Every now and again, a board resolution is referred to as a corporate decision. It implies a formal document that enshrines essential decisions made by the board of directors. These documents authorize committees to take certain actions on matters voted by the board.
Why Is a Board of Directors Needed?
Unlike an enterprise with one or more shareholders, which can be managed directly by the owners, in a public company, there are hundreds or even thousands of shareholders. For this reason, a special board of directors is formed to take into account the interests of all. Sometimes, it is also called the supervisory board.
The main task of the board of directors is to ensure the growth of the company’s value in the interests of all owners. In the process of workflow in companies, a resolution is a document that is created by an authorized person or official and reflects his decision.
Decisions of the Board of Directors
The Board of Directors makes the following key decisions:
- approval of the enterprise’s strategy;
- coordination of major transactions;
- disposition of treasury blocks of shares, as well as approval of SPOs and additional issues;
- recommendation of dividends and buyback programs.
It should be also noted that the board of directors has the right to:
- appoint and dismiss management;
- control its work;
- monitor the transparency of the company and the preparation of reports.
Moreover, the function of the board of directors is considered to be the implementation of other actions aimed at ensuring the benefits for shareholders and the suppression of possible abuses on the part of management and individual owners.
At the same time, not all-important decisions can be made by the board of directors independently. Several decisions can be approved exclusively by the general meeting of shareholders. For instance, the board cannot decide how much dividends the company will pay out. It can only recommend a certain amount, and the final decision will be made by a general vote of the shareholders.
How to Make a Resolution Document?
Even though a board resolution is considered quite an essential legit paper, it is not difficult to write one. The language of this document is straightforward and formal. These papers are made on the company’s letterhead. The wording of the resolution just describes all the operations that the board of directors has agreed to make. It shows the effective date as well as the names of the parties.
After the board votes and approves the board’s document, the paper must include the date it was approved and the ubieties where it was signed. The council president and all board members must sign the document.
As a rule, the board secretary must keep copies of all decisions of the board, along with the corporate articles and other key documents. In addition, the secretary undertakes to make a copy of the board’s resolution accessible to all parties who need it in accordance with the requirements of the law.
What Organizations Do Need a Board Resolution?
It is vital to note that not only asset managers and banks but also brokerage firms and title agencies often seek board decisions because of certain circumstances. Besides, transactions involving the purchase or sale of land, intellectual property, financial assets, and all that jazz often require boards of directors to pass a resolution as it is considered to be a part of their obligations under the transaction.