Upholding Governance Standards, GS 004: Resolutions
The governance landscape is essential for the smooth functioning of its institutions and organizations. The Institute of Certified Secretaries Kenya (ICSK) plays a crucial role in ensuring adherence to high governance standards through its comprehensive framework. The fourth standard focus on recommended governance practice for preparation, passing, recording and maintenance of resolutions.
Understanding Resolutions in Governance
Resolutions serve as official decisions made by the governing body of an organization during meetings or through written processes. These decisions guide the organization’s actions and are binding upon its members, management, and stakeholders. Resolutions can pertain to a wide array of matters, including strategic initiatives, financial matters, policy changes, and more. The standardization of the resolution process ensures clarity, consistency, and legality in the decision-making process.
There are various resolutions that an organization may pass in line with its Constitutive Documents. First, ordinary resolutions; these require a simple majority of members constituting a quorum, present and voting at a Meeting.
Second, special resolutions these require support of at least 75% (3/4) of members constituting a quorum, present and voting at a Meeting.
Third, resolutions requiring special notice. In line with the Companies Act, 2015, Section 27 (2) stipulates that within fourteen days after a resolution or agreement is passed or made, it shall be lodged with the Registrar of Companies.
Additionally, there are circular or written resolutions. These require the signatures of a simple majority of members through circulation, without holding a physical Meeting.
Key Components of the Standard
Resolutions as a governance standard is designed to establish a robust framework for the management and execution of resolutions within organizations. It addresses several key components that contribute to effective governance:
1. Documentation and Record-Keeping
Resolutions must be accurately documented and maintained. This includes a clear recording of meeting minutes, detailing the discussions leading to the resolution, the rationale behind it, and the decision itself. Proper record-keeping ensures transparency and helps in the event of audits, disputes, or historical references.
2. Approval and Authorization
The standard outlines the procedures for the approval and authorization of resolutions. It emphasizes the importance of having the right individuals or groups make decisions within their areas of responsibility. This helps in avoiding undue concentration of power and enhances accountability.
3. Transparency and Communication
Transparency is a fundamental principle of governance that encourages prompt and effective stakeholder engagement. This can be achieved through official communications, internal announcements, or public disclosures, depending on the nature of the resolution.
4. Compliance and Legalities
The standard underscores the need for compliance with legal and regulatory requirements when making and implementing resolutions. Organizations must ensure that resolutions align with laws and regulations to prevent legal complications.
Conflict of Interest Management
When decisions involve potential conflicts of interest, the standard outlines procedures for managing such situations. This includes disclosure of conflicts, abstention from voting, and transparently addressing any potential biases.
Benefits of Adhering to this Standard
Upholding Standard GS 004 brings numerous benefits and enhances governance in your organization:
- Enhanced Decision-Making: Clarity in the resolution process leads to more informed and effective decision-making by ensuring that key information is considered before arriving at a conclusion.
- Stakeholder Confidence: Transparent and well-documented resolutions enhance stakeholder confidence by demonstrating a commitment to accountability and ethical conduct.
- Legal Compliance: Adhering to legal and regulatory requirements safeguards organizations from legal liabilities, promoting a culture of compliance.
- Mitigation of Risks: A standardized resolution process helps identify and mitigate potential risks associated with decisions.
- Efficient Communication: Proper communication of resolutions minimizes misunderstandings and fosters a culture of open communication within the organization.
At Bellmac, our team of experts play a role in promoting good governance frameworks. By emphasizing the significance of documented decisions, transparency, compliance, and effective communication, the standard contributes to the overall integrity and success of organizations. Adhering to this standard not only ensures good governance within individual organizations but also plays a pivotal role in building a robust and ethical business environment.