In a governance environment shaped by evolving regulatory expectations and greater stakeholder scrutiny, the quality and precision of board resolutions play a critical role in protecting the integrity of decision-making and maintaining organisational credibility. Below, we highlight five common but often underestimated oversights in the preparation and adoption of board resolutions, and provide practical recommendations.

1. Vague, incomplete or procedurally deficient wording

Board resolutions must unambiguously capture the decision being made and the authority delegated. Ambiguous language such as “approved as discussed”, or “noted or supported” lacks legal certainty and fails to withstand scrutiny. Ensure the resolution clearly sets out the:

• action being approved;
• transaction or document referenced; and
• individuals who are authorised to act.

2. Misunderstanding section 74 of the Companies Act

The requirements for passing written board resolutions are often misunderstood. While the Companies Act 71 of 2008 (Companies Act) allows a board to adopt a resolution without convening a meeting to the extent the company’s memorandum of incorporation does not provide otherwise, the resolution is only valid if:

• all directors receive proper notice of the proposed resolution; and
• the majority of those directors provide written consent.

Mistakes arise when notice is not formally recorded or proved, consent is assumed based on silence, or the company’s memorandum of incorporation modifies the default position (e.g. requires unanimous consent). Always:

• document notification to all directors;
• ensure at least majority of the full board provides explicit written consent (unless the company’s memorandum of incorporation requires a higher threshold); and
• retain signed copies for audit and regulatory purposes.

3. Approving matters outside of the board’s authority

Boards sometimes pass resolutions on matters that require shareholder approval in accordance with the provisions of the Companies Act, applicable regulation, the company’s memorandum of incorporation or shareholder arrangements. If resolutions are passed without the required shareholder approvals, they are invalid despite being properly worded and passed by the directors. Before approving any transaction, the board should confirm whether shareholder approval is required along with any additional thresholds or processes.

4. Overlooking the declaration of personal financial interests

A director who has a personal financial interest or whose related person has such an interest in a matter to be considered by the board must comply with the disclosure and recusal obligations under section 75 of the Companies Act. Non-disclosure will render the agreement or transaction that was approved invalid, unless subsequently ratified by an ordinary resolution of the shareholders following disclosure, or if it has been declared valid by a court. Given the potential consequences, board resolutions should record:

• a director’s or related person’s personal financial interest in a matter;
• that disclosure was made prior to deliberation;
• the director’s recusal; and
• the director’s non-participation in the vote on such matter.

5. Failing to record a director’s dissent

It is not unusual within the context of an effectively functioning board for differences of opinion to arise between directors in relation to a proposed resolution, resulting in formal dissent. However, in such instances it is advisable to invite dissenting directors to expressly register their dissent and permit them to submit a written statement for the record. This may become important if the transaction or matter is later challenged. 

Ensuring that board resolutions are clear, complete and legally compliant not only strengthens the board’s decision-making framework but also protects the company and its directors from unnecessary risk. The quality of board resolutions is as crucial as the decisions themselves. Where complexities arise, seeking legal input at the outset is a prudent and cost-effective safeguard.