How to Write a Corporate Resolution

Writing a corporate resolution might not be the most thrilling task on your to-do list, but it's a fundamental part of corporate governance. Whether you're a veteran of board meetings or just dipping your toes into corporate waters, knowing how to draft a clear and effective corporate resolution is invaluable. In this post, I'll walk you through the process, providing practical tips and examples to make the task straightforward and maybe even a little enjoyable.

What Exactly is a Corporate Resolution?

Let's start with the basics. A corporate resolution is a formal statement made by a board of directors or shareholders to document a decision made on behalf of the company. These resolutions are essential for keeping track of major business decisions, like approving budgets, appointing officers, or acquiring another company. Think of it as the official record of what was decided and how.

Corporate resolutions are typically required for significant actions. For instance, you can't just wake up one day and decide to merge your company with another without a formal agreement. The resolution provides the legal backing for such decisions. They're usually not too lengthy or complex; they just need to be clear and precise.

Why Corporate Resolutions Matter

You might be wondering, "Why go through all this trouble?" Well, corporate resolutions serve several important purposes:

• Legal Authority: They give legal authority to actions that could affect the company's structure or operations. Without them, those actions might not hold up in a court of law.
• Internal Governance: They help maintain clarity and order within the company. Resolutions ensure that everyone is on the same page regarding what actions have been authorized.
• Historical Record: They provide a historical record of the company's decisions. This can be invaluable for future reference, audits, or legal disputes.

By documenting decisions in a formal way, corporate resolutions make sure that everyone knows what was agreed upon, which can help prevent misunderstandings and disputes down the road.

Components of a Corporate Resolution

When it comes to drafting a corporate resolution, there are a few key components you'll want to include. Here's a quick rundown:

• Title: Every resolution needs a title, which should clearly indicate what the resolution is about. For example, "Resolution to Approve 2024 Budget."
• Date: Always include the date the resolution was made. This is crucial for record-keeping.
• Whereas Clauses: These are the preamble statements that provide context for the resolution. They explain why the resolution is necessary.
• Resolved Clauses: This is the meat of the resolution. What the board is agreeing to. Be as clear and concise as possible.
• Signatures: The resolution should be signed by the officers or directors who are authorized to sign on behalf of the company.

Let's put these components into practice with a simple example.

Corporate Resolution

Title: Resolution to Approve 2024 Budget

Date: January 15, 2024

Whereas, the board of directors has reviewed the proposed budget for the fiscal year 2024;

Whereas, the board finds the budget to be consistent with the company’s financial goals;

Resolved, that the 2024 budget is hereby approved and adopted.

Signed,
John Doe, CEO
Jane Smith, CFO

As you can see, it doesn’t have to be overly complex. The key is clarity and precision.

Drafting the Whereas Clauses

The "whereas" clauses set the stage for your resolution. They explain the reasoning behind the decision and provide important context. Think of it as the "why" behind your resolution.

When drafting these clauses, keep the following in mind:

• Be Specific: Make sure each clause is specific and directly related to the decision at hand.
• Use Formal Language: While it doesn't have to be overly legalistic, it should maintain a level of professionalism.
• Keep It Concise: Don't add unnecessary information. Stick to the relevant facts.

Consider this example of a "whereas" clause:

Whereas, the board of directors has determined that acquiring ABC Corp. will enhance our market position and align with our long-term strategic goals;

This clause clearly and concisely explains the rationale behind the decision, setting the stage for the resolution itself.

Crafting the Resolved Clauses

Now comes the heart of the corporate resolution. The "resolved" clauses. This is where you articulate the decision being made. Here’s how to ensure they’re effective:

• Be Direct: State the decision clearly and directly. There should be no ambiguity.
• Action-Oriented: Use action verbs to specify what is being decided or approved.
• Include Details: If there are specific conditions or parameters, include them here to avoid confusion later.

Here's a sample "resolved" clause:

Resolved, that the company will proceed with the acquisition of ABC Corp. for the purchase price of $5 million, subject to the completion of due diligence and regulatory approvals.

This clause clearly states the decision and any conditions that need to be met.

Getting the Formalities Right: Signatures and Dates

Once you’ve drafted the resolution, don’t forget about the formalities. These might seem minor, but they’re crucial for the document’s validity:

• Signatures: Make sure the resolution is signed by all necessary parties. This typically includes the board members or officers who are authorized to make the decision.
• Date: Always include the date. This is important for record-keeping and can be essential if the resolution is ever questioned.

It might sound simple, but forgetting these formalities can lead to headaches down the road. Imagine trying to enforce a resolution that wasn’t signed or dated. It wouldn’t hold much water.

Common Pitfalls to Avoid

Even seasoned pros can trip up when drafting corporate resolutions. Here’s what to watch out for to keep your resolutions on point:

• Vagueness: A resolution should never be vague. Ambiguity can lead to misunderstandings and disputes, so be as clear as possible.
• Overloading: Don‚Äôt try to pack too many decisions into one resolution. Stick to one main topic per resolution to avoid confusion.
• Lack of Context: Make sure the "whereas" clauses provide enough context for the decision. Without them, the resolution might not make sense to someone reviewing it later.

By keeping these pitfalls in mind, you’ll be well on your way to drafting resolutions that are clear and effective.

Examples of Common Resolutions

Corporate resolutions can cover a wide range of topics, but some are more common than others. Here are a few examples of typical resolutions you might encounter:

• Appointing Officers: Resolutions to appoint or remove officers within the company are common. These might look something like this:

Resolved, that Jane Smith is hereby appointed as Chief Financial Officer, effective immediately.

• Approving Contracts: Whether it‚Äôs a new vendor agreement or a partnership deal, resolutions can formalize the approval of contracts:

Resolved, that the proposed partnership agreement with XYZ Co. is hereby approved and the CEO is authorized to execute the agreement on behalf of the company.

• Financial Decisions: From approving budgets to authorizing loans, financial resolutions are a staple:

Resolved, that the company is authorized to secure a line of credit with ABC Bank up to an amount of $2 million.

These examples provide a glimpse into the kinds of decisions that often require a formal resolution.

Using Spell for Faster Drafting

Drafting corporate resolutions can be time-consuming, but it doesn’t have to be. With Spell, you can streamline the process. It’s like having an AI-powered assistant that helps you create high-quality documents quickly and efficiently.

How does it work? Simply describe what you need in natural language, and Spell generates a draft in seconds. This can be especially useful when you're juggling multiple tasks and need to get resolutions drafted quickly. Plus, you can edit and refine the document right within the platform, making it easy to collaborate with your team in real time.

Final Thoughts

Writing a corporate resolution might not be the most glamorous task, but it's an important one. By following the steps outlined here, you’ll be able to draft resolutions that are clear, effective, and legally sound. And with Spell, you can make the process even faster and more efficient, freeing up your time for other important tasks. Happy drafting!