Board Resolution Approving Rights Offering Template

In plain language: Identifies the company, confirms the board has authority under the articles of incorporation and applicable corporate statute to approve the offering, and summarizes the business purpose for the capital raise.

Common mistake: Citing the wrong statutory authority — for example, referencing a Delaware provision when the company is incorporated in Nevada. A mismatch invalidates the resolution and may require a corrective board action.

In plain language: The operative clause formally resolving that the board approves the rights offering and authorizes the issuance of a specified maximum number of shares.

Common mistake: Omitting a maximum share cap in the resolution. Without it, officers have unlimited authority to issue shares, which can result in unintended dilution beyond what the board contemplated.

In plain language: Sets the subscription ratio — how many new shares each shareholder may buy per share held — and confirms the subscription price at which rights are exercisable.

Common mistake: Setting the subscription price above the current market price. A rights offering priced at or above market gives shareholders no economic incentive to subscribe, resulting in a failed offering.

In plain language: Establishes the date used to determine shareholder eligibility and the window during which rights may be exercised.

Common mistake: Setting a record date fewer than 10 business days before the offering commencement. Transfer agents and DTC require adequate processing time; a short record-to-launch window causes administrative failures and potential regulatory violations.

In plain language: Optionally grants shareholders who exercise their full basic subscription rights the ability to apply for unsubscribed shares on a pro-rata basis.

Common mistake: Including an oversubscription privilege without specifying the allocation mechanism. If multiple shareholders oversubscribe, an undefined allocation creates disputes and may require a supplemental board action to resolve.

In plain language: Documents any agreement with an underwriter, major shareholder, or affiliate to purchase all shares not subscribed to by other holders, ensuring the offering is fully funded.

Common mistake: Omitting the backstop party's identity and commitment terms from the resolution. A vague standby authorization leaves open whether any binding commitment exists, undermining the certainty of proceeds.

In plain language: Confirms that the offering is being conducted in reliance on applicable registration exemptions or pursuant to a filed registration statement, and directs officers to make required regulatory filings.

Common mistake: Citing an exemption without confirming that the offering structure actually qualifies. A rights offering to more than 35 non-accredited investors in the US, for example, does not qualify for the Section 4(a)(2) exemption, exposing the company to securities violations.

In plain language: Delegates authority to named officers — typically the CEO and CFO — to execute all documents, engage advisors, and take all actions necessary to implement the rights offering.

Common mistake: Restricting officer authority to a single named individual without an alternate. If that officer is unavailable at a critical execution moment, the company has no authorized signatory and may miss regulatory deadlines.

In plain language: Authorizes the company's transfer agent and DTC (where applicable) to distribute rights, process subscriptions, and deliver shares upon exercise.

Common mistake: Failing to notify the transfer agent of the resolution before the record date. Transfer agents require advance notice — typically 10–20 business days — to set up the rights distribution mechanics.

In plain language: Ratifies all prior actions taken by officers in anticipation of the rights offering, providing a clean authorization backstop for any preparatory steps taken before the formal resolution.

Common mistake: Using a blanket ratification clause to cure unauthorized actions that are materially inconsistent with the resolution itself — for example, a pre-resolution commitment to pricing terms the board later rejects. Courts have declined to enforce retroactive ratifications that contradict the substantive resolution.

A board resolution approving a rights offering is a formal corporate document in which a company's board of directors votes to authorize the issuance of subscription rights to existing shareholders, entitling them to purchase new shares at a fixed price — typically at a discount to market — in proportion to their current holdings. It records the key terms of the offering, delegates implementation authority to officers, and satisfies corporate governance, transfer agent, and securities regulatory requirements before the offering launches.

Issuing new shares is a fundamental corporate action that requires formal board authorization under most corporate statutes and a company's own articles of incorporation. Without a board resolution, the company has no documented authority to proceed, transfer agents will not distribute rights, securities regulators will not accept filings, and the issuance may be voidable by shareholders who challenge the process. The resolution also creates a clear record that directors exercised their business judgment in approving the offering.

A rights offering is made exclusively to existing shareholders in proportion to their current holdings, preserving their ability to maintain ownership percentage. A private placement sells new shares directly to selected outside investors — typically institutions or accredited investors — without a pro-rata offer to all existing holders. Rights offerings are generally more complex to administer but are less dilutive to participating shareholders and are sometimes preferred for governance reasons in closely held or listed companies.

In most jurisdictions, shareholder approval is not required if the board has authority under the articles of incorporation to issue shares up to the authorized limit. However, if the offering would require an increase in authorized share capital, listed companies often need stock exchange approval, or shareholder consent may be triggered by exchange rules (such as Nasdaq's 20% issuance rule for listed companies). Always confirm authorized share headroom before relying solely on board authority.

For US public companies conducting a registered offering, the rights shares are typically offered under a registration statement on Form S-1, S-3, or F-3. Rule 801 provides a limited exemption for cross-border rights offerings where fewer than 10% of eligible offerees are US residents. Private companies may rely on Section 4(a)(2) or Regulation D if the offering is limited to accredited investors or a small number of sophisticated shareholders. Securities counsel should confirm the applicable pathway before the resolution is finalized.

A standby commitment — also called a backstop — is an agreement by an underwriter, major shareholder, or affiliated party to purchase any shares not subscribed to by other rights holders at the expiration of the offering period. It guarantees that the company raises the full targeted amount regardless of overall shareholder participation. Standby commitments increase offering certainty and are often disclosed in the offering materials to encourage broader participation.

Yes, in most jurisdictions — including Delaware, most Canadian provinces, and England and Wales — board resolutions may be adopted by unanimous written consent of the directors without a formal meeting, provided the company's bylaws or articles permit it. The written consent must be signed by the requisite number of directors (unanimous consent is required in most jurisdictions for this route) and filed in the corporate minute book with the same formality as a meeting resolution.

The resolution should be adopted at least 15–20 business days before the planned record date to allow the transfer agent and DTC sufficient processing time, and before any binding engagement letters or regulatory notices are filed. For public companies, stock exchange rules typically require notification 10 business days before the record date, meaning the resolution must precede that notification by at least a few days to provide proper authorization for the filing.

Shareholders who do not exercise their subscription rights by the expiration date simply let their rights lapse. If the rights are transferable, they may sell them on a secondary market before expiry. Non-exercising shareholders experience dilution — their proportional ownership and earnings-per-share decrease as new shares are issued to exercising holders. The oversubscription privilege, if offered, allows participating shareholders to purchase additional unsubscribed shares, further concentrating ownership away from non-participants.

Notarization is not typically required for a board resolution approving a rights offering in the US, Canada, or the UK. However, a certified copy — bearing the corporate secretary's certification and the company seal where applicable — is commonly required by transfer agents, banks, and regulatory bodies. Some cross-border transactions and certain international filings may require apostille certification of the resolution; securities counsel should confirm requirements early.