Directors' Resolution

What is a Directors' Resolution?

This Directors' Resolution document is for use when the director(s) of a company intend to pass a resolution without having a meeting. It is often referred to as a "Circular Resolution". If the resolution is being passed at a meeting, use our Minutes of Directors' Meeting document instead.

Under the Corporations Act 2001 (Commonwealth), (the "Act") most of the decisions that affect a company need to be made by a resolution. A company's constitution and/or Shareholders' Agreement (if the company has a shareholders' agreement) might also set out what sorts of decisions need to be made by resolution.

This document may be used by companies with a single director ("single-director" companies), or those with multiple directors ("multi-director" companies). In the document, it is possible to select from a range of common resolutions, or to enter the details of one or more other resolutions (which are not covered by our common options).

What are the different types of Directors' Resolution?

A Directors' Resolution is a decision made by the company, by a vote of the directors. This can relate to a wide range of matters, although generally speaking, directors' resolutions relate to the day to day running of a company. For example, a decision to enter a particular contract, or to grant or revoke somebody's signing authority, might be able to be made by directors' resolution. On the other hand, more significant decisions, relating to the fundamental details of the company or changes in the company structure etc usually need to be made by Members' Resolution instead.

Subject matter of Directors' Resolutions:

Therefore, some common types of Directors' Resolution include:

• Granting somebody the authority to sign certain documents on behalf of the company.
• Granting somebody the authority to operate bank accounts on behalf of the company.
• Revoking somebody's authority to sign documents or operate bank accounts on behalf of the company.
• Appointing or removing a director.
• Appointing or removing a secretary for the company.
• Appointing or removing a public officer for the company.
• A decision that the company should enter a specific contract.
• A decision to distribute a dividend.
• A decision to change the location of the company's registered office.
• A decision to issue shares.
• A decision to approve a transfer of shares.

Resolution with or without a meeting:

This document is specifically designed for Directors' Resolutions that are passed without a meeting. Instead of attending a meeting, somebody prepares this document and distributes it to all of the relevant directors. The directors can pass the resolution by signing the document and returning it.

However, it is also possible to pass a resolution at a directors' meeting. Although if that is occurring, then our Minutes of Meeting document should be used instead.

What is the difference between a Directors' Resolution and a Members' Resolution?

A Directors' Resolution is a decision made by the company, by a vote of the directors. A Members' Resolution is also a decision made by the company, but it is made by a vote of the members (also known as the shareholders).

It is also important to note that under the Act, some kinds of decisions must be made by a members' resolution (ie shareholders' resolution), rather than a directors' resolution. However, different rules may apply to different types of company. In addition, the company constitution and shareholders agreement (if there is a shareholders agreement) might also say something about how certain decisions must be made. For most companies, their constitution is a good place to start looking for an explanation of which kinds of decisions need to be made by Directors' Resolution and which ones need to be made by Members' Resolution. But if in doubt, seek legal advice.

It is usually easier to get the directors to vote on something than it is to get the members to do so, because there are often a lot more members than there are directors, and the members are often less engaged in the day to day affairs of the company. Therefore, many day to day matters can be handled by Directors' Resolution, whereas more significant decisions, relating to the fundamental details of the company or changes in the company structure etc usually need to be made by Members' Resolution instead.

Is it mandatory to have a Directors' Resolution?

In Australia, although it is not always necessary to have a Directors' Resolution for every decision made by the company, there are some situations where it is required either by law and/or by the company's constitution. In those situations, the company is not considered to have made a decision unless a Directors' Resolution is used.

What are the prerequisites of a Directors' Resolution?

As a first step before preparing this document, it is important to make sure that the matter(s) with which the company is dealing, can actually be handled by way of a Directors' Resolution.

Consider the company constitution and shareholders' agreement (if the company has a shareholders' agreement) to check for any particular rules or procedural requirements that relate to the passing of Directors' Resolutions. Check whether the proposed resolutions can be decided by Directors' Resolution (or whether they need to be decided by Members' Resolution), and whether Directors' Resolutions can be passed without a meeting.

Consider any legal requirements which may apply, depending on the nature of the company or the types of resolution(s) that are being passed. These requirements may be set out in the Act and further information may be provided by the Australian Securities and Exchange Commission.

Who is involved in a Directors' Resolution?

For this document to be valid, it needs to be signed by all of the directors entitled to vote on the resolution.

As a result, these circular resolutions (without a meeting) can provide a convenient option when 100% of the directors are likely to agree. However, if any directors are likely to disagree with the resolution, or if the resolution is somewhat complicated and needs to be discussed in person, these circular resolutions may not be appropriate. Instead, a directors' meeting (with the outcome recorded in our Minutes of Meeting document) might be preferable.

What has to be done once a Directors' Resolution is ready?

The document will need to be signed by all directors entitled to vote on the resolution(s). Unless the constitution and/or shareholders' agreement state otherwise, the directors may all sign and date the same copy of the document, or the document may be signed in counterparts (meaning each director signs and dates a different but identical copy).

The resolution is passed when the last director signs it.

Section 251A of the Act requires that a record of the resolution be recorded in the company's minute books within one month of the resolution having been passed.

In addition, for many types of resolution, the Australian Securities and Investments Commission requires specific forms to be lodged. Further information, as well as links to the relevant forms, are available on the webpage of the Australian Securities and Investments Commission under the heading "Once a special resolution has been passed, what forms need to be lodged?"

What must a Directors' Resolution contain?

This Directors' Resolution should contain:

• Full name of the company.
• Australian company number.
• The date the resolution is passed.
• Any relevant background information (if applicable).
• The text of the resolution.
• Full names of all directors entitled to vote on the resolution.
• Signatures from all directors entitled to vote on the resolution.

Which laws apply to a Directors' Resolution?

The Corporations Act 2001 (Commonwealth) (the "Act") applies to many company matters, including directors' meetings.

Section 248A of the Act permits resolutions to be passed by multi-director companies without a meeting, if all the directors entitled to vote on the resolution sign a document containing a statement that they are in favour of the resolution set out in the document. Section 248B of the Act permits resolutions to be passed by single-director companies by recording the resolution and signing the record. However, even though these sections 248A and 248B of the Act say that the company may pass a resolution in either of these ways, it is possible that the company's constitution and/or shareholders' agreement might actually state that for this particular company, some other procedure must apply.

Section 251A of the Act requires that a record of the resolution be recorded in the company's minute books within one month of the resolution having been passed.

In some cases, the Income Tax Assessment Act 1936 (Commonwealth) may also apply, for example when dealing with a public officer.

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