Running a corporation involves far more than making sound business decisions — those decisions also need to be made and documented in the proper manner. The directors' resolution is one of the fundamental tools for that documentation. Yet many SME owners aren't always sure when one is required, or what can happen when one is missing.
What a Directors' Resolution Is
In a corporation governed by Quebec's Business Corporations Act (QBCA), important business decisions cannot rest solely on a verbal agreement between shareholders or on the good faith of the parties involved. They must be recorded in writing in the form of a resolution.
A directors' resolution is a formal document by which the board of directors — or, in the case of an SME with a sole shareholder, the sole director — officially authorizes an action on behalf of the corporation. It establishes that the decision was made in accordance with the company's internal governance rules and that it validly binds the corporation.
This mechanism structures authority within the business. Without it, it becomes difficult to demonstrate that a person was acting with the necessary authority to bind the corporation.
Situations That Call for a Resolution
Banking and Financial Transactions
Opening a bank account in the corporation's name, obtaining a line of credit, or securing a commercial mortgage generally requires a directors' resolution. Financial institutions consistently require one to confirm that the authorized signatories have been properly mandated to act on behalf of the corporation.
Significant Transactions and Contracts
Signing a commercial lease, purchasing or selling a significant asset, entering into a long-term service contract, or acquiring another business all require a resolution beforehand. In the context of a commercial real estate transaction, for example, the notary handling the deed of sale will request a resolution confirming that the corporation is duly authorized to proceed.
Internal Corporate Changes
Appointing or replacing a director, amending the share capital, declaring a dividend, or making any change to the powers of authorized signatories also requires a formal resolution.
Ordinary Resolutions vs. Unanimous Shareholder Resolutions
In practice, there is an important distinction between a resolution adopted by the board of directors in the exercise of its usual powers, and a unanimous shareholder resolution, which applies in specific situations requiring the agreement of all shareholders. Under Quebec law, certain decisions may only be made by the shareholders themselves, and not by the directors alone.
Me Petrulian will walk you through the details during your consultation to determine which type applies to your situation.
The Notary's Role in This Process
In the context of a transaction requiring a notarial act — such as commercial mortgage financing or the sale of a property held by a corporation — the notary must verify that the corporation's representatives have the required authority to act. This is where the directors' resolution becomes a critical document.
In Laval and the surrounding area, many SMEs retain a notary to draft their corporate resolutions, particularly when a transaction must close within a tight timeline. Groupe Synergie Notaires regularly assists corporations through this process, whether for an initial resolution or to bring a minute book that has fallen behind back up to date.
What Happens Without a Valid Resolution
The practical consequences of a missing or improperly drafted resolution can slow down — or even derail — a transaction entirely. A financial institution may refuse to release financing. A notarial act may not be signable on the scheduled date. In the event of a dispute between shareholders, the absence of formal documentation significantly weakens everyone's position.
Acting without a valid resolution also exposes the corporation to questions about the legitimacy of the commitments made, especially if internal conflicts arise afterward.
Contact Groupe Synergie Notaires
To find out whether your corporation's records are in order, or to have a resolution drafted in connection with a transaction, contact Groupe Synergie Notaires at (514) 399-1009 or info@gsnotaires.com. Me Petrulian and her team will guide you through every step — whether you're just getting started or a few days away from signing.
Frequently Asked Questions
Is a directors' resolution required to open a bank account in a corporation's name?
Yes, the vast majority of financial institutions require a directors' resolution to confirm the identity of the authorized signatories before opening an account in the name of a corporation.
What is the difference between a directors' resolution and a unanimous shareholder resolution?
A directors' resolution is adopted by the board of directors in the exercise of its ordinary powers, while a unanimous shareholder resolution requires the agreement of all shareholders for certain specific decisions prescribed under Quebec law.
Can a notary draft a corporate resolution in Quebec?
Yes, a notary can draft and keep corporate resolutions, particularly in connection with transactions requiring a notarial act, such as mortgage financing or a real estate sale involving a corporation.
This text is provided for informational purposes only and does not constitute legal advice. As each situation is unique, it is recommended that you consult a professional to obtain advice tailored to your particular situation.