In case it’s helpful to know, some forms of American companies (or at least the company-law statutes in many American states) tend to allow for less formality than most people imagine. A written resolution that comes out of a required annual shareholder meeting in a classical corporation is one thing, but for example the Uniform Law Commission’s current LLC act (adopted in several US states) defines an operating agreement for an LLC to include “the agreement, whether or not referred to as an operating agreement and whether oral, in a record, implied, or in any combination thereof.” American partnership law is similar and even more consistent on this point. So, for example, to evaluate this question under American LLC law—and there are far more LLCs than corporations in the US today—we would need to know whether there were oral or implied agreements concerning the legal effects of written documents adopted at owners’ or managers’ meetings. An implied agreement to rely on what was said at a meeting over what was written down would be recognized by at least the uniform LLC statute. Of course, such an implied agreement would have to be proved somehow.

I’ve found it interesting (perhaps just pedagogically) to consider the potential tension between statutory recognition of implied, informal agreements and statutory default rules for companies.

Shawn

I would say that the answer lies in the area of company law and meeting procedure. If the written resolution is an accurate record of what was put to the members and what they voted on, then the fact that other points have been discussed is not at all relevant and there is no question of rectification. If the resolution was not well drafted so it did not achieve the result that whoever drafted it wanted, they're stuck with the answer but can put it to a new meeting. As with any text, there might be some ability to shift meaning through a process of interpretation but with a less liberal approach than might be taken with a contract because it has a semi-public flavour with the potential to impact on third parties.

On the other hand, if an element of the matter put to the meeting was agreed upon and not recorded properly in the resolution, then the "resolution" is not reflecting the results of the vote and does not meet the statutory test for a resolution. I here assume that most jurisdictions have something simiilar to s 105 of the NZ Companies Act 1993 (since we borrowed it from elsewhere) which says that a resolution is one approved by a simple majority of the votes of those shareholders entitled to vote and voting on the question. So if the directors are acting in accordance with such a vote, the fact the "resolution" is not an accurate record will not stand in their way.

Barry Allan

Dear Colleagues:

 

A student posed an interesting question today:

 

Assume shareholders passed a resolution, (to reallocate shares or change share classes). Assume that the board then did something else on the grounds that this other thing was discussed but not included in the actual resolution. I.e., this is what we really meant...

 

Can the shareholders rely on the parol evidence rule to keep out evidence of these other discussions and enforce the resolution as written?

 

In short, would the parol evidence rule apply to a shareholder resolution or does it apply only to traditional contracts?

 

I want to say yes but don’t have any case for saying so.

 

Am I right?

 

Any thoughts greatly appreciated.

 

Thanks

Matt

 

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Matthew P Harrington
Professeur
Faculté de droit
Université de Montréal
www.commonlaw.umontreal.ca
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