Neufeld Legal | Law Firm's Basic Incorporation Costs

ORGANIZATIONAL RESOLUTIONS

Contact Neufeld Legal PC for your incorporation legal work at 403-400-4092 / 905-616-8864 or Chris@NeufeldLegal.com

A corporation's organizational resolutions are a set of formal, binding legal documents adopted by the Board of Directors at the corporation's first (or organizational) meeting. These resolutions complete the initial setup of the corporation after its Articles of Incorporation have been filed. They approve, adopt, and authorize the fundamental organizing actions necessary for the company to begin its legal and business operations.

Organizational resolutions solidify the corporate structure and authorize the initial necessary actions. Common examples include:

  • Adopting Bylaws: Officially adopting the corporate bylaws, which govern the internal management of the corporation.

  • Electing Officers: Naming the initial corporate officers (e.g., President, Treasurer, Secretary).

  • Issuing Stock: Authorizing the issuance of initial shares to stockholders and adopting a form of stock certificate.

  • Financial Setup: Authorizing the opening of corporate bank accounts, designating authorized signers for checks and funds, and selecting the corporate fiscal year.

  • Legal Compliance: Approving the registered agent for service of process and authorizing the payment of incorporation expenses.

  • Corporate Records: Directing the maintenance of the corporate minute book, which will contain the Certificate of Incorporation, Bylaws, and all meeting minutes/resolutions.

Organizational resolutions are crucial because they establish the foundation for legal compliance and good corporate governance. Their importance can be broken down into three key areas:

A. Legal and Operational Authority

These resolutions provide the legal framework and binding authority for the corporation's initial actions. Without them, critical activities can't legally proceed. For example:

  • A bank will typically require a copy of the corporate resolution authorizing a specific individual to open and manage the corporate bank account.

  • Transferring shares to founders or investors requires a resolution authorizing the issuance of that stock.

B. Maintaining the "Corporate Veil"

A primary benefit of a corporation is limited liability, which protects the owners' personal assets from the company's debts and liabilities. To maintain this "corporate veil," a corporation must act as an independent legal entity separate from its owners.

  • Organizational resolutions are a vital part of documenting that the corporation is making formal decisions, which helps demonstrate to a court or third party that the company is properly organized and observes all necessary corporate formalities.

C. Accountability and Record-Keeping

Organizational resolutions are placed in the corporation's minute book and serve as a permanent historical record of the founding decisions.

  • Audit Trail: They create a clear paper trail of who made what decision and when, which is essential for audits, tax purposes, and future legal or financial due diligence (such as when seeking a loan or outside investment).

  • Fiduciary Duty: The resolutions document that the Board of Directors is upholding its fiduciary duty to act responsibly and in the best interest of the corporation and its shareholders.

So if you are looking to incorporate a new corporation or deal with the corporate legalities impacting your company, contact us at 403-400-4092 [Alberta], 905-616-8864 [Ontario] or via email at Chris@NeufeldLegal.com.

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