Use and customize this free shareholder resolution template to ensure shareholder engagement and corporate governance.
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Creating a shareholder resolution can be complex, but it doesn't have to be.
We've put together this complete guide to help you get to grips with shareholder resolutions and how contract templates can simplify this process.
Shareholder resolutions are decisions made by the shareholders of a corporation, usually during the company's annual general meeting (AGM).
These decisions span a wide range of topics, from election of board directors to approving dividends and changing the company's bylaws, to numerous other corporate governance matters.
Shareholder resolutions ensure that the shareholders' collective voice is heard by the board of directors and executive management. This is a crucial tool in the corporate world, not to be underestimated.
These resolutions represent formal votes on certain aspects of a company's governance and operations and can be proposed by the board or the shareholders themselves.
They might cover a wide range of subjects such as changes in corporate governance, electing directors, approval of significant transactions, or company policies on environmental and social issues. Shareholder resolutions are an important aspect of transparency and accountability in business operations.
Typically, they serve as a key mechanism for shareholder engagement and corporate governance.
Shareholder resolutions have multiple uses and implications, making them a vital part of the functioning of a corporation.
They can be used to:
Shareholder resolutions allow shareholders to propose changes and express their view to management and the board of directors. This enables the shareholders, as owners of the company, to influence its policies and direction.
Resolutions can propose changes to a company's bylaws, management structure, or other aspects of corporate governance. This can help ensure the company is being run effectively, ethically and in line with shareholders' interests.
Major corporate decisions, such as mergers, acquisitions, or large-scale investments, often require approval via a shareholder resolution. This means that significant changes to the company's operations or strategy are backed by its owners.
Increasingly, shareholders use resolutions to push companies to take action on ESG issues. These can range from environmental sustainability to diversity and inclusion, allowing shareholders to influence a company's impact on wider society. This is becoming a more significant factor in agreements and is one to watch.
In some cases, shareholder resolutions can be used to resolve disputes or issues within the company. For example, if there's disagreement about the company's direction or management, a resolution can be used to settle the matter in a democratic manner.
While the specifics can vary based on the unique context of each company and the issues at hand, most shareholder resolutions include the following elements:
A concise, clear title that indicates the purpose of the resolution. The title should give an immediate sense of what the resolution seeks to achieve.
Also known as the preamble or whereas clauses, these provide the context or reasoning behind the resolution. They set out the background information, facts and circumstances that led to the resolution being proposed.
This is the heart of the resolution, detailing the action(s) that the shareholders wish the company to take. The language here is often quite formal, beginning with a phrase like "Resolved, that...".
This section expands on the reasons for the resolution, providing a detailed explanation of its rationale and intended benefits. It can also address potential objections or questions from other shareholders.
The resolution will also include specific instructions on how to vote, the date and time of the vote, and any rules regarding proxies or voting by mail.
Finally, the resolution will state the name(s) of the shareholder(s) proposing the resolution. This usually includes the individual or group's name and the number of shares they hold.
Just remember, the format and requirements for shareholder resolutions can vary depending on the laws of the jurisdiction and the company's bylaws. It's always a good idea to consult with a legal professional when drafting a shareholder resolution to ensure it is valid, enforceable, and effective.
Understanding the process of shareholder resolutions is key to their successful implementation. The steps involved may include:
The first step in the process is for a shareholder or a group of shareholders to submit a resolution. They must own a minimum number of shares, often stipulated in the company's bylaws or applicable regulations, to propose a resolution.
Once submitted, the board of directors reviews the proposal. The board has the responsibility to ensure that the proposal is legal and in line with the company's bylaws. In some cases, they may negotiate with the proposing shareholder(s) for amendments.
If the resolution passes the board's review, it is included in the company's proxy statement. This document is sent to all shareholders in advance of the annual general meeting (AGM) and includes information about the upcoming votes.
During the AGM, shareholders vote on the resolution - voting can be done in person or by proxy. Most companies follow the 'one share, one vote' rule, but this can vary depending on the company's specific voting policies.
If the resolution receives the necessary number of votes (usually a majority), it is passed and becomes a directive that the company is obliged to implement.
It's worth noting that the exact process can vary depending on jurisdiction, company size and the specific rules set out in a company’s bylaws.
Hence, understanding the regulatory framework and consulting with attorneys or lawyers is so important when drafting and proposing a shareholder resolution.
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Traditionally, the process of creating and managing shareholder resolutions involves numerous steps and various stakeholders.
