution Before the Board
As noted above, a corporate resolution is typically the end result of a board meeting. The typical process for creating such a document is as follows:
- As per usual, the agenda for the board meeting is created well in advance of the actual meeting. The specific item to be included in the resolution is included in the agenda.
- In the due process of the meeting, the item for the resolution is brought up and discussed among the board members.
- Board members vote on the resolution, and those votes are tallied and recorded.
- The minutes of the meeting should record both the fact of the resolution being discussed and the outcome of the vote.
This process, however, is not the only possible process for adopting a resolution. Other acceptable methods include necessary written consent and unanimous written consent. In both of these cases, a physical meeting need not take place because either enough members of the board have already given their written consent (as is the case with 'necessary consent') or all of the members have done so (hence, the 'unanimous' designation).
What Happens to a Corporate Resolution After It Is Created?
For the most part, corporate resolutions do not need to be submitted to a regulatory body or government agency. They should, however, be kept as part of the corporate record. Having easy access to corporate resolutions can be useful if, for example, a curious shareholder wants to understand various actions of the board, or, as stated above, a financial institution requests a review of the corporation's recent major decision. They may also be called upon as part of a financial or compliance audit.
As a physical artifact, a collection of corporate resolutions should act as a kind of biography of your corporation. By studying the series of resolutions, one can learn the progress of a corporation from its inception through its life as a company, including important hires, purchases, mergers and ventures. A look at the vote count can tell a reader whether the board was often in agreement or was characterized by close votes.
Corporate resolution forms ensure that each of these documents follows an accepted format favored by banks or regulatory agencies, which may use these documents when considering lending or conducting audits. If you have more questions about the uses of corporate resolutions or how to create a corporate resolution form that is right for your organization, contact us and we'd be happy to help!