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of a corporation take an action without a meeting. Attached is a form for Delaware and California and then a generic one for other jurisdictions. When Do You Need the Board to Take Action? The precise answer is it depends because corporations are creatures of state law so depending on the corporations code of the state that the entity is formed in, there are different decisions that require board action. In addition, depending on the articles or certificate of incorporation of the entity or any stockholder’s agreement that is in place, a specific company may have certain actions that also need board approval even though under state law that may not be strictly required. However, in general, any very significant corporate action that will change the corporate nature of the entity or make a major change to the corporation. Some key examples are: • • • • • • Changes to the CEO or President Appointment of new statutory officers (so, not a VP of Marketing but your Treasurer, Secretary, President) or a replacement director Amending your articles or bylaws Issuing more stock Selling the company or substantially all of its assets Declaring bankruptcy
For most of these things I would recommend retaining a lawyer to advise on the underlying main transaction so they could draft the consent. However, for other key agreements or even administrative things like opening up bank accounts you may find that third parties or even for internal reasons you want proof that not just the CEO or President approved something, but that the board of directors approved it, so getting a consent may prove useful then. Why Do a Written Consent Rather Than a Meeting? That is a good question and actually, especially if you have a small board (maybe even one person for a closely held corporation of a small family business), you can have a meeting easily. However, there are still formalities you need to follow – you need to have proof that notice was properly given (yes, awkward if you’re your own director, but its worth doing – an email to yourself is sufficient) and you need to draft minutes and enter it into your minute book (I have draft form of minutes available alternatively) – but its definitely doable. However, since the corporations codes of all 50 states permit action by written consent, sometimes its just easier to do a written consent and skip the formality of a meeting. One big drawback for boards of greater than one person though is that in many jurisdictions (Delaware and California, for example), written consents require all directors. In contrast, at a meeting of the board, as long as you have a quorum, unless your bylaws or articles or stockholders’ agreement specify otherwise, only a majority of
the quorum is required to approve (though notice of the meeting has to go to all directors). Therefore, lets say you have 5 directors of a Delaware corporation and you have majority quorum and majority vote requirements. A written consent would require you to get the signatures of all 5 directors. A meeting could approve the same thing with just 2 directors voting for it and 3 directors attending the meeting (though all 5 would need to receive notice). In terms of documentation however, the written consent route only requires a written consent whereas for the meeting you should have proof of notice (prior to the meeting), minutes and then if you are giving it to a 3rd party, you will likely have a secretary’s certificate attesting to the attached resolutions. Anything Else I Need to Watch Out For? You should check to see if your bylaws prevent action by written consent. That is very unusual but it happens from time to time. Go into the section on bylaws discussing director’s meetings and it should have a section addressing action by written consent. Almost always these just copy the relevant state’s law on it, but its worth checking. Also, you should check to see whether your articles or any existing stockholders’ agreement have stockholder consent requirements above and beyond a director’s requirement. For instance, some venture investors will put into the articles of companies they invest in requirements that certain key actions like the ones described above (and other actions, like incurring secured indebtedness or doing exclusive IP licensing) need not just board approval but approval of the preferred shareholder (the venture investors normally take preferred shares). What is the Difference between a Secretary’s Certificate and a Written Consent? A Secretary’s certificate is a document where the Secretary of a Corporation attests that the included or attached resolutions are resolutions that the Board has passed and that remain effective. It is a statement, not an action. Therefore, for instance, if you have a bank that asks for a Secetary’s certificate or certification on a set of resolutions, technically you have lied if you just sign the Secretary’s certificate even if you are the Secretary. The only thing the Secretary should be signing is certifying resolutions that the Board has already passed, whether by written consent or in a meeting. The takeaway here is that if a 3rd party asks for a Secretary’s certificate attesting to resolutions, first you need to get those resolutions passed (whether by written consent or in a meeting) and then you can have your Secretary sign a certificate saying those resolutions are in full force and effect. Any Advice on Drafting the Actual Resolutions? No. Just kidding. Well, normally they start with the phrase “Resolved,” and then authorize the company to do something and then authorize the officers of the company (you can either simply say officers or authorized persons or list out which specific
