Written Resolution to approve a Guarantee

This Written Resolution to approve a Guarantee is the usual form of shareholder approval obtained where the corporate benefit of a company giving a guarantee is not clear.

A director of a company must act in a way he or she considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (section 172 Companies Act 2006). Each director must therefore consider the corporate benefit of giving a guarantee and whether there is appropriate justification for guaranteeing the obligations of a third party.

What does Written Resolution to approve a Guarantee do?

It provides shareholder approval of the terms of the guarantee and records that the shareholders consider the guarantee will promote the success of the company.

When should you use Written Resolution to approve a Guarantee?

Corporate benefit should be set out in the board minutes approving the giving of the guarantee. Where there is any doubt regarding corporate benefit, and to avoid the risk that the guarantee is given in breach of directors’ duties, shareholder approval should be sought.

These ordinary resolutions are set out in the form of written resolutions.

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