What Is a Corporate Resolution?
A corporate resolution is a written statement created by the board of directors of a company detailing a binding corporate action. A corporate resolution will be found in the board meeting minutes, although its form and structure can vary.
How Does a Corporate Resolution Work?
A corporate resolution can take many forms form, such as describing which officers are authorized to act (trade, assign, transfer or hedge securities and other assets) on behalf of the corporation. This is a common type of resolution, given that many banks, brokerages, and asset managers require this information, along with some title agencies.
A corporate resolution can also be created if a board moves to increase the amount of dividend distribution to shareholders. Resolutions not only provide details of the new action (in this case, the terms of new dividends) but the date of the meeting, during which the resolution was created. Other common types of corporate resolutions may involve decisions to acquire other businesses, issue new loans, purchase real estate, vote in new board members, hire executive employees, sell new shares of the corporation, and/or file for a new patent. Following a vote, the corporate resolution serves as official documentation. It does not usually need to be submitted to an oversight body or government body.
Real-World Example of a Corporate Resolution
In December 2017, the National Company Law Tribunal (NCLT) extended the time, during which the firm Electrosteel Steels Limited was able to engage in its corporate insolvency resolution process. The extension is an additional 90 days, beginning January 17, 2018. The Kolkata-based Electrosteel Steels Limited was burdened with Rs 10,274 crore in debt; it owes this total to an SBI-led consortium of banks.
Facing insolvency proceedings, ESL was admitted to the insolvency process. The admission recommendation originated at the Committee of Creditors (CoC) committee meeting on December 6, 2017. NCLT executive members noted that meeting minutes underscored the CoC's approving the resolution by 99.82%.
Corporate Resolutions and a Company’s Board of Directors
As noted above, the board of directors of a corporation is responsible for making significant decisions. The board’s mandate is to establish policies for the management and make decisions on critical company issues. This is required of every public company. Board decisions include when to distribute dividends, the hiring, and firing of executives, options policies, and executive compensation. In addition to those duties, a board of directors is responsible for helping a corporation set broad goals, supporting executive duties, and ensuring the company has adequate, well-managed resources its disposal. Many critical decisions are recorded in board meeting minutes as corporate resolutions.