Corporate resolutions are deceptively simple documents which must be approved by the board of directors of any given corporation in order to legally transact vital corporate business.
Such resolutions contain three key elements.
A listing of individuals who are authorized to conduct specified actions on behalf of the company.
The specific actions that the named individuals are authorized to perform. Those actions may include assigning, transferring and selling securities issued by the corporation; signing checks; opening and closing bank accounts; buying or selling specific parcels of real estate; and making investment decisions on behalf of the company.
The period of time that the resolution will remain in force. Some corporate resolutions remain in force until and unless formally repealed by the board, while others are limited to specifically defined periods.
Attorney Lindsay Fischer, who has practiced law in Colorado Springs for nearly 50 years, is intimately acquainted with corporate resolutions.
“I learned how to write them when I was at Cravath (Cravath, Swaine & Moore, a New York law firm),” he said. “Remember, corporations are hierarchies. First you have the articles of incorporation, then the bylaws, then the directors and officers and then the folks like assistant treasurers, assistant secretaries — those are ‘resolution officers,’ who can act for the company if they have a resolution.”
Fischer said that years ago, title companies wanted to see corporate resolutions and corporate seals for any type of transaction.
“Now, the title companies don’t give a rip,” he said. “They don’t bother with C.R.’s. If a guy’s got a title, if he’s the company president, then that’s self-proving.”
While the board usually prepares such documents, shareholders may prepare a resolution for consideration.
During the 1980s,a coordinated effort among anti-Apartheid activists led to the introduction of hundreds of shareholder-authored corporate resolutions targeting American corporations that either conducted business in South Africa or invested in companies with such links.
These resolutions called for immediate divestiture of such businesses and/or investments. The effort met with broad success, and contributed to the economic isolation of the white-minority government.
Since then, the shareholder-authored corporate resolution has become a favorite tool of activists who favor socially responsible investing.
As Selena Maranjian reported last month in the Motley Fool,
“Some SRI activists have focused on the war in Darfur, trying to get mutual funds and other institutional investors to stop investing in companies that they link to genocide in the region,” she wrote. “In 2007, shareholders of Berkshire Hathaway introduced a corporate resolution supporting divestment of such investments. Earlier this year, fund company TIAA-CREF created a similarly vigorous policy for its funds …”
For small businesses, especially those in the formative stages, it’s crucial to create appropriate corporate resolutions that are clear, unambiguous and legally binding. Such resolutions must take the proper legal form, must be authorized during a formal meeting of the board of directors, and proper minutes must be prepared and approved detailing the actions of the board.
The quick, informal communications that so many people rely upon to communicate business decisions — e-mail, text messages, voice mail — can neither replace nor alter corporate resolutions.
If you’re away from the office during a long weekend, and you authorize your executive assistant to sign some checks on your behalf, or make some bank transfers, or sell some corporate property, watch out. You may be authorized to take all of these actions, but that doesn’t mean you can delegate them to someone else.
You might be the majority shareholder, the CEO and the sole decision-maker, but you’re still bound by the corporate resolution that originally empowered you to act on behalf of the company.
But, as Fischer recalled, sometimes you can successfully improvise.
“A few years back, when (another attorney) and I were in Breckenridge closing a real estate deal, they told us that we had to have a corporate seal affixed to the document,” he said. “So we took a 50 cent piece, made a round impression, and then inked in the rest. It worked fine.”