Frequently Asked Questions About Corporate Resolution in Chicago
Corporate Resolutions: Essential for Company Governance3 min read
Corporate resolutions provide legally-binding documentation of corporate decisions made by a company or its top management — an important part of corporate governance and critical for protecting company rights and liabilities. Corporate resolutions are required by law — including varying state laws applicable to the company’s jurisdiction. In Chicago, the Chicago-based attorneys of UpCounsel have the expertise to protect your Chicago corporate clients with effective and compliant corporate resolutions.
This article covers some of the frequently asked questions about corporate resolution in Chicago, providing business lawyers and executives in the Windy City and beyond with the resources and information needed to ensure corporate decisions are properly documented.
What is a Corporate Resolution in Chicago?
A corporate resolution is a legal document that records a critical decision made by a company’s board of directors and/or shareholders. It acts as a reference for all involved parties to understand the company’s decisions and dynamic. Corporate resolutions are legally binding and can provide a record of both major and minor decisions, making them an important part of corporate governance and mitigating liability for companies.
Due to the legal ramifications of corporate resolutions, it’s important to make sure that those documents comply with the laws in the company’s home jurisdiction. This is especially true in Chicago, which has its own set of laws regulating the form and use of corporate resolutions. Hiring a knowledgeable lawyer experienced in corporate resolutions can help ensure the documents are crafted correctly.
When Must a Corporate Resolution Be Documented in Chicago?
A corporate resolution is primarily used for decision-making related to “Extraordinary Corporate Acts” (ECAs), which involve changes that are not typically handled by management at regular board of director meetings. s of ECAs in Corporate Resolutions include:
Passing a buy/sell agreement
Approving an amendment of the operating agreement
Amending the by-laws of the company
Dividing assets, such as bank accounts
Approving transfers of securities
Authorizing the purchase of company stock
Issuing a guarantee
Opening a bank account
Appointing officers and/or directors of the company
To comply with Chicago law, a corporate resolution must also be completed when:
The company is closing, dissolving, merging, or buying another company.
The company is issuing stock.
The company is opening a bank account.
An officer or director of the company is appointed.
The company’s address is changed.
The company is changing its banking signature authority.
The specific laws related to Chicago corporate resolutions are found in the Illinois Business Corporation Act.
What Elements Must Be Included in a Corporate Resolution in Chicago?
The exact elements of a corporate resolution document can vary based on the company’s policies and needs. As a general rule, however, corporate resolutions must contain the following elements:
The name of the company.
A reference to the authority used to reach the decision (such as the board of directors, the shareholders, or officers of the company).
The date of the recorded resolution.
The resolution’s specific purpose.
The effective date of the resolution.
A statement of actual language used to effect the resolution.
Additionally, corporate resolutions must be signed by the appropriate individuals who have voted for their adoption. In many cases, these individual votes will also be noted in the document, along with records of abstentions and/or individuals who were not present at the meeting.
Who Should Write or Prepare a Corporate Resolution in Chicago?
While a company may ask any of its affiliates to draft a corporate resolution, it’s recommended that an attorney experienced in Illinois’ corporate laws be consulted for even a basic corporate resolution. Chicago laws can be complex, varying state-to-state, and experienced business lawyers can protect a company from potential pitfalls by accurately drafting the document and incorporating the company’s decisions into the document.
For Chicago-based companies, the attorneys of UpCounsel are a great resource for drafting corporate resolutions and ensuring that the documents are compliant with the company’s governance protocol.
What are the Potential Consequences of Not Creating Corporate Resolutions in Chicago?
As noted above, corporate resolutions are legally binding documents that are required by law in many cases. Failure to create corporate resolutions can have dire consequences, including the:
Loss of legal rights and advantages of the company.
Risk that third parties, such as vendors, may not recognize a company’s decisions.
Risk of third-party liability claims or defenses brought against the company.
Possibility of non-compliance with state law.
Risk of third parties obtaining legal solutions or options related to the company that may not be recognized.
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