While the Board of Directors make important business decisions and approve actions for the company, it’s important to take note of everything and have a written document or statement - which is what we refer to as resolutions 📝
Company resolutions are not just for recording purposes during a board meeting, but it will help to maintain the integrity of the company as well.
Definition of a Company Resolution
Resolutions are written document or statement that records a decision or action discussed and approved during an annual general meeting (AGM) or extraordinary general meeting (EGM).
Since the major commercial decisions are normally made by the board of directors, it is common for the resolution to be called as “Company Board Resolution”.
It is stated in the Company Act 2016, Section 290 that:
A resolution of the members or a class of members of a private company shall be passed either by a written resolution or at a meeting of the members
A resolution of the members or of a class members of a public company shall be passed at a meeting of the members
How Can a Company Resolution Be Passed?
Physical Meetings
The common way for a Company to pass a resolution is during physical meetings where the board of directors and shareholders meet; commonly during annual general meeting (AGM).
The resolution will be typed out by the Company Secretary and once decision is made; all parties will need to sign off the document for it to come into effect.
Through Writing
It may not always be possible to hold physical meetings, especially during the current pandemic situation or when some relevant parties are unable to be physically present.
Hence, in such a case, a Company may choose to pass the resolution in written from. The document will be prepared by the Company Secretary, detailing out all the crucial information.
Requirements for the Passing of a Resolution
There are several general requirements which must be fulfilled before the passing of a company resolution may be made.
Company resolutions are only allowed to be passed during a meeting which has been properly convened and fulfils all other requirements. Company resolution must be saved in the recordskept by the company Secretary after the meeting has been held. The minutes of the meeting are also required to be signed by the chairperson of the meeting.
A company which fails to follow these requirements might find that the outcome of the company resolution may become void.
Why Company Resolutions Are Important
Company resolutions are important because they document the decisions made and actions taken by the board of directors.
These company resolutions serve as documents that hold the board accountable and prove to licensing boards and government regulators that the board is acting in a proper manner.
Corporations are generally intended to be separate entities from their owners; thus, they are to have separate liability from the owners. Company resolutions assist in upholding this separation.
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