How to Use Board Consent Resolutions When Raising Capital
Board consent resolutions are critical legal instruments in the fundraising process for startups and investment funds. These resolutions authorize corporate actions without convening a formal board meeting, making them efficient tools for approving key decisions—especially when timing is essential. Whether issuing new equity, amending a certificate of incorporation, or entering into financing agreements, board consent resolutions are often required to validate the company’s authority to proceed.
This article provides a comprehensive overview of how and when to use board consent resolutions during a capital raise, and the legal elements founders and general partners must understand to remain compliant.
What Is a Board Consent Resolution?
A board consent resolution is a written document through which a company’s board of directors authorizes certain actions outside of a physical or virtual meeting. This mechanism, also known as "unanimous written consent," is recognized under corporate law in many jurisdictions, including Delaware and Florida.
When Are Board Consents Required in Fundraising?
Fundraising activities often involve corporate actions that require board approval. These include:
Approving the issuance of equity (preferred stock, common stock, convertible instruments)
Authorizing the execution of term sheets and financing agreements
Approving amendments to the certificate of incorporation
Delegating signing authority to officers or counsel
Approving option plan increases or grants concurrent with financing
Without valid board resolutions, such actions may be challenged as unauthorized or void.
Key Components of a Board Consent Resolution
1. Recitals (Background Statements)
Explain the context and rationale for the resolution, such as:
Reference to the funding round (e.g., Series A)
Mention of prior approvals or negotiations
2. Resolutions (Authorizations)
Detail the specific board actions being approved, including:
Approval of financing documents (term sheet, stock purchase agreement, investor rights agreement)
Approval of capitalization changes and filings with the Secretary of State
Designation of board members or officers authorized to sign
3. Unanimous Written Consent Language
Include a statement confirming that all directors have approved the resolution in writing without a meeting, pursuant to the applicable corporate code.
4. Execution Section
Provide signature blocks for each director and record the effective date.
Legal Requirements and Best Practices
1. Follow Governing Documents
Ensure compliance with the company’s certificate of incorporation, bylaws, and investor agreements. Some may require:
Advance notice to preferred stockholders or observers
Supermajority approval for specific actions
2. Keep Accurate Records
Maintain board consents in the corporate minute book and include them in the data room for investor diligence. Auditors and regulators may request copies.
3. Coordinate with Counsel
Have legal counsel draft or review board resolutions to ensure clarity, enforceability, and alignment with statutory requirements. Poorly drafted resolutions may be unenforceable or lead to legal disputes.
4. Use in Tandem with Stockholder Consents
Some actions, such as charter amendments, may also require stockholder approval. Coordinate board and stockholder consents as part of an integrated closing checklist.
Common Mistakes to Avoid
Failing to obtain proper board approval before issuing securities
Using outdated templates not aligned with current governing documents
Overlooking required consents from preferred stock classes
Omitting clear authorization for officer execution of documents
Board consent resolutions are indispensable for legally executing capital raises and related corporate actions. They formalize board authorization, demonstrate governance discipline, and protect the company from future challenges to the validity of its transactions.
If your startup or fund is preparing for a financing round and needs assistance with drafting or executing board consents, contact our firm at 786.461.1617 for a consultation. Our attorneys provide comprehensive legal support for corporate governance, fundraising, and board advisory matters.