Are you looking for information or a free board resolution template to appoint a new director in the UK? If so, you are in the right place because this step-by-step guide will explain everything you need to know and give you access to the free template.
What is a Board Resolution?
A board resolution is a formal written document that legally solidifies an action or decision made by a company’s board of directors.
The resolution can be concluded with or without a formal meeting of directors, depending on if it’s a private or public company. For example, when directors of a private company clearly agree on a certain action or decision, a written resolution can be used instead of a formal meeting.
In contrast, when the situation is not clear, directors will formally meet to achieve a resolution, but in either scenario, there will need to be an approval rate over a certain percentage of the eligible voters that will be defined in the company’s legal papers.
When it comes to public companies in the UK, they are not allowed to pass written resolutions, instead they can only be passed once members conclude a general meeting.
The primary goal of a board resolution is to document the information they voted and agreed on so it can be formally recorded and kept for self-assessment. For instance, shareholders may want to verify an action or decision the board have taken so in the example it would be vital that the company has the necessary information in their records.
When is a Board Resolution Required?
Board resolutions are required whenever directors make an important decision on behalf of the company, as opposed to decisions made during normal day-to-day business operations.
Common board resolutions include:
- Appointing a company officer.
- Granting authority to sign legal documents.
- Purchasing or selling company assets.
- Issuing shareholder dividends.
- Entering into contracts.
- Selling shares.
- Authorising bank loans.
- Hiring or letting go large numbers of employees.
What Are the Types of Board Resolution?
When it comes to board resolutions, there are various types that are each used depending on the situation. The most used terms to describe the different types of board resolutions are as follows:
Directors Resolutions
Otherwise known as a board meeting, simply put, this is a meeting with the directors. The decisions made at a director’s resolution are approved either by a simple majority of votes, or by approval of all directors depending on what is stated in their articles.
Members Ordinary Resolutions
Important decisions made in most private companies are made by the shareholders, but you may hear them being referred to as members. This type of resolution is used in all situations unless the articles of that company state otherwise.
A resolution is passed when there is a majority of over 50% of the quorum and the issues may include:
- Electing a director.
- Dividend declarations.
- Changes to remuneration.
Members Extraordinary Resolutions
For the most part, extraordinary resolutions haven’t existed since 2007 and are nowadays often called ‘special resolutions’, although in some cases a company’s article of association can allow them to be used.
Extraordinary resolutions occur when a company needs to deal with an issue immediately, so they call a meeting that is outside of their annual general meeting. In most cases, extraordinary resolutions require an approval rate of at least 75% of the members who voted on the motion.
Special Resolutions
For a few critical business issues, a simple majority is not enough, instead a majority of at least 75% is needed for the motion to be passed.
For a special resolution to take effect, at least 21 days notice must be given to the company and at least 14 days notice given to the members. Examples of instances where a special resolution is needed are:
- Changing the company name.
- Updates to the articles of association.
- Reduction in the company’s share capital.
- Winding up the company.
Unanimous Resolutions
This is where board resolutions require 100% of votes for it to be passed, although these are rare in today’s world. Given that the number of people on a board can be extremely large, it would be almost impossible to carry out such a meeting, so most resolutions use the ‘ordinary’ or ‘special’ format.
Written Resolutions
Private companies don’t necessarily need a meeting to pass a resolution, it can be done in writing too. They can be proposed by directors or by the members without any notice, but every eligible voter must receive either a hard copy or an electronic version of the proposed resolution which they must then sign.
Who is Involved in a Board Resolution?
In order to officially conclude a board resolution, there are certain members that may need to be present, which include:
- Directors – These are the elected representatives of the company’s shareholders.
- Shareholders – These are the investors and shareowners of the company.
- The Chairperson – This is a director who manages the board meetings.
- Officers – These people manage the day-to-day operations of the business and are appointed by the directors.
- The President – This is the CEO of the company who is required to sign the certified corporate resolution.
- The Secretary – This is the person responsible for company records and may be tasked with handling the meeting minutes.
How to Write a Board Resolution Letter?
Given that Knowing how to write a resolution for a board meeting can seem like a daunting task, but if you follow our tips below then you should find it a lot easier.
What Are Board Meeting Minutes?
In accordance with section 248 of the companies act 2006, limited companies must record board minutes at every meeting so there an accurate account of what happened. In order to take effective minutes, you should include:
- Company name and registered address.
- Time, date and location of the meeting.
- The time that the meeting commenced.
- Name of attendees and absentees.
- Items on the agenda.
- Proposed resolutions.
- Outcome of the proposed resolutions (passed or rejected).
- List of board members for or against any motion.
- Objections or queries that were raised.
- Actions needed to fulfil passes resolutions.
- Any additional issues discussed.
- Date of next agreed board meeting.
- The time the meeting ended.
