Each corporation in Canada has a Board of Directors. And the Board of Directors is considered the corporation’s brain or “guiding mind”.
(This is true of corporations of every size, whether there is just one director or whether there are 15 directors.)
So how does that brain, i.e. the Board of Directors, make decisions about what the corporation should do?
In short, big and important decisions need to be made by a resolution of the Directors of the corporation. All other decisions, for example, decisions about day-to-day operations, can be made by officers of the corporation and do not require a resolution of the Board of Directors (check out this article to learn more about the difference between officers and directors).
What is a Resolution?
A resolution is a statement, or statements, about a decision that has been made by the Board of Directors.
For example, a common Directors resolution is to approve of the annual financial statements prepared by the corporation’s accountant. That resolution would be worded something like this:
“It is resolved that the annual financial statements for the fiscal year of the corporation ending December 31, 2023, prepared by the accountant of the corporation and accompanied by a Compilation Engagement Report dated April 25, 2024, are hereby approved.”
Often, a resolution, such as the example above, would also be accompanied by other resolutions. The other resolutions might provide specific instructions about what further steps should be taken to give effect to the resolutions.
What do you do with a Resolution?
The resolution itself is just a written record of a decision. After the resolution is passed, it must be acted on in most cases. Usually, it is acted on by an officer, a director, a representative (such as a lawyer or accountant), or an employee.
The resolution must also be stored in the records of the corporation. That’s where the Minute Book comes in. And that’s where a digital minute book on the Tobuso platform is especially handy! The Tobuso digital minute book makes it easy to keep your records organized and in one place, easily accessible 24/7 from wherever you are.
How do you create a Resolution?
Resolutions are created in two very distinct ways: (1) written resolution and (2) motion at a board meeting followed by a resolution.
1. Written resolution
Written resolutions are the most common way for small businesses in Canada to record director resolutions.
You do not need to have a board meeting in order to pass a written resolution, which is what makes it such a popular option. By choosing to record decisions via written resolution, you avoid the need to coordinate the schedules of multiple directors, call a formal board meeting, prepare meeting minutes, and follow all the other formalities that come with board meetings.
In order to pass a written resolution, you need signatures from all of the directors of the Corporation (with limited exceptions). So, recording decisions by way of written resolutions requires unanimity. This can be seen as another benefit of passing written resolutions: It requires consensus building and can only be done if all directors can be brought onside with the decision in question.
Typically, a written resolution is formatted like this:
- Name of corporation;
- Date;
- Title of resolutions;
- Preamble (brief description of context leading to the decision);
- Resolutions;
- Catch all resolution that authorizes representatives of the corporation to act on the resolutions; and
- signature block.
2. Motion at a board meeting followed by a resolution
Resolutions can also be passed at meetings of Boards of Directors.
To begin the process of passing a resolution at a meeting of the Board of Directors, a Director needs first to put forward a “Motion”. A motion is an idea that the Director is proposing to the rest of the Board.
Once a motion is put forward, it needs to be discussed by the Board. Once there has been sufficient discussion, the motion will be put to a vote. If a sufficient number of directors favours the motion (usually 51%+), then it will be passed as a resolution.
Often, the wording of the motion will be changed throughout the discussion. For example, the original motion might be qualified with some prerequisites or limitations. In this way, presenting a motion gives rise to an opportunity for negotiation among the various board members.
If a resolution is passed at a meeting of the Board of Directors, then it needs to be recorded in the minutes of that meeting. After the meeting is concluded, the draft minutes are circulated to the Board members for review. Board members not present at the meeting only have a short time to contest the decision reflected in the resolution; otherwise, they will be deemed to have agreed to it. The meeting minutes are not formally approved until the next Board meeting, after which they are usually signed by the Chair or the Secretary and then placed in the minute book for the corporation. Again, the tobuso.ca digital minute book comes in really handy here for keeping the records organized and in one place, easily accessible 24/7 by all directors from wherever they are.
What is better—a written resolution or a motion/resolution at a Board Meeting?
There is no right answer. A written resolution will almost always be best if there is consensus about the decision, especially if the corporation’s board of directors does not hold regular meetings. On the flip side, presenting a motion at a meeting of the Board of Directors will be best for decisions where there might not be unanimity or where a discussion is needed. Passing resolutions at board meetings also works well if the directors hold regular board meetings.
If you are dealing with an important and time-sensitive decision, but you’re not sure whether there will be a consensus among the board members, then you can consider this approach: One alternative approach is to circulate a written resolution for signature at the same time as a notice of a meeting of the board of directors (because usually, directors need to be given significant advance notice of a meeting, usually an average of 5 days). The meeting can be cancelled if everyone signs the written resolution. But at least you have started the clock on giving meeting notice just in case you cannot get a consensus on the written resolution.
How do I prepare a written resolution or meeting minutes?
You can find all of the resources that you need at tobuso.ca. You can automatically generate written resolutions on the Tobuso platform for common director resolutions. Once the resolution is generated, Tobuso will automatically send it out to all of the directors of the corporation for e-signature, and once signed, it will automatically be saved in the minute book for the corporation. It’s one of the easiest things you’ll ever do for your corporation!
Once logged in, you can also request additional assistance using the help feature on the Tobuso platform.
We hope this article gives you a better understanding of board resolutions. If you want to learn more about Tobuso, just visit our site or go ahead and sign up for free today!
