Corporate Resolution: Understanding Life Insurance Requirements

A corporate resolution is a formal declaration made by a board of directors that records specific decisions that are material to a business. In the context of life insurance, a corporate resolution may be required for a company to establish a separate investment account for its variable life insurance products. For example, the Board of Directors of C.M. Life Insurance Company passed a resolution to establish C.M. Life Variable Life Separate Account I, which would be funded by the sale of variable life products, dividend accumulation, and advances made by the company. Understanding the requirements and process for obtaining a corporate resolution is crucial for businesses seeking to expand their operations and make strategic decisions.

Characteristics of a Corporate Resolution for Signing Authority

Corporate resolution for signing authority

A corporate resolution for signing authority is a formal declaration made by a board of directors that confers the power to sign contracts on behalf of a corporation to specific individuals. It is a crucial aspect of corporate governance and board reporting, ensuring the proper functioning of the organisation, its transparency, and compliance.

The process of establishing signing authority typically involves the following steps:

• Identifying roles: Determining the organisational jobs that require signing authority, such as executives or department heads.
• Setting eligibility requirements: Establishing criteria such as seniority, experience, or specialised credentials for the roles that require signing authority.
• Formal appointments: Officially appointing individuals with signing authority, typically through a board resolution or a similar process.
• Defining the scope and limits of authority: Clearly outlining the types of documents that can be signed and any restrictions on their authority.
• Documenting authority: Creating official records that include the names, positions, and scope of authority for individuals with signing power.
• Communicating the authority: Ensuring that relevant internal and external stakeholders are informed about who possesses signing authority.
• Regular review and auditing: Conducting periodic reviews and audits to ensure compliance and effectiveness, and to make necessary updates.

When granting signing authority, the board must pass a resolution that includes specific elements:

• Governing body: The resolution must be issued by the company's governing body, typically the board of directors.
• Date and time: The resolution must specify the date and time when the board met to pass it.
• Authorised person(s): The resolution must name and provide the title of the individual(s) being granted signing authority.
• Types of contracts: It should outline the types of contracts or agreements the authorised person(s) can execute on the company's behalf.
• Effective date: The resolution should stipulate the date from which it takes effect.
• Certification and signature: The resolution must be certified and signed by a corporate secretary or another officer, excluding the person granted signing authority.

It is important to ensure that the corporate resolution for signing authority meets all legal requirements and is properly executed. This includes understanding the different types of signing authority, such as actual authority, apparent authority, and ostensible authority, and addressing common challenges, such as complexity, legal compliance, liability, approval processes, and lack of understanding among authorised signers.

Board of directors' consent

A corporate resolution is a document that outlines the basic format for creating a resolution expressing the board's opinion, will, or intent. While the board secretary or other board members can use a template and fill in the blanks, this particular example requires a more detailed, direct, and instructive approach. Here is a sample "Board of Directors Consent" for a life insurance company:

"We, the undersigned, being the sole Directors of [Life Insurance Company Name], hereby consent to the following actions and direct the Secretary to file this consent with the minutes of the Board of Directors.

[Life Insurance Company Name] intends to establish a separate investment account, as permitted by [relevant section] of the [State] Insurance Laws. The Board of Directors is authorized to create such an account, and it is desired by the Board that the Company establishes this account to fund its variable life insurance products.

Therefore, the Board of Directors of [Life Insurance Company Name] resolves to establish a separate investment account, henceforth known as [Account Name], as per the authority granted under [relevant section] of the [State] Insurance Laws.

The assets of [Account Name] will be derived solely from:

• The sale of variable life products.
• Funds corresponding to dividend accumulation related to the investment of such assets.
• Advances made by the Company concerning the operation of [Account Name].

Furthermore, the Company shall maintain assets in [Account Name] with a fair market value that is equal to or greater than the statutory valuation reserves for the variable life policies.

The Board of Directors grants the President, any Vice President, the Secretary, and the Treasurer (collectively known as the "Executive Officers") the authority to:

• Divide [Account Name] into divisions or subdivisions, with each division investing in designated classes of investment companies or other appropriate securities.
• Modify or eliminate any such divisions or subdivisions.
• Change the name of [Account Name] if deemed necessary.

Additionally, the Board of Directors grants the Executive Officers the authority to invest cash from the Company's general account into [Account Name] or any of its divisions, as they may deem appropriate to facilitate the commencement of operations or meet any minimum capital requirements. The Executive Officers may also transfer cash or securities between the Company's general account and [Account Name], as long as such transfers comply with applicable laws and the terms of the variable life policies.

The income, gains, and losses (realized or unrealized) from assets allocated to [Account Name] shall be credited to or charged against [Account Name], respectively, without regard to the Company's other income, gains, or losses.

The Company, through its Executive Officers, shall adopt procedures that include criteria for providing a pass-through of voting rights to the owners of variable life policies regarding the shares of any investment companies held by [Account Name].

The Company shall prepare and execute the necessary agreements to enable [Account Name] to invest or reinvest its assets in securities issued by investment companies or other appropriate securities as designated by the Executive Officers, in line with the provisions of the variable life policies related to [Account Name].

[Include any further details regarding the Board's consent and actions.]

Dated at [location], on this [date].

[Signed]

[Names and positions of Directors]"

Investment account establishment

A corporate resolution is a legal document that outlines the decisions and actions taken by a company's board of directors. In the context of life insurance, a corporate resolution example would be a document that authorises the purchase of a life insurance policy for a company's employees or establishes an investment account to fund the premiums.

Now, let's focus on the investment account establishment aspect of this topic.

