A shareholder resolution is a document used by one or more shareholders to formally request that a corporation's board of directors take a particular action. Although non-binding, these resolutions are a way for shareholders to influence a company's operations.
Statement of purpose. Outlines the intended purpose of the submitted resolution.
Reasons for the resolution. Explains the reasons why the shareholders elected to submit their resolution.
Specific requested action. Details the action(s) that the shareholders want the board of directors to take.
How to Write a Shareholder Resolution (6 steps)
1. Describe the Purpose of the Resolution
The purpose of the resolution may be to amend the corporation’s bylaws, approve major events like mergers or acquisitions, or direct the board to address the environmental or social impact of its practices.
2. Identify the Shareholders
Enter the number of shares that the relevant shareholders own, as well as the percentage of issued shares that their holdings collectively represent.
Proxies – Resolutions may also be filed by proxies or “representatives” of the stock’s true owner; doing so requires an additional letter authorizing the representative to act on the stock owner’s behalf.
3. Provide the Reasons for the Resolution
Enter any background information, such as past corporate performance or changing economic factors, needed to explain why the requested action is necessary.
4. Describe the Requested Action
Describe in detail what action the shareholders want the board of directors to take. Be as specific as possible when describing the action.
5. Specify How the Resolution will be Submitted
Indicate whether the resolution will be submitted as a shareholder proposal at the next shareholder meeting, as a formal request for a special board meeting, or as a proposal for adoption by written consent without a meeting entirely.
6. Sign the Form
How many shareholders must sign the document varies based on state law and the individual company’s bylaws. In any event, the number of individuals signing the document must equal or exceed the number of votes needed to pass the resolution.
Frequently Asked Questions (FAQs)
Are shareholder resolutions binding?
In general, shareholder resolutions are not considered binding even if they pass at a shareholders’ meeting. However, in revealing the prevailing sentiment of the shareholders, they can have a significant influence on the actions of a corporation’s board of directors.
What is the difference between shareholder resolutions and corporate resolutions?
Corporate resolutions are the written records of decisions made by a board of directors, whereas shareholder resolutions merely reflect the feelings of one or more shareholders. However, public companies must include these documents in their proxy materials.[1]
Who can submit a shareholder resolution?
Under SEC rules, to submit a resolution, a shareholder must meet one of the following ownership requirements:[2]
At least $2,000 worth of company stock for at least three years;
At least $15,000 worth of company stock for at least two years; or
At least $25,000 worth of company stock for at least one year.
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