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There's NY resolutions, but what about Company resolutions?

Hello 2022! 

NY resolutions has also got me thinking about another type of resolution being Company Resolutions (or Trust Resolutions or Limited Partnership Resolutions). 

These are fairly important documents, that may not garner the attention that they deserve. The word “resolution” is referred to in the Companies Act 1993 a whopping 348 times. 

To emphasise the purpose or importance of resolutions, I found a great description below that I couldn't have said better myself! 

Corporate resolutions help to keep the board accountable with various laws and regulations as well as ensure that the board is upholding its fiduciary duty to the shareholders

Corporate resolutions provide a paper trail of the decisions made by the board and the executive management team. 

These resolutions can be reviewed later by regulators, the [Inland Revenue Department (IRD)], shareholders, and corporate officers to ensure that the board and the company's management are adhering to regulations, tax laws, and the bylaws of the corporation. Investopedia, 2021.

What are resolutions?

In essence, a resolution represents the people in charge coming together to formally decide on matters of business. 

For companies, it’s important to note that board resolutions (signed by the directors) are separate to shareholder resolutions (signed by the shareholders). 

As you may know, directors oversee the day-to-day operations of a company where their decisions may be addressed at regular in-person board meetings or via resolutions in lieu (remotely). Time and time again, the board may wish for the company to acquire a significant asset/liability or implement a major new structure/policy where these key events will likely require the approval of at least a majority of shareholders with the power to vote. 

Let’s check out two shareholder resolution types:

  • Ordinary Resolution (section 105(2), CA 93'): "...resolution approved by a simple majority [≥50%] of the votes of those shareholders entitled to vote and voting on the question."
  • Special Resolution (section 106, CA 93'): "…resolution approved by a majority of 75% or, if a higher majority is required by the constitution, that higher majority, of the votes of those shareholders entitled to vote and voting on the question."

Examples of resolution subject matters

Types of subject matters for resolutions:

  • Share Issues: Issuing a new share class (i.e. voting & non-voting share classes).
  • Major Transactions: Deals involving more than half the value of the company's assets.
  • C-Suite Appointment: Appointing a CEO, CFO, CTO etc.
  • Loans: To take out or replace existing lending from banks or investors. 
  • Dividends: To decide the details of any distribution of dividends to shareholders.  

What are some consequences of not doing necessary resolutions...

  • Risks associated with failure to keep company records.
  • Potential fines under the Companies Act 1993.
  • Breach of fiduciary duties to shareholders / beneficiaries.
  • Breach under any governance contract (i.e limited partnership agreement, constitution or shareholders agreement).


It can be ideal for your lawyer to prepare resolutions. This is because the subject matter of a resolution can touch on several different areas of law. 

A tailored resolution will typically further include reference to specific sections of any corresponding Act, contract or deed for relevant persons (i.e directors, shareholders, trustees, partners) to consider before signing. 

If you have any questions regarding your business’ proposed transaction or structure, please reach out to Janey at janey@jhlaw.nz.



 

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