Director Resolution
A Director Resolution is a formal written record of a decision made by the directors of a company. Under Section 248B of the Corporations Act 2001 (Cth), it has the same effect as a vote at a meeting if all directors sign it.
A formal record of a decision made by the directors of a company, usually signed instead of holding a full board meeting.
20 free credits on signup — no card needed
About this Document
A Director Resolution is a formal document that records a decision made by the board of directors of a proprietary company in Australia. This document is essential for company governance. It acts as the official record when directors make a binding decision without holding a formal board meeting. In Australia, most proprietary limited companies use these resolutions to streamline business operations. They are legally binding under the Corporations Act 2001. This guide explains everything you need to know about creating, signing and storing these documents. It focuses on the needs of tradespeople and small business owners who run their businesses through a company structure. Understanding how to use this document correctly protects you from legal risks. It ensures you comply with the Australian Securities and Investments Commission rules and the Australian Taxation Office requirements.
What is a Director Resolution?
A Director Resolution is a written record of a decision. In a proprietary company, directors can pass resolutions without a meeting if all directors sign a document stating the resolution. This process is outlined in Section 248B of the Corporations Act 2001. This rule allows small businesses to move quickly. You do not need to organize a formal meeting with notices and agendas every time a decision needs to be made. Instead, you write down the decision and have all current directors sign it. This signed document becomes the official resolution. It has the same legal effect as a resolution passed at a meeting. This is vital for tradespeople who may be on site and cannot attend office meetings. It allows for quick decision making regarding purchasing equipment, hiring staff or opening bank accounts.
Why you need one
You need a Director Resolution for specific major decisions. The Corporations Act and your company constitution usually dictate when you need one. Common examples include appointing or removing a director, changing the company address, or borrowing large sums of money. Banks often require a resolution before they will lend money or open a business account. The Australian Taxation Office may look for these records during an audit to prove that expenses were authorized by the board. If you sell a major asset, like a work vehicle or excavator, you should have a resolution to approve the sale. This proves the sale was a legitimate business decision made by the directors, not an individual acting without authority. Without a proper record, you risk piercing the corporate veil. This means courts could look past the company and hold you personally liable for company debts. Keeping proper records shows that the company is a separate legal entity.
Legal requirements in Australia
The primary law governing these documents is the Corporations Act 2001. Section 248B is the specific section for proprietary companies. It states that a resolution in writing is passed if all the directors entitled to vote on the resolution sign the document. You do not need to send out notices or wait for a meeting date. The resolution takes effect on the date the last director signs it. You must keep a copy of the signed resolution with your company records. ASIC requires companies to maintain financial records for seven years. This includes minutes of meetings and written resolutions. Failure to keep proper records can lead to heavy fines. ASIC can issue penalties for failing to maintain adequate financial records. For a public company, the rules are stricter, but this guide focuses on proprietary companies where most small businesses operate.
Your company constitution might also have specific rules. You must check your constitution to ensure you are following the correct internal procedures. If the constitution says a decision must be made at a meeting, you cannot use a written resolution unless you change the constitution first. However, most standard constitutions for small companies allow written resolutions. The replaceable rules in the Corporations Act also allow directors to pass resolutions without a meeting.
How to complete the document
To complete a Director Resolution, you need specific details. You must state the full name of the company and its ACN or ARBN. You should include the date the resolution is made. You need to clearly state the resolution. This is the decision you are making. You must be specific. Instead of saying approve a loan, you should say approve a loan from Commonwealth Bank for $50,000 to purchase a new ute, secured against the vehicle. This clarity prevents disputes later.
You then list the directors. All current directors must sign the document. Each director must print their name, sign, and write the date they signed. The resolution is not valid until every director signs it. If you have a sole director company, that single director signs the document. If you have multiple directors and one refuses to sign, you must hold a formal meeting to pass the resolution.
Common uses for tradespeople and builders
For tradespeople, a Director Resolution is often used when purchasing high value equipment. If you buy a new crane or truck, the finance company will want proof that the company agrees to the purchase. You can use the resolution to authorize the director to sign the finance contract. It is also used when changing the registered office. If you move your business premises, you must notify ASIC. A resolution authorizes the change of address and appoints someone to sign the ASIC forms.