after careful consideration. So. otherwise it raises questions as to how they can approve it. Here’s the specific revised version: . amend that language to reflect that fact (so replace “in the form presented to the Board” with “as summarized in materials delivered to the Board”. Its probably best to provide them some kind of document. don’t say that. for example. Then the resolution you might include in your written consent might be something like: Resolved. However.” What if I Already Signed It and Now I Want the Board to Approve It The best way to handle it is to have the board ratify the action. So as a variation on the previous example. together with such changes as they deem reasonably necessary. for example. that the Distribution and License Agreement by and between the Company and Big X in the form presented to the Board (the “Distribution Agreement”) is hereby approved and authorized both in terms of execution and performance of the terms herein and that the President and CEO. it is fairly common to add a preamble paragraph that explains why the Board is finding it in the best interests of the Company to enter into the agreement. Chief Financial Officer or Vice President of Marketing are hereby instructed and authorized to execute such Distribution Agreement. Note that it says that the Board has been presented the form of agreement – if you don’t present it to them. lets say the CEO already has signed the Big X agreement and a week later Big X wants to see proof of approval by the Board so you need to ratify it. If you summarize it for them in a memo or a slide deck. Note that “whereas” clauses are descriptive – it’s the “resolved” clause that actually constitutes the approval.officers or even specific people) to act in furtherance of that resolution. this is a Whereas clause you could stick before the action “Resolved” clause in the previous example: “Whereas. whereas are sometimes helpful in proving that the Board met their fiduciary duties of care because it provides evidence of why approving the proposed action was in the interests of the company. the Board has determined that it is in the best interests of the Company to enter into an exclusive distribution arrangement with Big X on the terms described to the Board by management. lets say that you are entering into a distribution agreement with company “Big X” and their lawyer says they want to see that your board approved the agreement. Lets say the title of the distribution agreement is “Distribution and License Agreement”. You can either specifically call out the ratification in the resolution authorizing the agreement or you can do a general omnibus ratification. So. As an addition.
approved and confirmed in all respects. ratified and confirmed in all respects as the proper acts and deeds of the Company. ratified and authorized both in terms of execution and performance of the terms herein and that the execution by the President and CEO of the Distribution Agreement is hereby ratified.Resolved. Here’s the omnibus ratification: Resolved. that the Distribution and License Agreement by and between the Company and Big X as presented to the Board is hereby approved. . that all actions previously taken by any officer or director of the Company in connection with the transactions contemplated by the foregoing votes are hereby approved.
the foregoing resolutions shall be deemed to be adopted and in full force and effect as of the date hereof.] FURTHER RESOLVED. [signature] [print or type name] .Unanimous Written Consent of Board of Directors of ____________________________ [name of corporation] a California corporation Dated: . that this Unanimous Written Consent may be executed in one or more counterparts and when each Director has executed at least one counterpart. Acting pursuant to Section 307(b) of the California General Corporation Law. 20__ The undersigned are all of the Directors of the corporation (the “Company”). we (the “Board”) adopt the following recitals and resolutions: [Insert text of recitals and resolutions.
Acting pursuant to Section 141(f) of the General Corporation Law of the State of Delaware. we (the “Board”) adopt the following recitals and resolutions: [Insert text of recitals and resolutions.Unanimous Written Consent of Board of Directors of ____________________________ [name of corporation] a Delaware corporation Dated: ___________________. [signature] [print or type name] . that this Unanimous Written Consent may be executed in one or more counterparts and when each Director has executed at least one counterpart.] FURTHER RESOLVED. the foregoing resolutions shall be deemed to be adopted and in full force and effect as of the date hereof. 20__ The undersigned are all of the Directors of the corporation (the “Company”).
that this [Unanimous] Written Consent may be executed in one or more counterparts and when each Director has executed at least one counterpart. The state of your corporation Its traditional to put in the specific section of the state’s corporation code permitting board action by written consent but not having it may be easier and is not fatal. 4 Obviously. 20__ The undersigned are all of the Directors of the corporation (the “Company”). doing unanimous can’t hurt.] FURTHER RESOLVED. Acting pursuant to [Section _________ of]3 the Corporation Law of the State of _________.[Unanimous]1 Written Consent of Board of Directors of ____________________________ [name of corporation] a ____________2 corporation Dated: ___________________. we (the “Board”) adopt the following recitals and resolutions: [Insert text of recitals and resolutions. do as many of these as you have directors. 3 2 1 . [signature]4 [print or type name] If you know your state permits non-unanimous written consents you may do that. If you are not sure. the foregoing resolutions shall be deemed to be adopted and in full force and effect as of the date hereof.