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The natural approach for board resolutions in group restructuring projects

Group Reorganisations

Intercompany Agreements

4 May 2020

The more complicated a decision is, the more important it is to express what’s happening clearly and succinctly.

In the legal world, group reorganisations and cross-border restructuring projects are prime examples of this. Board resolutions and other forms of corporate approval are an essential part of documenting the steps involved, and of managing personal liability risks for directors of individual legal entities within a group. But the length of those documents often seems to grow exponentially with the number of entities involved and the number of steps. The result can be an unintelligible mass of corporate resolutions, each containing long lists of documents tabled, statutory provisions observed and matters considered. Mistakes and contradictions can be very hard to spot.

Our philosophy is that board resolutions should reflect a natural decision-making process as far as possible, and should be as short as possible. The key functions of board resolutions should be to:

  • Express the overall objectives (in other words, the actual end result. Not merely the consideration of the 79 legal documents involved);
  • Identify the key source or sources of information about what is proposed and how it affects the relevant entities (e.g. board papers, accounts and cashflow forecasts);
  • Identify the principal transaction documents; and
  • Document the decision to approve the proposals, and to grant delegated authority to implement them.

In general, we prefer written resolutions of directors. This is not always possible, for example if there is a need to show that an actual meeting has taken place in a specific location. But all things being equal, we believe it’s a more authentic way to record decisions, and it avoids the potential artificiality of claiming that a 5 minute meeting has considered 5 lever arch files worth of documents.

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Article by
Paul Sutton
LCN Legal Co-Founder

Free Guide: Effective Intercompany Agreements for TP Compliance