Another common use is opening a bank account. Banks are strict about anti money laundering laws. They need to know who is authorized to operate the account. A resolution lists the directors and specifies who can sign cheques or make online transfers. If you hire a general manager or give someone else power to sign documents, you need a resolution to delegate that authority. This protects the company if the employee makes a mistake or acts dishonestly. The resolution sets the limits of their authority.
Tax and ATO considerations
The ATO looks at the substance of transactions. They want to see that company expenses are for business purposes. A Director Resolution helps prove this. If you pay yourself a director fee or a bonus, the resolution records that the board approved this payment. This supports your tax return and fringe benefits tax calculations. If the ATO audits your business, they will ask for records of major decisions. A file of signed resolutions shows you are running the business professionally and complying with tax laws.
You also need resolutions related to PAYG withholding and superannuation guarantee. If you set up a salary sacrifice arrangement, the directors should approve it. This ensures the arrangement is documented and legally compliant. It confirms that the employee agreed to the sacrifice and the company accepted it.
Work Health and Safety (WHS)
Under the WHS Act 2011, company officers have a duty of care. Directors are officers. You must exercise due diligence to ensure the company complies with safety laws. A Director Resolution can record decisions about safety policies. For example, you might pass a resolution to adopt a new safety management system or to purchase specific safety equipment. This shows you have actively considered safety risks. While a resolution does not automatically make a workplace safe, it is evidence that directors took their duties seriously. In the event of an incident, Safe Work Australia inspectors will review company records. Resolutions regarding safety training, hazard reporting, and budget allocations for safety can be vital evidence during an investigation.
Mistakes to avoid
A common mistake is not having all directors sign. If one director is away on holiday, you cannot just sign on their behalf unless they have a valid power of attorney. The resolution must be signed by the directors themselves. Another mistake is being too vague. If the resolution just says approve borrowing money, it does not give specific authority to a bank manager or employee. You must list the amount, the lender and the purpose.
Do not date the document until it is signed. If you backdate documents, you can face legal action for fraud. The date should reflect when the last director signed. Also, do not lose the original. You must store the resolution safely. Many businesses keep a bound minute book. You should also keep a digital copy, but make sure it is secure. Poor record keeping is a major issue with ASIC. Inspectors often issue infringement notices for companies that cannot produce their records.
Another mistake is confusing a Director Resolution with a Shareholder Resolution. Shareholders make decisions about the company structure, like changing the name or winding up the company. Directors make decisions about running the business. Do not use a shareholder resolution for operational decisions. If you do, the decision may not be legally valid. This could cause problems with banks or the ATO.
Interaction with contracts
When you sign a contract on behalf of the company, the other party often wants to see the resolution. This proves you have the authority to bind the company. If you sign a lease for a new warehouse, the landlord might ask for a resolution confirming the board approves the lease and the term. This is standard practice in commercial law. Without it, the landlord might refuse to sign or might later claim the contract is invalid. Having the resolution ready speeds up the process. It shows you are organized and professional.
Annual reviews
It is good practice to review your resolutions annually. At the end of the financial year, check that all major decisions were recorded. This helps your accountant prepare the financial statements. It ensures nothing was missed. If you find a decision was made without a resolution, you can sometimes rectify it with a retrospective resolution. However, this is risky. It is better to record the decision at the time. Retrospective resolutions may not hold up in court if there is a dispute.
Digital signatures
In modern business, you might use digital signatures. The Corporations Act allows electronic signatures if certain conditions are met. The method must identify the person and indicate their intention to sign. It must be reliable. Most reputable digital signature platforms meet these requirements. However, you should check with your lawyer or accountant if you are unsure. For important documents like property transfers or bank guarantees, some institutions still prefer wet ink signatures. Always check the requirements of the third party you are dealing with.
Conclusion
A Director Resolution is a powerful tool for Australian businesses. It provides flexibility and legal protection. It allows directors to make decisions quickly without the burden of formal meetings. For tradespeople and small business owners, it ensures the company runs smoothly. It complies with the Corporations Act 2001, ATO rules and WHS duties. By keeping clear records of your decisions, you protect your personal assets and the company reputation. Always be specific, ensure all directors sign, and store the documents safely. This simple document can save you significant time and legal trouble in the future.
