Action by written consent: Overview, definition, and example
What is action by written consent?
Action by written consent allows a company’s board of directors or shareholders to approve decisions in writing without holding a formal meeting. Instead of convening in person or via conference call, decision-makers can sign a written resolution to authorize actions such as business transactions, policy changes, or corporate governance matters.
For example, if a company’s board needs to approve a new executive hire but cannot schedule a meeting, they may sign a written consent document to finalize the decision.
Why is action by written consent important?
This process is important because it provides a quicker, more efficient way to make decisions without the need for formal meetings. It allows businesses to act swiftly on urgent matters while ensuring that approvals remain legally binding.
For companies, written consent reduces delays, enhances flexibility, and helps maintain operational efficiency, especially in fast-moving industries or when stakeholders are in different locations.
Understanding action by written consent through an example
Imagine a startup’s board of directors needs to approve a new funding round. Rather than waiting to schedule a board meeting, all directors sign a written consent document agreeing to the terms of the funding. This approval is just as valid as if they had voted during a formal meeting.
In another scenario, a company’s shareholders must approve an amendment to the corporate bylaws. Instead of gathering for a meeting, the required percentage of shareholders sign a written consent form, making the change legally effective.
An example of an action by written consent clause
Here’s how an action by written consent clause might appear in a contract:
“Any action required or permitted to be taken at a meeting of the Board of Directors or Shareholders may be taken without a meeting if written consent setting forth the action is signed by the required majority of Directors or Shareholders, as applicable.”
Conclusion
Action by written consent simplifies corporate decision-making by allowing directors or shareholders to approve actions without holding formal meetings. It ensures that businesses can operate efficiently while maintaining legally binding approvals.
By including an action by written consent clause, companies can streamline decision-making processes, reduce administrative burdens, and respond quickly to important business matters.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.