Board resolutions play a vital role in shaping the framework of corporate governance in Singapore. These formal decisions, made by a company’s board of directors, serve as the backbone of effective decision-making and ensure accountability within an organisation.
From approving critical strategies to overseeing compliance and regulatory responsibilities, board resolutions carry significant legal weight, safeguarding the interests of both the company and its stakeholders.
Understanding the importance and proper execution of board resolutions is essential for fostering transparency, driving strategic growth, and maintaining corporate integrity in today’s dynamic business environment.
In this blog, we look at board resolutions in Singapore in greater detail to find out what they entail and how companies can write theirs.
What is a Board Resolution?
A board resolution, otherwise known as directors’ resolution, is a formal document that documents the intentions or decisions made by board members on the organisation’s behalf.
According to Section 157A of the Singapore Companies Act, a company’s business is to be managed or supervised by its directors. This often means that they require the board of directors to make significant decisions.
This is where board resolutions come in – they record these decisions, which can be:
- Change in ownership structure
- Voting in of new board members
- Sale of company shares
- Approval of a new business strategy
- Appointment of a new CEO
- Entering significant contracts
When the board of directors make critical decisions, they face huge responsibilities. Board resolutions serve as a point of reference for these directors as they go about managing the business.
Types of Board Resolutions
There are several types of board resolutions, such as:
- Ordinary Resolutions: Used for regular decisions to address routine matters and require only a simple majority of over 50% to pass
- Special Resolutions: Used to address significant and usually structural decisions and typically need a higher approval rate of at least 75%
- Unanimous Resolutions: Reserved for highly sensitive or significant decisions and require full approval from all directors present
Importance of a Board Resolution
Board resolutions are a cornerstone of effective corporate governance, ensuring that decisions are made responsibly, transparently, and in the best interest of the company and its stakeholders. Here are more reasons highlighting their importance:
Legal Compliance
Board resolutions are often required by law to document significant decisions, such as approving financial statements, appointing directors, or authorising major transactions. They help ensure the company adheres to regulatory requirements.
Accountability and Transparency
By formally recording decisions, board resolutions provide a clear trail of accountability. This transparency is crucial for stakeholders, including shareholders, regulators, and auditors.
Strategic Decision-Making
Resolutions formalise critical decisions that shape the company’s direction, such as mergers, acquisitions, or policy changes. They ensure that these decisions are well-documented and agreed upon by the board.
Conflict Prevention
Having a formal record of board decisions helps prevent disputes or misunderstandings among directors or stakeholders, as it provides a clear reference point.
Stakeholder Confidence
Properly documented resolutions demonstrate good governance practices, which can enhance trust and confidence among investors, partners, and other stakeholders.
How Board Resolutions Relate to Directors’ Duties
Although a board resolution is not submitted to any legal body in Singapore, it still falls in line with the directors’ duties of a business. It can show whether directors are fulfilling their duties.
For example, Section 156(1)(a) of the Companies Act dictates that directors must disclose their interest in transactions with the company at a directors’ meeting. This can be done through verbal or written methods, such as using a form. The board’s meeting minutes will record such vital intentions or decisions when disclosed.
Further actions after reacting to this disclosure can become possible board resolutions, allowing shareholders to see if directors have met their duty of declaration of interest.
What is Included in a Board Resolution?
As the Companies Act does not detail the type of management action that requires a board resolution, the onus falls upon the company constitution, which varies across firms, to decide the specific requirements and when one is needed. Hence, it is common for board resolutions to differ among companies.
There are, however, key aspects of a board resolution to ensure compliance with regulatory standards, support for future auditing, and for easy understanding:
- Date and time
- Title
- Decision statement
- Resolution details
- Director signatures
- Secretary or chairperson signature
- (Optional) supporting documentation
Aside from the key components, there are also common issues that most company directors face that call for the passing of a board resolution. Some examples are:
- Stock issue
- Appointing company officers
- Opening a company bank account
- Selling of company assets
- Approval of mergers and acquisitions
- Borrowing of money and mortgaging of company property
How to Write a Board Resolution
A board resolution is relatively straightforward. Hence, its format largely depends on the issues being resolved by the company.
There are 2 ideal ways to structure a board resolution:
- General Board Resolution
For this resolution, it is a more generic one where it has many different issues resolved or decided upon by board members in 1 document. The different issues that the board of directors will endeavour to resolve at the meeting will appear as the points that make up the board resolution.
All issues that have been resolved will begin with “RESOLVED”.
Other key decisions and information will be recorded in the board resolution. Structuring your board resolution as a general one is especially useful if each issue is not information-heavy and the board has many issues to tackle. - Issue-Specific Board Resolution
Another way is to structure the board resolution according to the issue being resolved. For example, your board of directors could be seeking approval for the company’s annual budget. Any sub-issues resolved at the board meeting would need to start as “RESOLVED”.
Other key details should be recorded in the board resolution. Structuring your board resolution according to the issue being resolved is particularly useful if the specific issue has a significant amount of details. It is also useful if there are only a few extensive issues that need discussion at the board meeting.
How Are Board Resolutions Passed?
Board resolutions usually arise from formal meetings where board members congregate and discuss strategically important matters. Once a consensus is achieved, a resolution is drafted to formally capture the decision. The board members then vote on it, often through a show of hands. If the majority approves, the resolution is passed and officially recorded in the company’s documentation.
Get Help for Your Board Resolution With InCorp
Drafting and passing board resolutions can be a complex process that requires a clear understanding of legal and corporate governance standards. Partnering with professionals, such as those at InCorp, ensures that your resolutions are not only properly structured but also compliant with applicable regulations.
This expertise minimises risks and safeguards the integrity of your company’s decision-making process. Whether you need assistance in drafting, reviewing, or maintaining records of your board resolutions, seeking professional guidance can streamline operations and enhance organisational efficiency.
Our team is here to help. Contact us today to get started!
FAQs about Skills Development Levy
What is the difference between a board resolution vs directors’ resolution?
- They refer to the same thing and can be used interchangeably.
How do directors pass resolutions?
- Directors pass resolutions through a formal process during board meetings or, in some cases, via written resolutions.
How can InCorp help with my board resolution?
- InCorp provides comprehensive support for board resolutions, ensuring the entire process is handled with expertise and precision. Get in touch to find out how we can help!
We’re here to help you with your board resolution!
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