What Is A Written Resolution

What is a Written Resolution? A Comprehensive Guide

A written resolution is a formal document recording a decision made by a group, typically a company's board of directors, shareholders, or members of an organization. It serves as legal proof of the decision taken, outlining the specifics of the matter and the vote cast. Understanding written resolutions is crucial for anyone involved in corporate governance, organizational management, or legal compliance. This comprehensive guide will explore everything you need to know about written resolutions, from their purpose and structure to legal implications and best practices.

The Purpose of a Written Resolution

Written resolutions serve several critical purposes:

• Legal Compliance: Many jurisdictions require certain decisions, particularly those involving significant corporate actions, to be documented through written resolutions. This ensures accountability and transparency. The specific requirements vary depending on the governing laws and the type of organization.

• Evidence of Decision-Making: The written resolution acts as irrefutable evidence that a decision was made, by whom, and with what outcome. This is invaluable in case of disputes, legal challenges, or audits.

• Clear Record Keeping: Resolutions provide a clear and concise record of the decision-making process, avoiding confusion or misinterpretations that can arise from informal discussions. This is vital for maintaining effective corporate governance.

• Facilitating Future Actions: The resolution provides a clear mandate for future actions, guiding the implementation of the decision.

• Protecting the Organization: A well-drafted written resolution minimizes the risk of legal challenges or disputes by ensuring that all parties involved are aware of the decision and its implications.

Components of a Well-Drafted Written Resolution

A typical written resolution includes the following key elements:

• Heading: Clearly states the purpose of the resolution, e.g., "Resolution Authorizing the Issuance of New Shares."

• Date: Indicates the date the resolution was passed.

• Organization Name: Specifies the name of the organization adopting the resolution (e.g., company, society, partnership).

• Recitals (Optional but Recommended): This section provides background information relevant to the decision, outlining the context and rationale behind it. It explains why the resolution is being passed.

• Resolved: This crucial section formally states the decision being made. It is usually phrased in a clear, concise, and unambiguous manner, leaving no room for interpretation.

• Voting Information: Details on how the vote was conducted, including the number of votes cast for and against the resolution, and whether the required majority was achieved. For example, it might state: "RESOLVED, that the foregoing resolution be, and it hereby is, adopted by a vote of 10 in favor and 0 opposed."

• Signatures: Signatures of the authorized individuals, such as the chairperson and secretary, are essential to validate the resolution. This provides authentication and legal validity.

• Appendix (Optional): Any supporting documents, such as financial statements or legal agreements, might be attached as appendices.

• Filing Information: Some jurisdictions require resolutions to be filed with relevant authorities, like the registrar of companies. This section may include details about where and when the resolution was filed.

Types of Written Resolutions

The specific format and requirements of a written resolution can vary depending on the circumstances and the type of organization. Here are some common types:

• Board Resolutions: These are decisions passed by the board of directors of a company, covering various aspects of business management, such as appointing officers, approving budgets, or authorizing contracts.

• Shareholder Resolutions: These resolutions are passed by the shareholders of a company, typically at an annual general meeting (AGM) or an extraordinary general meeting (EGM). They often concern significant changes to the company's structure or operations.

• Member Resolutions: In organizations such as clubs, societies, or cooperatives, member resolutions are used to make decisions affecting the organization's operations or policies.

• Unanimous Written Resolutions: These resolutions are passed without a formal vote, with all members expressing their agreement in writing. They are often used for less significant decisions where a formal vote is not strictly necessary.

• Ordinary Resolutions: Require a simple majority (more than 50%) of votes to pass.

• Special Resolutions: Require a higher majority, often two-thirds or three-quarters, to pass, indicating a more significant decision. Examples include changes to the company's articles of association or winding up the company.

Legal Implications and Best Practices

• Adherence to Legal Requirements: It's crucial to ensure that the written resolution complies with all applicable laws and regulations. This includes adhering to procedural requirements, such as quorum (the minimum number of members required to conduct a meeting), and voting procedures.

• Accurate Record Keeping: The resolution should accurately reflect the decision made and the voting process. Any inaccuracies can have serious legal consequences.

• Clear and Unambiguous Language: Use clear, concise, and unambiguous language to avoid any misinterpretations. Legal jargon should be minimized to ensure the document is easily understood by all parties involved.

• Professional Drafting: For important resolutions, it's highly recommended to seek legal advice to ensure that the document is properly drafted and complies with all legal requirements.

• Proper Storage: Written resolutions should be stored securely and systematically, ensuring easy access when needed. This is vital for record-keeping and compliance.

• Version Control: When multiple drafts are involved, maintaining version control is vital to prevent confusion and ensure everyone is working from the latest version.

• Witnessing (where required): Some jurisdictions may require witnesses to the signing of the resolution.

• Sealing (where required): Similarly, some organizational structures may require the resolution to be sealed with an official seal.

Frequently Asked Questions (FAQ)

Q: What happens if a written resolution is incorrectly drafted?

A: An incorrectly drafted resolution can lead to legal challenges, disputes, and even invalidate the decision. It's essential to ensure accuracy and compliance with legal requirements.

Q: Who should sign a written resolution?

A: The individuals authorized to sign depend on the organization and the type of resolution. Typically, it's the chairperson and secretary of the meeting, or other designated officers.

Q: Can a written resolution be amended?

A: Yes, a written resolution can be amended, but this typically requires another formal resolution. The process depends on the organization's rules and applicable laws.

Q: What if a member disagrees with a written resolution?

A: Disagreement is possible, but the resolution still stands as the official decision of the organization. Depending on the organization's rules, there might be avenues for appeal or further discussion.

Q: Are written resolutions legally binding?

A: Yes, properly drafted and executed written resolutions are legally binding documents, providing evidence of a decision made by an organization.

Q: How long should written resolutions be kept?

A: The retention period depends on the type of organization, applicable laws, and the nature of the decision. Consult legal advice or relevant governing documents for specific guidance.

Conclusion

Written resolutions are essential tools for organizational governance, providing a clear and legal record of decisions made. Understanding their purpose, components, and legal implications is critical for anyone involved in organizational management or corporate governance. By adhering to best practices and seeking legal advice when necessary, organizations can ensure their resolutions are legally sound, transparent, and contribute to effective decision-making. Remember, a well-drafted resolution protects the organization, ensures accountability, and facilitates effective implementation of decisions. Prioritizing accuracy, clarity, and legal compliance will minimize risks and promote good governance.