What is Resolution of Directors and Officers and why a corporation needs to have corporate resolutions?

What is Resolution of Directors and Officers and why a corporation needs to have corporate resolutions?

• Incorporation course
• July 27, 2021

Resolution of Directors and Officers

Every business must make multiple decisions at any given point in time and these decisions need to be agreed upon and recorded in writing. Corporate Resolutions need to be a complete, clear, and accurate record of company history for prosperity.

Now the question, Why does a corporation need to have corporate resolutions.

Everything a corporation does must be accurately documented in writing. The purpose of any resolutions is to create documents that hold the board  of directors accountable and to show licensing boards, provincial and federal  regulators (including the CRA/IRS) that the board is acting according to its fiduciary responsibilities and in the best interest of the corporation.

A common example of a corporate resolution, is one that notifies a bank that a specific executive in the corporation has the authority to access corporate funds, sign cheques, and acquire loans on behalf of the corporation.

Corporations are separate entities from their owners and they have separate liability from the owners of the corporation. In order to uphold this separation, the corporation must act independently from the owners and it is often referred to as a corporate shield or veil and this protects the owners from the liabilities of the corporation. Corporate resolutions help demonstrate this independent action.

Corporation boards do not need to have resolutions for day-to-day activities of the business, such as the hiring and firing of individual employees (not executives), making payments on debts, or taking on new customers. These activities are under the direction of corporate officers (CEO, president, etc.), who have been given the responsibility by the board. 

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