Here's a typical workflow:
The process begins with drafting the resolution. This usually involves the shareholder(s) proposing the resolution, possibly with the help of legal counsel, to ensure the language is precise and the proposal is in line with the company's bylaws and regulatory requirements.
The draft resolution is then submitted to the board of directors. They, potentially with the help of legal advisors or a company secretary, review the resolution to ensure it meets all necessary criteria. They may suggest changes or reject proposals that are not in line with the company's strategic objectives or legal requirements.
Once approved by the board, the resolution is typically included in the company's annual proxy statement, which is then distributed to all shareholders. This process can involve printing and mailing physical copies, or sending out digital versions via email.
Shareholders then have a chance to vote on the resolution, usually at the company's annual general meeting (AGM). Voting typically requires a show of hands or voting by proxy, which can involve collecting and tallying physical proxy cards.
After the AGM, the results of the vote are documented and stored for future reference. This is usually done by the company secretary and can involve significant paperwork.
This traditional approach can be time-consuming and prone to errors, especially for companies with numerous, complex shareholders. It can also be less accessible for shareholders who are unable to attend the AGM in person.
Fortunately, modern digital tools are starting to offer a more streamlined, efficient approach to managing legal and corporate documents.
Juro is one of them.
Juro's intelligent contract platform offers a transformative solution for managing shareholder resolutions. Here's how it can simplify the process:
With Juro, you can draft shareholder resolutions digitally, collaborating with stakeholders in real-time. This eliminates the need for multiple versions and back-and-forth emails, making the drafting process faster and more efficient.
Customize templates for shareholder resolutions with Juro. These can be modified to suit your company's specific needs, ensuring consistency and reducing the risk of errors.
Juro's platform enables seamless review and approval processes. Proposed resolutions can be reviewed by relevant parties directly within the platform, with comments and changes tracked clearly, ensuring transparency and accountability.
Once approved, the resolution can be shared digitally with all shareholders directly from the Juro platform. Juro also enables secure electronic signatures, which can be used to cast votes, making the voting process simpler and more accessible for all shareholders.
Juro stores all your resolutions in one place, creating a centralized contract repository that's easily searchable. This makes record keeping easier and ensures compliance, making it painless to refer back to past resolutions.
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Juro helps companies streamline their shareholder resolution procedures, making them quicker, more efficient and more transparent.
This not only saves time and resources but also enhances shareholder engagement and ensures a higher level of corporate governance.
To find out more about how Juro can improve the way you manage your legal documents, hit the button below for a personalized demo.
A shareholder resolution is a formal record of a decision the shareholders of a company have voted on, such as electing directors or approving a major transaction. It states what was decided and how the vote was taken, so the company has evidence the decision was properly made.
Usually, yes. Small companies still need to show that key decisions were properly approved, and a signed resolution is the simplest evidence when a bank or a future buyer asks for it. Keeping formal records also helps keep the line between you and the company clear, which normally matters for limited liability.
A share purchase agreement is a contract between a buyer and a seller that transfers ownership of shares. A shareholder resolution records a decision by the company’s shareholders, and a share sale sometimes needs one, for example to approve the transfer or to waive other shareholders’ rights to buy first.
Often, yes. Many companies can pass resolutions by written consent, where shareholders sign the resolution instead of voting at a meeting, but the rules depend on the jurisdiction and the company’s bylaws. Some decisions, and some public companies, may still require a formal meeting.
Most resolutions pass with a simple majority of the votes cast, but bigger decisions, such as changing the bylaws or approving a merger, often need a higher threshold. The required majority and any quorum are normally set by the company’s governing documents and local corporate law. Check both before the vote, because a resolution passed on the wrong threshold can be challenged later.
It’s a sound starting point, but you’ll need to adapt the resolving clause and voting details to your company and the decision being made. Requirements differ between jurisdictions and between public and private companies. For specific legal advice on your contract templates, consult an attorney.
Set up the template in Juro once and generate each resolution from it, with the company secretary or legal team filling in the decision and the date of the vote. When your governance process changes, you update that one template and every new resolution follows. Signed resolutions are stored together and searchable, so you can find past decisions on dividends or director appointments in seconds.
Yes. Operator, Juro’s AI drafting feature, can draft one by learning from your existing resolutions and contracts, including your drafting style and the positions you usually take on points like voting thresholds and notice. Your legal team reviews and approves the first draft before anyone uses it, so it reflects your risk appetite.
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