Board Consent vs. Shareholder Consent

Shareholder Consent

A shareholder consent is the authorization of shareholders to carry out a specific corporate action. For example, a shareholder consent is used to elect/remove a member of the board of directors, approve a merger, and implement a Stock Incentive Plan (SIP). A good rule of thumb is that shareholder consents usually happen around large company decisions that can affect the shareholders' equity. Often times, a written consent will be drafted by the company and then signed by the shareholders in lieu of a physical or virtual meeting of the shareholders. Here is an example from the SEC's database of public company filings.

Board Consent

A board consent is very similar to a shareholder consent. It refers to the document that approves specific business decisions by the board of directors. These decisions often have to do with strategic business matters, like seeking an equity financing, restructuring the company, implementing the SIP, and adopting employee benefit plans. Board consents are enacted once they are signed and do not require a board meeting.

FAQs about Board Consents and Shareholder Consents

What is the Difference Between Board Minutes and Board Consents?

In the context of approving strategic business decisions, board minutes serve exactly the same function as a board consent. The board minutes differ from a board consent in that the minutes requires a board meeting to be held. After all, the minutes are a log of what was discussed and resolved at the board meeting.

What is the Difference Between Shareholder Agreements and Shareholder Consents?

A shareholders’ agreement is a contract that details the relationships between the shareholders as well as their rights and obligations. It is meant to protect the shareholders and their equity in the company. In a nutshell, a shareholder agreement is an agreement between shareholders about what they are allowed to do and how they will act, whereas a shareholder consent authorizes the company to take certain actions.