What are corporate resolutions and when does my corporation need them?

Corporate resolutions are formal written records of decisions made by the directors or shareholders of a corporation. They are the way a corporation officially approves significant actions, and they form the backbone of your minute book.

Examples of decisions that typically require a director resolution include approving the corporation's financial statements, authorizing an officer to sign a specific contract, setting officer salaries, declaring dividends, and authorizing the opening of bank accounts. Examples of decisions requiring shareholder resolutions include electing directors, approving certain major transactions, and amending the corporation's articles or by-laws. Some decisions require a higher threshold — a "special resolution" — that must be passed by at least two-thirds of the votes cast.

Resolutions can be passed at a formal meeting (with proper notice and a quorum present) or, more commonly in small corporations, by written resolution signed by all directors or shareholders entitled to vote. A written resolution has the same legal effect as a resolution passed at a meeting.

Many business owners skip this step for years and then scramble to catch up when a bank, investor, or purchaser requests the records during due diligence. Keeping resolutions current from the start is far less expensive than reconstructing years of missing corporate history.