What Is A Directors’ Resolution?

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Companies encounter a variety of issues and dilemmas that need to be addressed. When these arise, the company needs to make a decision. Generally, this needs to be formally passed and approved by members of the company.

This is known as a resolution. However, there are different types of resolutions.

This article will look closely at Directors’ Resolutions, which are specific to the director’s role alone.

When Do I Need To Pass A Directors’ Resolution?

Like we mentioned, a Directors’ Resolution is required when making a decision for the company. But what kinds of decisions are we talking about?

The types of decisions that require a Directors’ Resolution are set out in the Companies Act 1993. This Act is the piece of legislation that governs companies in New Zealand, from the duties of a director to winding up a company.

For example, if the company is planning to borrow money from another party, you will need to pass a resolution authorising the company to do so.

Sometimes, decisions may need a higher level of consideration as they are more significant, such as restructuring the company. In this case, you may need a higher percentage of votes.

So, what are these types of resolutions called?

Ordinary Resolution Vs Special Resolution

An ordinary resolution is commonly used for regular company decisions – this could be for lending money or entering into a transaction with a third party.

However, for bigger decisions like changes for issuing shares or acquiring another business, you may require a special resolution. Generally, this would need to be passed by a higher majority, such as over 75%.

These percentages or thresholds will be set out in your Company Constitution, which are often tailored to the needs of each company. So, it’s important that you check the rules in your Constitution (or replaceable rules) to ensure you follow the correct steps in passing a resolution.

Do I Need To Hold A Meeting?

While some company decisions usually need to be passed through a resolution, there are some instances where a director can make a decision without holding a meeting at all (you can read more about this in section 122 of the Companies Act).

This is a Directors’ Resolution.

A director can pass a Directors’ Resolution when they want to make a key decision for the company. They can do this regardless of whether there is a meeting or not. In other words, they won’t need to discuss or seek approval from company members when passing the decision.

However, it’s also important to check your Company Constitution as they may be different for each company. Your company may have different rules around passing directors’ resolutions and how voting works – our lawyers at Sprintlaw can Review Your Constitution if you need assistance.

What Does A Directors’ Resolution Look Like?

Like many things in a company, a Directors’ Resolution needs to be recorded in writing for the company’s records.

It is essentially a document that sets out details around the decision and any relevant action that was taken. You’ll also need to include the following:

Details of the company and its directors (and any company secretaries if relevant)
Details of the meeting (if one took place)
Details of the resolution (you can use Sprintlaw’s Directors’ Resolution Template)
Signing details (for example, the secretary and the presiding director)

Need Help?

If you need to pass a directors’ resolution but you’re not too sure where to start, our lawyers can walk you through the process.

We also offer a Directors’ Resolution Template package so that you can get a headstart. It’ll help ensure you’re compliant with the Companies Act.

Our expert lawyers can also help your business with the following:

If you would like a consultation on your options going forward, you can reach us at 0800 002 184 or [email protected] for a free, no-obligations chat.

Rowan Gardoce

Rowan is the Marketing Coordinator at Sprintlaw. She is studying law and psychology with a background in insurtech and brand experience, and now helps Sprintlaw help small businesses

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