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Singapore: Board resolutions

January 30, 2023

A resolution of the board of directors (also known as a directors' resolution) is a formal document that records the decisions or intentions of the members of the board of directors on behalf of the corporation.

Section 157A of the Companies Act states that a company's business must be carried on by directors or under their direction or control. This direction, management, and control often require essential decisions by the board of directors. Board resolutions record decisions such as changing ownership, voting for new board members, or selling company shares.

A huge responsibility rests with the board of directors when they make crucial decisions. Therefore, board resolutions are important because they record these decisions and ultimately serve as a guide for directors as they manage the business.

This is in line with other decisions made by the company, all of which are subject to the company's charter.

What is included in the resolution of the board of directors?

The Companies Act does not detail what management actions require a decision by the board of directors. It depends on the company's charter, which differs from company to company and specifies the requirements of the board's resolution and when it is needed. So companies are likely to have different board resolutions.

However, some common issues that most directors face require a resolution by the board of directors. This includes:

• Appointment of company officers, i.e. auditors, company secretary;

• Cash loans and pledge of company property;

• Opening a bank account for a corporation;

• Sale of the company's assets;

• Approval of mergers and acquisitions;

• Issue of shares.

This list is not exhaustive and varies by company.

Quorum of the Board Resolution

Section 179(1)(a) of the Companies Act states that at least 2 members shall constitute a quorum of the meeting in a company.

However, the number of board members required to form a quorum for the meeting depends on the company's constitution. For example, some companies will use 2 board members as their quorum (see, for example, paragraph 51(2) of the Model Constitution for Private Companies), while others will not.

In addition, key employees who must attend the meeting are also provided for by the company's charter. For example, some companies require that all appointed officers in charge of managing the affairs of the company and directors attend a board of directors meeting.

Consequently, depending on their charter, different companies will have different quorums and different attendance requirements for board meetings.

How to write the board of directors' resolution?

A board decision is a relatively simple document containing only crucial details, so the format of a board decision is highly dependent on the issue(s) being addressed by the company.

Here are two recommended ways to structure a board resolution:

1. The board of directors' resolution on a specific issue

The first way is to structure the board's resolution per the case the board members decided.

For example, if your board of directors is seeking approval for the company's annual budget, your board's resolution would have the following heading:

"The resolution of [your company's] board to approve the [fiscal year] budget is made in 2023."

Any sub-questions, say, about budget employees that are resolved at a board meeting should begin with the word "RESOLVED." An example of a line in your board of directors' resolution might be:

"It IS RESOLVED that the staff dealing with the budget will…."

Other critical decisions and information will then be recorded in a board resolution. Structuring the board resolution on the issue being addressed would be especially helpful if the particular issue contains a significant amount of detail. It would also be beneficial if the board meeting only needed to discuss a few key points.

2. General resolution of the board of directors

The second way is to structure your board resolution as general, with many different issues decided or accepted by board members in one document.

For example, you will have the following header:

“The resolution of [your company’s] board was made in 2023.”

The issues the board of directors will attempt to resolve at the meeting will appear as items shaping the board's resolution. Again, all issues resolved begin with the word "RESOLVED". An example of what a board resolution might look like:

Assignment [employee name]

"It IS RESOLVED that [name] will be appointed..."

Sale of assets

"It IS RESOLVED that [the asset] will be sold…"

Other key decisions and information will then be recorded in a board resolution. Structuring your board resolution as a general one would be especially helpful if each issue contains a limited amount of information and the board has many issues to consider.

Board Decisions and Directors' Responsibilities

Although the resolutions of the board of directors are not presented to any legal entity in Singapore (as opposed to annual returns), they are still consistent with the duties of the company's directors. Therefore, the board of directors' resolutions can show whether the directors are fulfilling their responsibilities concerning the business.

For example, section 156(1)(a) of the Companies Act states that directors must disclose their interest in dealings with a company at a directors' meeting. They may do this through oral or written means, such as through a form. The minutes of board meetings will record such significant intentions or decisions when they are disclosed.

Follow-up action in response to this disclosure, such as allowing a director to participate or refraining from doing a particular job or entering into a transaction, may be possible resolutions of the board of directors. Therefore, through the minutes of the meetings and subsequent board resolutions, shareholders can see whether the directors have complied with this obligation regarding the declaration of economic interests.

The directors are also the trustees of the business and have a duty to avoid any potential conflicts of interest. Board resolutions documenting the directors' decisions will be necessary for shareholders to ensure that the directors have fulfilled their responsibilities. In addition, board resolutions can potentially be used as evidence in court cases.

The company's constitution will affect how directors make decisions for their companies. From the example above, it can be seen that board resolutions are critical to ensuring that directors carry out their duties. Well-documented board resolutions go a long way in helping the board to remain accountable to the business and its shareholders.

If you need assistance in preparing board resolutions or in other matters of doing business in Singapore, the specialists of our company will be happy to help you. We are waiting for your requests to info@eltoma-global.com!

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