Directors’ resolutions are common place in commerce as a convenient and effective manner in which the Directors of a Company can make a decision on behalf the Company. Particularly, in the light of Section 74 of the Companies Act 71 of 2008 (the Act) stating that, except to the extent that the Memorandum of Incorporation of a company may provide otherwise, a decision that could be voted on at a meeting of Directors, may instead be adopted by written consent of a majority of Directors, given in person or by electronic communication, provided that each Director has received notice of the matter to be decided.       

Requirements in terms of Section 73(7) of the Act

With Directors’ resolutions being a well-established method of decision making by a Company, it is important to consider what the requirements of the Act are in terms adopting a resolution by the Directors.

Section 73(7) of the Act is the relevant provision relating to such requirements and states that Directors’ resolutions:

  • Must be dated and sequentially numbered; and
  • Are effective as of the date of the resolution, unless the resolution states otherwise.

The requirement that is quite often overlooked by Companies and/or the individuals responsible for drafting Directors’ resolutions, is that such resolutions must be sequentially numbered. This would necessitate that a numbering system must be adopted by the Company in respect of its Directors’ resolutions. Such a numbering system would create an audit trail to ensure that all Directors’ resolutions are accounted for in the order that such resolutions were adopted, creating a complete historic record of the resolutions adopted by the Directors. Typically, such a numbering system would include a number allocated to the particular resolution, together with the year in which such a resolution were adopted, e.g. No. 001 / 2015; 002 / 2015 etc.  

Conclusion

In practice, the requirement that all Directors’ resolutions must be sequentially numbered can become quite a complex matter, particularly as Companies often outsource the company secretarial function of the Company, whilst still drafting some of their own resolutions, and as the Company may also receive draft resolutions from various sources, such as banking institutions or as part of a suite of transactional agreements. The obligation in such instances rests upon the Company, and the Directors of the Company, in order to ensure that each and every Directors’ resolution is adequately numbered, once it has been adopted, in accordance with an established numbering system, in order to comply with this requirement.      

Phillip Kruger

Divisional Director | Legal, Johannesburg