When establishing an investment account to fund life insurance premiums, there are several key steps and considerations to keep in mind. Here are some detailed instructions to guide you through the process:

• Identify the investment objectives: Before establishing the investment account, it's crucial to define the objectives and goals of the investment. This includes determining the types of life insurance policies that will be purchased, the expected returns on investment, and the level of risk that is acceptable to the company.
• Select an investment firm: Choose a reputable investment firm or financial institution to open the investment account. Conduct thorough research and compare different firms' offerings, fees, and investment options.
• Allocate funds: Decide on the amount of funds that will be allocated to the investment account. This should be done in consultation with financial advisors and based on the expected costs of the life insurance policies and the desired rate of return.
• Diversify investments: To mitigate risk, it's important to diversify the investments within the account. This could include investing in a range of mutual funds, exchange-traded funds (ETFs), bonds, or other conservative investment vehicles.
• Establish risk management strategies: Work with financial professionals to put in place risk management strategies that align with the company's risk tolerance. This could include setting stop-loss orders, utilising derivatives to hedge against potential losses, or implementing regular portfolio rebalancing.
• Monitor and review: Regularly monitor the performance of the investment account and schedule periodic reviews. This ensures that the investments are performing as expected and allows for adjustments to be made if the market conditions change or the company's financial situation evolves.
• Comply with regulations: Ensure that the investment account establishment and all subsequent transactions comply with relevant financial regulations and laws. This includes adhering to disclosure requirements, tax obligations, and any industry-specific rules that may apply.
• Document and record-keeping: Maintain comprehensive records of all investment decisions, transactions, and performance metrics. This is crucial for compliance, financial reporting, and future decision-making purposes.

By following these steps and considerations, a company can effectively establish an investment account to fund life insurance premiums, ensuring that the process is well-managed, compliant, and aligned with the company's financial objectives.

Executive officers' authority

A corporate resolution is a formal declaration made and passed by a company's board of directors, which officially records specific decisions that are material to a business. These are then recorded by a corporate secretary and filed among the company's official records.

The corporate resolution for signing authority grants specific corporate officers the legal standing to sign contracts on behalf of the corporation. This can include employment contracts, sales contracts, real estate sales or purchases, and other agreements that are material to the business.

When it comes to executive officers' authority, a corporate resolution can grant them the power to take specific actions or make decisions on behalf of the company. For example, in the case of the C.M. Life Insurance Company, the board of directors passed a resolution granting the President, any Vice President, the Secretary, and the Treasurer (collectively referred to as the "Executive Officers") the authority to take actions related to the establishment and management of a separate investment account for their variable life insurance products.

The resolution outlines the specific powers granted to the Executive Officers, including the ability to:

• Divide the investment account into divisions or subdivisions and invest in designated classes of investment companies or other appropriate securities.
• Modify or eliminate any such divisions or subdivisions.
• Change the name of the investment account.
• Invest cash from the company's general account into the investment account or any of its divisions.
• Transfer cash or securities between the company's general account and the investment account, as long as it is not prohibited by law and aligns with the terms of the variable life policies.
• Make necessary registrations, filings, and qualifications under applicable securities and insurance laws and regulations.

It is important to note that the specific authorities granted to executive officers can vary depending on the company and the context of the corporate resolution. The above example illustrates how executive officers' authority can be defined and granted through a corporate resolution in the context of a life insurance company's board decision.

Corporate secretary's role

A corporate resolution is a formal declaration made by a board of directors that officially records specific decisions that are material to a business. These resolutions are passed by the board, officially recorded by a corporate secretary and filed among a company's official records.

The role of the corporate secretary is critical in ensuring the integrity of the corporate resolution process. The corporate secretary is responsible for accurately recording the board's decisions and ensuring compliance with legal and governance requirements. Here's an overview of the key aspects of the corporate secretary's role:

Record-Keeping and Documentation

• The corporate secretary maintains comprehensive and accurate records of all board meetings, including the minutes of discussions, motions, and resolutions passed. This involves taking detailed notes during meetings, capturing the key points, and documenting any actions or decisions made.
• Ensuring that all corporate resolutions are dated and include the specific time and date when the board met to pass the resolution. This information is crucial for record-keeping and audit purposes.

Resolution Formatting and Certification

• The corporate secretary is responsible for ensuring that corporate resolutions adhere to the prescribed format. This includes confirming that the resolution includes the name and title of the authorized person(s) and the types of contracts they can execute.
• The corporate secretary signs the corporate resolution certification, attesting to its accuracy and completeness. This signature serves as a verification of the resolution's authenticity.
• In the absence of a company seal, the corporate secretary may be required to affix their signature along with the notation "LS" inside a circle to validate the resolution.

Compliance and Governance

• The corporate secretary plays a vital role in ensuring compliance with legal and regulatory requirements. They are often responsible for staying up-to-date with any changes in legislation or governance standards that may impact the company's operations.
• They may also advise the board on governance best practices and provide guidance on complex regulatory matters, helping the company maintain its compliance obligations.

Communication and Support

• Corporate secretaries facilitate effective communication within the organization. They may be tasked with distributing meeting agendas, sending out notices, and ensuring that all relevant parties are informed about upcoming meetings and resolutions.
• Additionally, they provide support to the board and senior executives, offering guidance on procedural matters, interpreting bylaws, and clarifying any questions regarding the implementation of corporate resolutions.

In summary, the corporate secretary plays an essential role in maintaining the integrity of the corporate resolution process. They ensure that decisions made by the board are accurately recorded, properly authorized, and compliant with legal and governance standards. The role of the corporate secretary is critical in safeguarding the interests of the company, its shareholders, and stakeholders, contributing to the overall effective functioning of the organization.

Frequently asked questions