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The remit of decision making for the board of directors of a company and the company’s shareholders is different – albeit for many smaller companies the shareholders and directors may be one and the same.
The board of directors: guiding the company's direction
Board resolutions are decisions made by the board of directors. Directors are responsible for the day-to-day management of a company and the decisions which the directors typically make are geared around that day-to-day management function.
Key aspects of board meetings and resolutions made at those meetings include:
- Strategic decision-making: Board resolutions are the driving force behind strategic planning and day-to-day operations. The board usually addresses critical issues such as market expansion, mergers, or major investments as well as employment decisions, litigation and financing.
- Limited shareholder involvement: Shareholder participation in director decisions is indirect, as shareholders may elect directors or have a board representative to represent their views. Solely as a shareholder they do not make executive decisions themselves.
- Confidential Nature: Discussions and decisions made during board meetings are confidential; safeguarding sensitive company information and strategies.
- Examples: Board resolutions can encompass a wide array of topics, including appointing directors, authorising significant contracts or loans, approving annual budgets, and declaring dividends.
Shareholder Resolutions: The collective shareholder voice
Shareholder resolutions are proposals or decisions made collectively by the shareholders of a company. They offer shareholders the opportunity to influence corporate actions.
Key aspects of shareholder resolutions include:
- Ownership influence: Shareholders are the ultimate owners of the company, and shareholder resolutions empower them to have a direct say in crucial corporate matters. Each share typically carries one vote, giving more substantial shareholders more influence.
- General meetings: Shareholder resolutions are commonly now dealt with by way of the written resolution procedure but having a formal general meeting offers an opportunity for shareholders to get together and discuss company matters face to face including discussing the company's performance and electing directors.
- Transparency and accountability: Shareholder resolutions promote transparency and help to hold the board accountable. They provide an opportunity for shareholders to raise concerns, question decisions, and propose changes in corporate direction.
- Examples: Shareholder resolutions can cover a broad spectrum of topics, such as appointing independent auditors, approving major transactions, amending the company's articles of association, or advocating for environmental and social responsibility initiatives.
For further guidance on corporate governance or generally in relation to any other corporate matter, please call Sarah Ward, Head of our Corporate Team, on 01384 340 596 or e-mail Sarah at sward@georgegreen.co.uk for advice and assistance.