Resolutions and Their Importance
What is a Resolution?
Is your corporation facing a significant decision? If so, it is likely that a corporate resolution will be passed by the Board of Directors. A corporate resolution is an important document serving as a formal statement of the Board’s wishes.
A resolution is an official expression of the decision or opinion of an official body. Typically, resolutions are passed by one of two groups: a legislative body, such as Congress or a state legislature, or the Board of Directors of a corporation. In the corporate world, a resolution is a written decision passed by the Board of Directors.
A corporation’s Board of Directors is charged with making many significant decisions that will impact the future of the company. Each of these major decisions should be recorded formally as a corporate resolution. A resolution can be specific, covering a particular transaction, or broader, concerning several transactions. The resolution is legally binding, and must be agreed upon by a vote occurring at an official meeting of the Board of Directors.
Within Florida Corporations, corporate resolutions can serve many different purposes. Examples of corporate resolutions include statements giving consent to a real estate purchase or to the termination of a lease. Resolution can also approve the opening of a bank account or authorize the company to issue shares. These are just a few examples of the many possible reasons for passing a resolution.
Importance of Corporate Resolutions
A resolution that has been passed by the Board of Directors gives assurance to other parties in a transaction that the transaction was properly authorized by the Board. A Director may be asked to show the resolution as proof in order to open a corporate bank account or conduct other transactions on behalf of Florida corporations. The resolution also indicates that the actions were taken on behalf of, and by, the corporation, rather than by a Director whose actions were not approved by the rest of the Board.
More formal than a verbal decision, a written and agreed upon corporate resolution can prevent later disputes between individual Directors or between the Board and a third party. All Resolutions passed by the Board of Directors of Florida corporations should be kept for at least 6 years in the corporation’s Corporate Minute Book. This written record can be useful in the event that the Board’s actions are challenged by shareholders or others.