Not-for-profit and charity boards may sometimes need to make a board resolution – something that formalises — in writing — the critical decisions made by members in board meetings. If you are not familiar with what resolutions are and how to formulate one, we’ve put together a quick guide to how to write one and some best practices.
Comparatively speaking, making decisions is often easier than writing a board resolution. Nonetheless, drafting them is far easier when your board understands its purpose and the components that go into writing them.
To that end, we will cover:
- The definition of a board resolution
- The types of situations that call for a board resolution
- How to write a board resolution
- How to pass a resolution at a board meeting
What Is a Board Resolution?
A board resolution is sometimes called a directors’ resolution. Simply put, a board resolution is a formal document of a board’s decision.
A board of directors is thehighest authorityin an organisation, and their decisions can have far-reaching consequences. Boards should write clear resolutions so that nothing can be called into question later.
Writing board resolutions for important decisions is considered abest practice for good governance. Record all resolutions in the meeting minutes and store them on yourboard management system. Your board management system gives all board directors easy access to resolutions as needed.
The entire board is accountable and liable for its actions and decisions, and individual board directors may be held personally liable if they are not diligent in their duties. Resolutions provide proof that the board is fulfilling its responsibilities in an efficient, responsible manner.
When Is a Board Resolution Required?
The benchmark for writing a board resolution is fairly broad. Boards of directors can write resolutions for any reason they deem appropriate. Boards often write them to proactively protect themselves in case anyone questions their decisions.
Specific Situations Calling for a Board Resolution
Think about a board resolution in terms of any act a board resolves to do. A board of directors can decide to draft a resolution for almost any reason they choose.
For example, some of the common reasons for writing resolutions include board and shareholder decisions on the following scenarios:
- Retaining a new member of the board
- Agreeing to a grant of money
- Establishing an investment policy
- A large asset purchase
- Hiring a new employee
- Delegating funds to a certain project
- An honour bestowed upon a member of the organisation
How to Write a Board Resolution
The board secretary typically writes board resolutions, but any board member or trustee can write them. The length of the resolution isn’t important. It’s best to keep it clear and simple, stating only what you need to say.
Before writing a board resolution, be clear on the purpose of writing it and stay focused on its purpose.
7 Steps for Writing a Resolution
The following steps will guide you through the process of writing a board resolution:
- Put the date and resolution number at the top.If it’s the board’s first resolution, you can number it however you wish. Consider using something like 0001 and then give all future resolutions a consecutive number.
- Give the resolution a title that relates to the decision.For example, “Resolution to Designate Funds from the 2023 Gala Fundraiser to the Marketing Fund.”
- Use formal language.Begin each new paragraph with the word, whereas. The first sentence should reference the board’s responsibility. For example, “Whereas it is the responsibility of the Board to designate funds for a specific purpose…”
- Continue writing out each critical statement.Use a separate paragraph for each important point.
- Wrap up the heart of the resolution in the last statement.The last statement of the resolution should state the final resolution, which is the action the board took or will take. For example, “Now, therefore be it resolved to designate the funds from the 2023 Gala Fundraiser to the Marketing Fund.”
- List the names of the board directors who voted on the resolution at the bottom of the resolution.Provide space adjacent to their names where they can indicate a “yes” or “no” vote. The resolution is approved when the majority of the board members vote “yes.”
- Provide a section for the board president’s signature.The resolution is not complete without the board president’s signature and the date they signed it. Some boards provide room for all the board’s officers to sign resolutions. Either way is acceptable.
The Charity Commission for England and Wales has some advice and guidelines on the law and good practice of charity meetings.
How to Pass a Resolution at a Board Meeting
Once a board resolution has been written, the board will need to approve it orally at aboard meetingand preserve it in writing after the meeting.
The following steps will take you through the process:
- The board chair reads the resolution (or asks another board director to do so)
- The board chair asks for a motion to adopt the resolution
- A board director moves to adopt it, and another director seconds it
- The board chair asks if there is any further discussion (there may or may not be a further discussion)
- The board chair calls for aye votes (directors may respond verbally or by a show of hands)
- The board chair calls for no votes
- The board chair calls for abstention
- The board chair announces whether the resolution is approved or not approved
The reason for asking for further discussion is it gives any dissenters a final chance to provide their reasoning for casting a no vote. Such statements may influence otherdirectors’ votes.
Lastly, theminutesshould reflect whether the resolution passed or failed, along with the number of aye votes, no votes and abstentions.
Considerations on Writing Effective Board Resolutions
Understanding how resolutions are written should take any intimidation out of the process. You may even learn to eventually enjoy it.
It helps to review templates of resolutions that were written by other boards for similar purposes. Find a good template to help you get started yet keep it flexible enough to serve the true purpose of the resolution.
Most importantly, never lose sight of the fact that board resolutions are legal documents, and they are legally admissible in a court of law.
Frequently Asked Questions (FAQs)
Can a Board Resolution be Signed Digitally?
It is perfectly legal and acceptable for boards to sign resolutions digitally, and for the sake of convenience, they often do.
Where Should the Board Store a Board Resolution?
Boards should store all board resolutions with their other important books and documents. It is wise to keep a backup copy somewhere in case the original gets lost. Many boards make it a practice to keep one copy with their articles of incorporation and bylaws and another in theirboard management system.
Why Is a Board Resolution Required?
Board resolutions formalise board decisions in writing and help to protect the board in case any of their actions or decisions are called into question by stakeholders or the courts.
