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Significance of a Board Resolution in Corporations

This article defines a Board Resolution. Corporate powers are exercised by the Board of Directors. A Board Resolution is a formal document which serves as evidence of the actions and matters taken by the directors of the corporation in the meeting duly held.

A Board Resolution is a formal document which serves as evidence of the actions and matters taken by the directors of the corporation in the meeting duly held.

Republic Act No. 11232, otherwise known as the Revised Corporation Code of the Philippines, defines a corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. Since a corporation’s existence is only by fiction of law, it can only exercise its rights and powers through its directors, officers, or agents, who are all natural persons (Lanuza, Jr. v. BF Corporation, G.R. No. 174938, October 1, 2014).

The general rule is that, in the absence of authority from the board of directors, no person can validly bind the corporation.

Section 22 of the Revised Corporation Code expressly states that the board of directors or trustees shall exercise the corporate powers, conduct all business, and control all properties of the corporation.

In Cebu Mactan Members Center, Inc. vs. Tsukahara (G.R. No. 159624, 17 July 2009), the Supreme Court held that a corporation, being a juridical entity, may act through its board of directors, which exercises almost all corporate powers, lays down all corporate business policies and is responsible for the efficiency of management. It added that the general rule is that, in the absence of authority from the board of directors, no person, not even its officers, can validly bind a corporation. Furthermore, an individual corporate officer cannot solely exercise any corporate power pertaining to the corporation without authority from the board of directors (Philippine Numismatic Ad Antiquarian Society vs. Aquino, G.R. No. 206617, 30 January 2017).

The Board of Directors (or Trustees) must act as a body in order to exercise corporate powers.

It bears stressing that in order to exercise corporate powers, the board of directors (or board of trustees) must act as a body and not individually. As enunciated by the Supreme Court in the case of University of Mindanao, Inc. vs. Bangko Sentral ng Pilipinas, G.R. No. 194964, 11 January 2016), individual trustees (or directors) are not clothed with corporate powers just by being a trustee (or director). Hence, the individual director cannot bind the corporation by himself or herself.

The discussion and decision of the Board of Directors are formalized in a document called the Board Resolution.

Since the corporation exercises corporate powers through its Board of Directors, meetings are generally held by the Board to discuss the going concerns of the corporation as well as approve or disapprove corporate measures. This discussion is documented in the minutes of the meeting. Thereafter, the said minutes are formalized in a document called a Board Resolution. Consequently, a Board Resolution is a formal document which serves as evidence of the actions and matters taken by the directors of the corporation in the meeting duly held.

Contents of a Board Resolution.

The Board Resolution starts with the “Whereas clauses” which recite the preliminary facts such as the date of the meeting, intent of the directors, etc. Thereafter, it shall enumerate the measures taken by the board. It usually begins with the statement “NOW, THEREFORE, for and in consideration of the foregoing premises and pursuant thereto, a majority of the Board of Directors of the Corporation hereby approves the following resolutions:”. This is followed by the resolutions of the board. Finally, it ends with the date and place when these resolutions were approved and adopted.

The Board Resolution is duly signed by the directors present in the meeting. There is no requirement that a Board Resolution be notarized. However, when Board Resolutions are used as evidence in court trials, notarization gives more credence to the document.

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