What is the difference between a shareholder resolution and a directors' resolution?

Who decides what?

Under section 102 of the CBCA, and section 115 of Ontario’s Business Corporations Act, the directors manage or supervise the management of the corporation’s business and affairs, subject to any unanimous shareholder agreement. Shareholders don’t run the company; they elect the people who do, and approve fundamental changes.

Decision	Usually approved by
Issuing shares, granting options, approving SAFEs	Directors
Appointing and removing officers	Directors
Approving major contracts, banking, budgets	Directors
Approving annual financial statements	Directors, then presented to shareholders
Electing and removing directors	Shareholders, ordinary resolution
Appointing an auditor, or waiving one	Shareholders (waiver needs all shareholders)
Amending the articles (name, share classes)	Shareholders, special resolution
Selling all or substantially all the assets, amalgamating, continuing to another jurisdiction	Shareholders, special resolution
Adopting by-laws	Directors, then confirmed by shareholders

A shareholder agreement can add to this list, for example requiring investor approval for new share issuances.

What’s an ordinary vs a special resolution?

An ordinary resolution needs a majority of votes cast by shareholders at a meeting. A special resolution needs at least two-thirds of the votes cast. Both definitions are in section 2 of the CBCA and section 1 of the OBCA. Either can instead be passed in writing, signed by all shareholders entitled to vote. An Ontario corporation that isn’t an offering corporation can also pass an ordinary resolution in writing signed by the holders of a majority of the voting shares (see below).

Some special resolutions also need a separate class vote, for example when an amendment changes the rights of one class of shares.

What is a written resolution?

A resolution signed by everyone entitled to vote on it, instead of holding a meeting. Section 117 of the CBCA makes a written directors’ resolution signed by all directors as valid as one passed at a meeting; section 142 does the same for shareholders. Ontario has equivalent rules in sections 129 and 104 of the OBCA.

Ontario adds one exception. Since July 5, 2021, under section 104(1)(c) of the OBCA, a corporation that isn’t an offering corporation can pass an ordinary resolution of shareholders in writing signed by the holders of a majority of the voting shares, as long as it gives the shareholders who didn’t sign written notice within 10 business days (section 104(3)). It isn’t available where a director has submitted a written statement opposing their removal, and the articles or a unanimous shareholder agreement can require more signatures.

Otherwise, the catch is “all”. Directors’ resolutions, special resolutions and federal shareholder resolutions need every eligible signature. If one director or voting shareholder won’t sign, you need a meeting with proper notice and quorum.

Where do resolutions go?

In the minute book. Investors check that every share on the cap table was issued by a directors’ resolution, and that directors were properly elected by shareholders. See what do investors check in due diligence?

What if I’m the only director and shareholder?

You still sign both kinds of resolution, wearing each hat. It sounds formal, but it creates the record that shows the corporation, not you personally, made the decision. See can a corporation have one director?

What if we skipped a resolution?

It can usually be fixed with a ratifying resolution confirming the earlier decision, as long as it was within the corporation’s powers. Fix it before a financing, not during one.

Our incorporation package includes the organizational resolutions and by-laws. See fees.

This guide is general information about Ontario and Canadian law, not legal advice for your situation. To check your company’s resolutions, book a free 15-minute consult.