Board resolutions and board minutes are two integral components of board meetings (i.e., formal meetings of company directors).
A board resolution is a legally binding action or decision taken by directors at a board meeting. Whenever this type of meeting is held, ‘minutes’ must be taken. These minutes ensure that the company has a written account of the proceedings of the meeting, including the discussions held and any resolutions, proposed, rejected, or passed.
Directors’ decision-making powers and procedures are primarily regulated by a company’s constitution (articles of association), which is prescribed by the Companies Act 2006. These rules may also be supplemented in shareholders’ agreements and/or directors’ service contracts. Therefore, if you are appointed as a company director, you must familiarise yourself with these important documents.
What are board resolutions?
Board resolutions are formal agreements, decisions, or actions made by company directors. This type of directors’ resolution is recorded in board minutes.
Officially, the term ‘board resolution’ refers to a decision made at a board meeting. In practice, however, the term often encompasses directors’ written resolutions as well.
Under the Model articles of association, a board resolution is ‘passed’ if it achieves the requisite number of directors’ votes, which is usually a simple majority (i.e., more than 50%).
Some companies choose to alter their articles to stipulate that a higher majority or unanimous agreement must be obtained to pass a resolution.
At board meetings, all eligible directors will cast their votes. Each director has one vote, which should be cast by a show of hands or by way of a poll. If the required number of votes in favour of the motion (proposed resolution) is not achieved, it fails.
In the event of a deadlock, the chairperson of the board will normally exercise the casting vote.
What are directors’ written resolutions?
Directors’ written resolutions are simply decisions that a board of directors makes in writing, rather than at a board meeting. There is no difference in the authority or validity of decisions made by written resolutions or board resolutions made at meetings.
Provided that a company’s articles of association does not preclude the use of written resolutions, directors may use this procedure at any time. Public limited companies, however, are not permitted to pass resolutions in writing.
Written resolutions provide directors with greater flexibility when decisions need to be made. They are much quicker and easier to facilitate because there is no need to give prior notice of the motion or assemble at a board meeting. Directors’ written resolutions are particularly useful when:
- Decisions are time-sensitive
- Directors are voting on straightforward matters that do not require in-depth consideration or discussion
- It is known or anticipated that the board is likely to agree to the motion
- Geographical restrictions or other practical matters make it challenging for all of the directors to assemble in one place or convene at a mutually agreeable time
- A company has only one director
Directors’ written resolutions must be sent to all directors who are entitled to vote. A single hard copy can be circulated to each director in turn, if practical, or individual hard copies can be sent to each director at the same time. Alternatively, the written resolution can be sent electronically or made available via a website.
The document should include the proposed resolution, clear instructions on how to signify agreement to the motion, and the deadline for casting votes. Depending on the format of the written resolution, directors will communicate their agreement to the motion by signing and returning the hard copy document, providing an electronic response, or voting via a website.
Whilst board resolutions can be passed by a simple majority vote, directors’ written resolutions can only be passed by unanimous agreement of all directors who are entitled to vote unless any provision in the articles states to the contrary.
What decisions can be made by a directors’ resolution?
Board resolutions and directors’ written resolutions are used whenever directors need to make significant and/or formal decisions on behalf of the company, as opposed to routine decisions made during the course of managing day-to-day business activities.
In accordance with the default Model articles, which are used by the vast majority of private limited companies in the UK, directors have the authority to “exercise all the powers of the company.” This means that directors can pass a resolution on any matter, other than decisions expressly precluded by the Companies Act 2006, altered articles, or passed special resolutions of the members (shareholders or guarantors).
Common decisions that require a resolution of the directors include:
- Appointing a company secretary
- Opening a business bank account
- Signing legal documents on behalf of the company
- Approving documentation
- Ending contracts or entering into new ones
- Authorising corporate loans
- Issuing shareholder dividends
- Buying or selling company assets
- Leasing premises
- Changing the company’s registered office address
- Setting up a SAIL address
- Moving statutory records
- Appointing an accountant or auditor
- Appointing a chairperson to the board
- Approving statutory accounts
- Changing the company’s accounting reference date (ARD)
Certain company decisions can only be made by passing a members’ resolution. Common decisions that are beyond the scope of directors’ powers include:
- Changing the company name
- Altering the articles of association
- Striking off the company
- Authorising substantial property transactions when there is a conflict of interest
- Authorising certain directors’ loans
- Approving certain directors’ contracts
- Issuing shares
- Removing directors
To find out more about directors’ and member’s resolutions, read our blog post on different types of company resolutions.
What are board minutes?
Pursuant to section 248 of the Companies Act 2006, board minutes must be taken at every directors’ meeting. This means that limited companies are legally required to keep an accurate written account of all board meetings.
To take effective board minutes, the following information should be recorded, where applicable:
- Company name and registered office address
- Time, date, and location of board meeting
- The time that the meeting commenced
- Names of all persons in attendance
- Names of absentees
- Authorised proxies
- Name of the chairperson
- Whether a quorum is present
- Items on the agenda
- Proposed resolutions
- Outcome of proposed resolutions (i.e., ‘passed’ or ‘rejected’)
- List of directors for and against any motions
- Actions or next steps required to fulfil passed resolutions
- Objections, queries, or concerns raised
- Amendments or corrections to previous board minutes
- Additions to current board meeting agenda
- Items on the agenda postponed until next meeting or future date
- Note of any filings that have to be made at Companies House or HMRC, as well as the name(s) of the person(s) responsible for these tasks
- Any additional matters discussed
- Agreed date of next board meeting
- Time of adjournment
To comply with limited company record-keeping requirements, board minutes must be kept for a minimum of 10 years after the date on which the corresponding meeting takes place.
Aside from being a legal requirement, board minutes are incredibly useful. By keeping a written record of meetings, directors can track the progress of the business, detail future plans, provide a reference point for important matters, and ensure that the board is meeting its legal and fiduciary duties to the company and its members.
