10.3 Shareholder and board resolutions and powers of attorney
First of all, choose a title that identifies the type of resolution. If a shareholder resolution prominently presents the name of the shareholder (e.g. because it is the first entity referred to and printed in bold), it is desirable to make it equally prominently known that it is not the shareholder but the company to which the resolution relates.
Recitals. A resolution should preferably address all those elements that are necessary to ascertain its validity and enforceability. As a matter of good practice, the resolution contains a preamble explaining the background of the resolution. Therefore, a resolution should confirm the title, authority and presence of the persons who should decide, as well as the fulfilment of procedural aspects for the relevant resolution.
Listing prerequisites. Mentioning the fulfilment of procedural aspects serves as a reminder that all those aspects have been taken into account, as a failure could have the effect of the resolution being declared void or even null from the outset. The procedural aspects that could be addressed may include:
a statement that each director and all holders of non-voting shares have received notice and were (therefore) given a reasonable opportunity to attend and advise the general meeting of shareholders;
if the resolution relates to the approval or fixation of the annual accounts, preferably a statement that the company’s auditor has received notice and was given a reasonable opportunity to advise the general meeting of shareholders;
if there are holders of pledge with the right to vote, a reconfirmation of this (and the relevant holder of pledge should sign, preferably with the statement that the shareholder itself had received notice and was given a reasonable opportunity to advise the holder of the pledge);
if the articles of association contain specific requirements for shareholder or board resolutions, a reference to the relevant provisions in the articles of association and a brief synopsis of those requirements;
if the resolution is required under the applicable law, a reference to the relevant statutory provisions and a brief synopsis of requirements or the qualifying facts;
if the resolution relates to a resolution by another body or organ of the company, a reference to such other resolution (i.e. the title, such body or organ and the date of the resolution);
a confirmation that any required approvals or advice from works councils and other employee representative bodies and employee unions, if relevant, were given.
The company resolves. Please note that, from a legal point of view, depending on the applicable law, it may be the company that decides, even though the company does so by virtue of a decision by the shareholder. In other words, where for instance the articles of association require that a shareholder resolution is adopted in connection with a sale of important assets, it may be the company that adopts such resolution by virtue of the fact that the shareholders duly exercise their voting rights.
Minutes, not resolutions. In several jurisdictions, resolutions are embodied in minutes of a shareholders or board meeting, as the case may be. In such case, a rather absurd story is conveyed of a meeting that has never taken place. The minutes explain that the chairman opened the meeting, established those aspects that would otherwise be included in a mere resolution, this followed a phantom agenda including items such as “what comes up for discussion” and -any other matters. The minutes should of course contain the above elements for a resolution.
Where such a procedure is not necessary, the “words of resolution” (i.e. the lead-in to the individual resolutions) could explicitly address this as follows:
NOW THEREFORE, the undersigned, constituting all the members of the Company’s management board, acting by written consent instead of in a meeting, resolve as follows:
Or, more simply, since the authority to bind the company can be verified in the Trade Register (or Companies Register) and is therefore redundant:
NOW THEREFORE, the Company resolves as follows:
Lead-ins. It is recommended to enumerate each individual resolution and precede the enumeration by a lead-in phrase such as:
The Company hereby resolves to:
Instead of such lead-in, U.S.-style resolutions sometimes precede each enumerated resolution by the word RESOLVED. This is similar to using WHEREAS in each recital of U.S.-style agreements and is (for the same reason) redundant. As with recitals, it is unnecessary to start each resolution as a strict grammatical continuation of the lead-in, especially if the enumerated clauses are somewhat more extensive than one or two lines. It is recommended to adopt the best practice rules for recitals and for enumerations in resolutions.
Adopt or ratify. Corporate resolutions are effective as of the moment that the resolution is actually adopted or ratified. The distinction between adopting or ratifying a resolution or act is that a ratification confirms or repairs the validity of an otherwise invalid, inexistent or defective act or resolution. It would be correct to express this by using the word ratify instead of adopt but be aware that, in English, ratify is also used to simply express the adoption of the resolution.
Hereby is or be. An archaic way of drafting is the use of the legalese be, and hereby is. The background of this combination of verbs is grammatical and would distinguish between the resolution being adopted with a view to something happening in the future and something taking place concurrently. The wording might be correct in its most strict grammatical interpretation. It ignores the fact that statutory laws are generally geared towards repairing or reducing any nullities or invalidities; failure to ascertain that both be and is hereby apply (i.e. the adoption of the resolution permitting something to happen concurrently or in the future, as the case may be) does not mean that the drafter intended the failing variant to apply. Correct wording is:
…the Attorney is hereby authorised to
…the Attorney be authorised to
Dating. Note that for the validity of the resolution, a resolution has effect as of the moment that all formalities for the resolution have been fulfilled. Depending on the strictness of the applicable law, that could be the mental consent amongst the persons whose consent is required followed by a confirmation of the consent in writing; but could also be that, in addition, each of those persons (and not merely the majority, have actually signed the document. It is good practice that instead of dating the resolution as such, each signatory is encouraged to write down the date of signature.