Key Facts
- A written resolution is valid when signed by all directors of a proprietary company.— Corporations Act 2001 (Cth) s 248B
- Company records must be kept for 7 years including minutes and resolutions.— Corporations Act 2001 (Cth) s 286
- Directors have a duty to prevent insolvent trading when approving financial commitments.— Corporations Act 2001 (Cth) s 588G
- Officers must exercise due diligence to ensure the company complies with WHS duties.— Work Health and Safety Act 2011 (Cth) s 27
- You can authorize a director to open a bank account via a resolution.— ASIC Regulatory Guide 109
- A resolution must be signed by the director personally, unless a valid power of attorney exists.— Corporations Act 2001 (Cth) s 127
- Company constitutions may impose stricter rules than the Corporations Act.— Corporations Act 2001 (Cth) s 134
- ATO requires records of director fees for tax and superannuation compliance.— Income Tax Assessment Act 1997 (Cth) s 26-35
Sources
Required Sections
Company Details
Identifies the company passing the resolution including the full legal name and ACN.
It is vital to get the company name and Australian Company Number (ACN) correct on this resolution. Under the Corporations Act 2001, a company must display its name on all public documents and business premises. If you leave this information out or get it wrong, the resolution may not hold up if a bank, landlord, or government agency challenges it later. You need to be precise.
Always write the full registered company name exactly as it appears on your Certificate of Registration. Do not use a shortened version or a trading name for this section. For example, if your registered name is "Smith's Plumbing Services Pty Ltd", you must write that in full. You cannot simply write "Smith's Plumbing". The Corporations Act specifically requires the legal name to establish the identity of the entity making the decision. Using a nickname or unregistered business name creates confusion about who is actually liable for the decision.
You must also include the Australian Company Number, or ACN. This is the unique nine-digit number assigned by the Australian Securities and Investments Commission (ASIC). The ACN proves the company is registered under Australian law. In some cases, you can use an Australian Registered Body Number (ARNBN) instead, but only if the company is on the Australian Business Register. You should check your registration details if you are unsure. The ACN is a mandatory identifier for public documents.
If the company name is not clearly stated, third parties like suppliers or financiers might refuse to accept the document. They need to know they are dealing with a legitimate corporation. A document without the correct name and ACN looks unprofessional and can raise red flags about due diligence. In a legal dispute, a court might look at the wording of this section to confirm the directors had the authority to act.
Take the time to check your ASIC records before you sign. Copy the name and number letter for letter. This small step protects the validity of the resolution and ensures your business decisions are legally sound.
Resolution Text
The specific decisions being made by the board.
List each resolution as a separate numbered item. You must use plain English to describe exactly what the directors have decided. Do not use legal jargon or complicated sentences. A resolution is a formal record of a decision, so it must be clear to anyone reading it, including your bank manager, the Australian Securities and Investments Commission (ASIC), or an auditor.
Start each resolution with a clear action statement. Use words like "RESOLVED THAT" or "IT IS RESOLVED THAT". For example, if you are opening a new bank account, state who is authorised to operate it and which bank it is with. Do not just write "open bank account". You must specify "The company authorises John Smith to sign the account opening forms for Westpac". This level of detail protects you and the business.
For decisions involving money, you must state the specific amount or the upper limit. If you are approving a loan, write the exact dollar figure. If you are approving ongoing payments, set a clear limit, such as "payments up to $5,000". This helps you manage your cash flow and complies with your duties under the Corporations Act 2001. You have a duty to act in the best interests of the company and to keep proper financial records. Vague resolutions make it difficult to prove you met these duties.
If the resolution involves appointing someone to a role, state their full name and the specific powers they have. For instance, if you are appointing a company secretary, write "It is resolved that Jane Doe be appointed as Company Secretary". If you are changing a business address, list the full new address.
