Create a Board of Directors Resolution Online

Board resolutions are needed in a wide variety of corporate situations. Understanding when a resolution is required helps ensure proper corporate governance and protects directors from personal liability.

Banking and financial transactions: One of the most common uses of board resolutions is to authorize banking activities. Banks typically require a certified board resolution to open a corporate bank account, designate authorized signatories, establish lines of credit, or authorize wire transfers above certain thresholds. The resolution identifies the specific individuals authorized to act on behalf of the corporation in banking matters and defines the scope of their authority (single-signature authority, dual-signature requirements, dollar limits, etc.).

Officer appointments and compensation: When the board appoints new officers (president, vice president, secretary, treasurer), sets officer compensation, or removes officers, a board resolution documents this action. This is important for corporate governance records and may be required by the corporation's bylaws. The resolution should specify the officer's title, responsibilities, compensation terms, and effective date.

Major contracts and transactions: Significant business transactions — including real estate purchases or sales, equipment acquisitions, vendor contracts above certain dollar thresholds, mergers and acquisitions, and joint ventures — typically require board approval documented by a resolution. The resolution authorizes specific individuals to negotiate and execute the transaction on behalf of the corporation.

Loan authorization: When a corporation borrows money, the lender will almost always require a board resolution authorizing the loan and designating who can sign the loan documents on behalf of the corporation. The resolution should specify the maximum loan amount, the authorized signatory or signatories, and any conditions on the borrowing authority.

Dividend declarations: When the board decides to distribute dividends to shareholders, this action must be documented in a board resolution. The resolution specifies the dividend amount per share, the record date (which shareholders are entitled to the dividend), and the payment date. Dividend declarations have legal and tax implications and must be properly documented.

Policy approvals: Changes to corporate policies — including compensation policies, benefits programs, employee handbooks, privacy policies, and governance procedures — should be approved by the board and documented in resolutions. This provides legal protection for the corporation and its directors by demonstrating that policy changes were properly authorized.

A well-drafted board resolution contains several essential elements that establish its validity and ensure it serves its intended purpose.

• Company identification: The resolution must identify the corporation by its full legal name and state of incorporation. This establishes which entity the resolution applies to and is particularly important when a company operates under multiple names or has subsidiaries.
• Meeting information: The date, time, and location of the board meeting at which the resolution was adopted. If the resolution was adopted by written consent in lieu of a meeting (permitted in most states), this should be noted instead. The meeting information establishes that the resolution was adopted through proper corporate procedures.
• Quorum statement: A statement confirming that a quorum of the board of directors was present at the meeting. The quorum requirement is typically defined in the corporation's bylaws — most commonly a majority of the total number of directors. Without a quorum, the board cannot take valid action, and any resolution adopted without a quorum may be voidable.
• Whereas clauses: The "whereas" clauses (also called recitals or preamble) provide the background, context, and rationale for the resolution. They explain why the board is taking the action and establish the factual basis for the decision. Well-drafted whereas clauses help third parties understand the purpose of the resolution and can be important if the resolution is later challenged.
• Resolved clauses: The "resolved" clauses state the specific actions the board is authorizing. Each resolved clause should be clear, specific, and actionable. Vague resolved clauses can create confusion about the scope of authority being granted. If the resolution authorizes a specific person to act on behalf of the corporation, the resolved clause should name that person, their title, and the specific actions they are authorized to take.
• Voting results: The number of votes for, against, and abstaining. Most board actions require a simple majority of the quorum, but some actions (amending bylaws, authorizing stock issuance, etc.) may require a supermajority. Recording the vote count provides evidence that the resolution was properly adopted.
• Secretary certification: The corporate secretary's signature certifying that the resolution is a true and correct copy of the resolution adopted by the board. The secretary's certification is what gives the resolution its legal authority as an official corporate record. Third parties rely on this certification when verifying the board's authorization.

Board resolutions can be categorized by the type of action they authorize. Understanding the different types helps corporations maintain proper governance records and ensures that the right level of authorization is obtained for each action.

Bank account authorization: These resolutions authorize the opening of bank accounts and designate individuals who can sign checks, make deposits and withdrawals, and conduct other banking transactions on behalf of the corporation. Banks have specific resolution formats they prefer, and many require the resolution to be on their own forms. However, a general board resolution authorizing banking activities is also valid and may be more flexible.

Signatory authority: Resolutions granting signatory authority authorize specific individuals to sign contracts, agreements, checks, and other documents on behalf of the corporation. The resolution should clearly define the scope of authority — for example, authority to sign contracts up to $50,000, authority to sign all employment agreements, or authority to execute a specific transaction. Clearly defined limits protect the corporation from unauthorized commitments.

Officer appointment: When the board appoints, promotes, or removes corporate officers, the action is documented in a resolution. The resolution typically names the individual, specifies their title and role, sets their compensation, and establishes the effective date. Officer appointment resolutions are important corporate governance documents and are often required by state law to be recorded in the corporate minutes.

