What should board resolutions cover in New Zealand?

• Published date: 26 January 2024
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Shareholders
• Law Firm: LegalVision
• Author: Mr Dan Kim

The directors of a company are responsible for the day-to-day management and operations of the business. In a company, the shareholders own the company and appoint the directors to fulfil this role. When the board of directors decides on behalf of the company, the directors may need to pass a board resolution approving this decision.

Documenting these decisions by resolution is essential so that the company has a record of its key decisions and the prior approvals for such decisions. Additionally, it is essential that the directors have considered their director duties and that directors have complied with legal requirements before making these decisions. This article covers what board resolutions are and some of the legal considerations contained in board resolutions.

What are Board Resolutions?

A board or directors resolution is a formal decision passed and signed off by the directors of a company. Companies usually have board resolutions to document important significant decisions or actions of the company officially.

Board resolutions are also important documents for ensuring that the company's shareholders' agreement and constitution have been considered before crucial decisions have been passed. A company's shareholders agreement may specify that a certain director or shareholder approval threshold is obtained before the company makes certain decisions.

Board resolutions require an ordinary resolution of over half (50%) of the directors, a special resolution of 75% of the directors, or a unanimous resolution of 100% of the directors. It is possible to sign board resolutions electronically, which helps enable speedy decisions.

Legal Considerations for Board Resolutions

As well as complying with the company's shareholders agreement and company constitution, board resolutions may also need to comply with certain legal requirements.

1. Major Transactions

Before the company enters into a significant transaction (a single transaction worth more than half of the company's assets), the directors should ensure that shareholders are aware of this and that relevant board resolution documentation exists. Additionally, the directors must ensure that the company has obtained prior 75% shareholder approval of the significant transaction.

2. Issuing Shares

If the company issues new shares to a new or existing shareholder, the board of directors must ensure that the share issue is in the company's best interests. Additionally, the directors need to obtain the proper...