You must also include any necessary authorisations. If the resolution allows a director to sign a contract on behalf of the company, say so explicitly. This is for the Personal Property Securities Act 2009 and other commercial dealings where third parties need proof of authority. Ensure the text authorises specific individuals to execute documents.
Review each item to ensure it stands alone. If you cannot understand the decision without reading the previous paragraph, rewrite it. Every resolution must be complete on its own. This clarity is essential for good corporate governance and ensures your records meet the standards required by Australian business regulations.
Signing Block
The area for all directors to sign and date the document.
You must complete the Signing Block for this document to be legally effective. Under Section 248B of the Corporations Act 2001, a resolution is valid only if every director who holds office at the time of the signing signs the document. This means you cannot leave this section blank, and you cannot ask just one person to sign if your company has more than one director. If your business has two or three directors listed on the ASIC register, every single one of those people must put their name on this page.
For tradespeople and small business owners, this is a strict requirement. You must ensure the signatures are handwritten. A typed name or a digital signature font is not sufficient unless you have a specific electronic signing platform that meets the requirements of the Electronic Transactions Act 1999. In most cases, a physical signature in blue or black ink is the safest way to avoid issues later. Each director must also print their full name clearly underneath their signature so there is no confusion about who signed.
Dates are just as important as signatures. Every director must write the date they signed next to their name. The date records when the director agreed to the resolution. This matters because the decision takes effect when the last director signs, or on the date specified in the resolution text. If one person signs today and another signs next week, the validity timing changes. You should have all directors sign the same document on the same day to keep things simple and ensure the resolution is active immediately.
Do not sign this page unless you are currently a director of the company. If a director has recently resigned or a new appointment has not yet been registered with ASIC, they must not sign. ASIC records are the definitive source of truth for who is a director right now. If you sign this document when you are not officially a director, you risk personal liability and legal complications. Once everyone has signed, place the completed resolution in your company records binder. You must keep this with your minutes and other statutory records for at least seven years. If you use cloud storage, ensure the scanned copy is clear and shows the original ink signatures.
Meeting Details
Confirmation that the resolution is passed without a meeting.
This section records that the directors of the company have agreed to pass this resolution without holding a formal meeting. We are using the process allowed by Section 248A of the Corporations Act 2001. This rule lets directors make binding decisions by signing a document, instead of gathering in a room or setting up a conference call. For busy tradespeople and small business owners, this option saves significant time and allows you to respond to business needs immediately.
To make this resolution valid, every director listed in the company’s records must sign this document. The Corporations Act requires unanimous agreement. If one director refuses to sign or cannot be reached, you must hold a face-to-face or virtual meeting to pass the resolution. You cannot use this method if the company’s constitution, which is the internal rule book for the business, specifically bans written resolutions. You should check your constitution to ensure no restrictions apply before relying on this section.
The resolution becomes effective on the date stated in this document. However, if the directors sign the document on different dates, the resolution becomes active when the last director signs. You must keep the signed original with your company records. Under Australian law, you must store this document for at least seven years. This is a strict requirement. Failing to keep proper records can lead to penalties for the directors.
This written resolution carries the same legal weight as a decision made during a formal meeting. Once passed, the company can act on the decision immediately. For example, if the resolution approves a bank loan or the purchase of a new ute, you can proceed with the transaction as soon as the paperwork is complete. You do not need to wait for a general meeting of shareholders unless the decision also requires their approval under the Corporations Act.
Using this method reduces the administrative burden of running a small business. It eliminates the need to send formal notices of meeting, record minutes of proceedings, or deal with proxies. It is an efficient way to manage company business as long as all directors agree and sign the document. Always ensure you file this document safely with your financial and statutory records.
Optional Sections
Frequently Asked Questions
What is a Director Resolution?
When do I need a Director Resolution?
Is a Director Resolution legally required in Australia?
Can a Director Resolution be signed electronically?
Do I need a lawyer to write a Director Resolution?
What is the difference between a Director Resolution and a Shareholder Resolution?
How long must I keep a Director Resolution?
What happens if not all directors sign the resolution?
Explore More Documents
Ready to create your document?
Use our free template or generate a custom version tailored to your needs.
20 free credits on signup — no card needed
We recommend professional review for your specific situation.