Loan authorization: Resolutions authorizing the corporation to borrow money are among the most scrutinized by third parties. Lenders require these resolutions to verify that the individuals signing the loan documents have proper authority. The resolution should specify the lender, the maximum amount, the general terms, and the authorized signatory or signatories. Some states require board approval for borrowing that exceeds a certain percentage of the corporation's assets.

Major purchase or sale: Significant asset acquisitions or dispositions typically require board approval. This includes real estate transactions, major equipment purchases, business acquisitions, and the sale of significant business assets. The resolution authorizes specific individuals to negotiate and execute the transaction and may set conditions or limitations on the terms.

Dividend declaration: When the board declares a dividend, the resolution specifies the amount per share, the record date, and the payment date. Dividend resolutions have important legal implications — directors can be personally liable if dividends are declared when the corporation is insolvent or if the declaration violates the corporation's articles of incorporation or state law.

Board resolutions must comply with the corporation's governing documents and applicable state law to be valid and enforceable. Understanding these requirements helps ensure that resolutions will be accepted by third parties and withstand legal scrutiny.

Proper notice: Board meetings at which resolutions will be adopted must be properly noticed in accordance with the corporation's bylaws. Most bylaws require written notice to all directors a specified number of days before the meeting, including the date, time, location, and general purpose of the meeting. Special meetings may have additional notice requirements. Failure to provide proper notice can render actions taken at the meeting voidable.

Quorum requirements: A quorum must be present for the board to take valid action. The quorum requirement is typically defined in the bylaws — usually a majority of the total number of directors. If a director has a conflict of interest regarding a particular resolution, they may need to recuse themselves, which could affect whether a quorum is present. Directors participating by phone or video conference typically count toward the quorum if permitted by the bylaws.

Voting thresholds: Most board actions require approval by a majority of the directors present at a meeting at which a quorum is present. However, certain actions may require higher voting thresholds — a supermajority (two-thirds or three-quarters) or even unanimous approval. These enhanced voting requirements are typically found in the articles of incorporation, bylaws, or state corporate statutes. Common actions requiring enhanced approval include amending the articles or bylaws, approving mergers or major asset sales, and authorizing stock issuances.

Written consent in lieu of meeting: Most states allow the board to act by written consent without holding a formal meeting, provided that all directors (or the minimum number required by state law) sign the written consent. This is particularly useful for routine matters or when scheduling a full board meeting is impractical. The written consent should contain the same elements as a formal resolution and must be filed with the corporate records.

Conflict of interest: Directors who have a personal financial interest in a transaction being considered by the board may have a conflict of interest. Most state corporate statutes and corporate bylaws require conflicted directors to disclose their interest and, in many cases, to recuse themselves from voting on the matter. The resolution should note any recusals and confirm that the required approval threshold was met among non-conflicted directors.

Corporate records retention: Board resolutions must be maintained as part of the corporation's official records, typically in the corporate minute book. These records should be preserved indefinitely, as they may be needed to verify corporate authority for transactions, demonstrate compliance with governance requirements, or defend against claims that corporate actions were not properly authorized.

Even experienced corporations sometimes make mistakes with board resolutions that can undermine their validity or create legal complications. Awareness of common pitfalls helps ensure proper corporate governance.

Vague or ambiguous language: Resolutions that use vague language — "authorized to do whatever is necessary" or "authorized to take appropriate action" — fail to clearly define the scope of authority being granted. Third parties (especially banks and lenders) may reject resolutions with vague language because they cannot determine exactly what actions are authorized. Each resolved clause should be specific about the action, the authorized person, and any limits or conditions.

Missing quorum documentation: Failing to document that a quorum was present at the meeting is a common oversight that can call the validity of the resolution into question. The resolution or the meeting minutes should clearly state the names of directors present, confirm that a quorum exists, and record the vote count. Some organizations include a quorum certification directly in the resolution document.

Inadequate whereas clauses: Whereas clauses that are too brief or omit important context fail to establish the rationale for the board's decision. While whereas clauses are technically not operative (the resolved clauses are what matters legally), they provide important context that helps third parties understand the resolution and can be critical if the resolution is challenged. Take time to draft whereas clauses that fully explain the background and reasoning.

Not obtaining required approvals: Some corporate actions require not only board approval but also shareholder approval (such as amending the articles of incorporation, approving mergers, or dissolving the corporation). Adopting a board resolution for an action that also requires shareholder approval does not substitute for the shareholder vote. Always verify which level of approval is required before proceeding.

Failing to update resolutions: Board resolutions remain in effect until they are superseded or revoked by a subsequent resolution. When authorized signatories leave the company, when loan terms change, or when corporate policies are updated, the original resolutions should be updated to reflect the current state of affairs. Outdated resolutions can create confusion and may lead to unauthorized individuals continuing to act on behalf of the corporation.

Not maintaining corporate records: Board resolutions that are adopted but not properly recorded in the corporate minute book are difficult to locate and verify later. Maintain a well-organized minute book that includes all resolutions in chronological order, along with the meeting minutes, attendance records, and any supporting documents. Digital record-keeping is acceptable in most jurisdictions, but ensure that the records are secure, backed up, and accessible when needed.