Board Resolution

A board resolution records a decision that the directors have taken together, in a form that can be shown to others. It matters most when an outsider has to rely on the decision.

Suppose a company is buying a smaller competitor. The seller's lawyers will want to see that the buyer's board approved the purchase and named the person who signs the agreement. A bank opening an account for the company asks for the same kind of document. The resolution usually states the date, the directors who took part, the decision itself and any authority given to a named person. Outsiders often receive a certified extract in place of the full minutes.

How a board passes a valid resolution is a matter for the company law of the country of registration and for the company's articles of association. National law also decides which bodies a company has: a single board of directors, a management board with a supervisory board beside it, or a sole director. The points to check are how a meeting is called, how many directors must take part, what majority is needed, whether a director with a personal interest may vote, and whether the board may decide in writing without meeting.

Under EU law the electronic form is not an obstacle in itself. Article 25 of the eIDAS Regulation says that an electronic signature cannot be denied legal effect or refused as evidence solely because it is electronic. It also gives a qualified electronic signature the equivalent legal effect of a handwritten one. Article 2(3) leaves national rules on form intact. Company law and the articles therefore still decide whether the board may adopt a resolution in writing, and in what form.

Three things are worth checking before the directors sign electronically. The first is whether national law and the articles allow written resolutions at all. The second is whether the decision is one for which the law prescribes a stricter form, such as a notarial record. The third is what the recipient will accept. Where the resolution goes to a company register with a filing, ask the register which format it accepts. Directive (EU) 2019/1151 requires member states to make online company formation and online filing possible.

The date of a resolution often matters, because the decision should come before the act it authorises. Under Article 41(2), a qualified electronic time stamp enjoys a presumption that the date and time it indicates are accurate. A qualified signature adds evidence of who signed. The certificate behind it is issued only after the provider has verified the signer's identity (Article 24(1)).

A board resolution shows that the company's own decision-making body gave a named person authority for a stated act. An obliged entity has to establish exactly that. Article 20(1)(i) of the EU Anti-Money Laundering Regulation requires it to be "verifying that any person purporting to act on behalf of the customer is so authorised", and to identify that person and verify their identity.

The resolution covers only the first half. It is evidence of authority, not of identity. The signatory still has to be identified as a person, from an identity document or through electronic identification at assurance level substantial or high and qualified trust services under eIDAS (Article 22(6)).

A resolution is also only as reliable as the people who passed it. Article 22(1)(b) lists the names of a legal entity's legal representatives among the information to obtain. A careful firm compares those names, and the company register, with the directors who signed the resolution. It then reads the resolution against the act: the right company, the right transaction, a date before the signing, and no limit that the act exceeds.

The regulation applies from 10 July 2027 (Article 90). Until then, the national laws that implement the EU anti-money laundering directives apply.

A board resolution can show control that a share register does not. Under Article 20(1)(b), a firm must understand the ownership and control structure of its client. Article 53(3) lists the rights that always count as control by other means, among them the right to appoint or remove a majority of the board. The articles of association are one place where such rights are written down.

Board papers are where the rights leave traces. A resolution may record that a director was appointed by a particular shareholder, or that a decision was taken with the consent of a named investor. Imagine a company whose largest shareholder holds 15% of the shares, below the 25% ownership threshold in Article 52(1). Its resolutions show that this shareholder nominated four of the seven directors. The firm now has a reason to ask what right those nominations rest on, and whether the shareholder is a beneficial owner through control.

For the company, national company law sets how long board minutes and resolutions are kept.

A firm that received the resolution during customer due diligence has a separate duty. Under Article 77, an obliged entity keeps a copy of the documents and information obtained in customer due diligence for five years from the end of the business relationship. After that the personal data must be deleted, unless another law requires it to be kept for longer.

For a resolution signed electronically, keep the signed file itself. A printout or a flattened copy no longer carries the signatures as data, so they cannot be validated later.