BOARD RESOLUTION -- AUTHORIZATION OF BORROWING

OVERVIEW AND PURPOSE

This Board Resolution authorizes the corporation to borrow funds and execute related loan documentation. Under the laws of most states, the power to borrow money is vested in the board of directors as part of its general authority to manage the business and affairs of the corporation. This resolution documents the board's formal approval and delegation of authority to officers to negotiate and execute loan documents.

When This Resolution Is Needed:
- The corporation seeks to obtain a new loan, line of credit, or other financing arrangement
- Refinancing of existing debt obligations
- Issuance of promissory notes, bonds, or other debt instruments
- Granting security interests, mortgages, or pledges of corporate assets
- Guaranteeing obligations of subsidiaries or affiliated entities

Legal Effect:
- Provides formal corporate authorization required by most lenders
- Protects officers from personal liability for actions taken within the scope of delegated authority
- Creates a record of board approval for corporate governance and audit purposes
- Satisfies bank and lender documentation requirements

Who Must Authorize:
- Board of Directors (majority of quorum, unless bylaws require greater vote)
- Shareholder approval may be required if borrowing involves pledge of substantially all assets or exceeds charter-imposed limits
- Review applicable state law regarding extraordinary transactions

RESOLUTION DOCUMENT

UNANIMOUS WRITTEN CONSENT OF THE BOARD OF DIRECTORS

OF [________________________________]

(the "Corporation")

IN LIEU OF A SPECIAL MEETING

The undersigned, being all of the members of the Board of Directors of [________________________________], a [________________________________] corporation (the "Corporation"), pursuant to the provisions of [________________________________] (applicable state statute permitting action by written consent), hereby consent to the adoption of the following resolutions, which shall have the same force and effect as if adopted at a duly convened meeting of the Board of Directors at which a quorum was present and acting:

RECITALS

WHEREAS, the Corporation is a [________________________________] corporation duly organized, validly existing, and in good standing under the laws of the State of [________________________________]; and

WHEREAS, the Corporation's Certificate of Incorporation authorizes the board of directors to manage the business and affairs of the Corporation, including the power to borrow money and incur indebtedness; and

WHEREAS, the Board of Directors has determined that it is in the best interests of the Corporation to obtain financing in the form of [________________________________] (describe type: term loan / revolving line of credit / promissory note / bond issuance / equipment financing / commercial mortgage / other) (the "Financing") from [________________________________] (the "Lender"); and

WHEREAS, the proposed Financing is in the principal amount of up to $[________________________________] (the "Principal Amount"), bearing interest at a rate of [________________________________]% per annum (or as otherwise set forth in the loan documents), with a maturity date of [__/__/____]; and

WHEREAS, the Lender has required, as a condition of the Financing, that the Corporation provide evidence of board authorization for the borrowing and execution of related loan documents; and

WHEREAS, the Board of Directors has reviewed and considered the terms and conditions of the proposed Financing, including the interest rate, repayment terms, collateral requirements, financial covenants, and other material terms, and has determined that the Financing is fair, reasonable, and in the best interests of the Corporation and its shareholders; and

WHEREAS, the Board of Directors has confirmed that the proposed borrowing does not violate any provision of the Corporation's Certificate of Incorporation, Bylaws, or any existing contractual obligation, including negative covenants in existing loan agreements;

RESOLVED CLAUSES

NOW, THEREFORE, BE IT RESOLVED, that the Corporation is hereby authorized to borrow from [________________________________] (the "Lender") an amount not to exceed $[________________________________] (the "Maximum Borrowing Amount"), on terms and conditions substantially consistent with those described in the term sheet, commitment letter, or loan proposal dated [__/__/____], a copy of which has been presented to and reviewed by the Board (the "Loan Proposal"), and the Board hereby approves the proposed Financing;

RESOLVED FURTHER, that the Corporation is hereby authorized to execute and deliver a [________________________________] (describe: Promissory Note / Loan Agreement / Credit Agreement / Line of Credit Agreement / Equipment Financing Agreement) and all related documents, instruments, and agreements (collectively, the "Loan Documents"), including but not limited to:

☐ Promissory Note in the principal amount of $[________________________________]
☐ Loan Agreement or Credit Agreement
☐ Security Agreement granting a lien on: [________________________________]
☐ Mortgage or Deed of Trust on real property located at: [________________________________]
☐ Guaranty Agreement
☐ UCC Financing Statements
☐ Pledge Agreement
☐ Subordination Agreement
☐ Environmental Indemnity Agreement
☐ Assignment of Leases and Rents
☐ Other: [________________________________]

RESOLVED FURTHER, that the following officers of the Corporation (each, an "Authorized Officer") are hereby authorized and directed, acting individually or jointly as indicated, to negotiate, execute, and deliver the Loan Documents and any amendments, modifications, renewals, extensions, or supplements thereto, and to take all actions necessary or advisable to consummate the Financing:

RESOLVED FURTHER, that the Authorized Officers are hereby authorized to:

(a) Grant security interests, liens, mortgages, pledges, or other encumbrances on any or all assets of the Corporation as collateral for the Financing, as required by the Lender;

(b) Execute and deliver guarantees of payment or performance on behalf of the Corporation, if required;

(c) Open, maintain, and operate depository accounts with the Lender, including lockbox or sweep accounts, as may be required under the Loan Documents;

(d) Make representations and warranties on behalf of the Corporation as set forth in the Loan Documents;

(e) Comply with all covenants and conditions contained in the Loan Documents, including financial reporting requirements and maintenance of financial ratios;

(f) Draw down funds under any revolving credit facility or line of credit established pursuant to the Financing;

(g) Execute and deliver any certificates, opinions, or other documents required by the Lender in connection with the Financing;

(h) Engage legal counsel, appraisers, environmental consultants, and other professionals as necessary in connection with the Financing, and to authorize payment of their fees and expenses from the proceeds of the Financing or other corporate funds;

RESOLVED FURTHER, that the aggregate principal amount of indebtedness incurred pursuant to this resolution shall not exceed $[________________________________], and any borrowing in excess of such amount shall require further approval of the Board of Directors;

RESOLVED FURTHER, that any Authorized Officer is hereby authorized to execute and deliver, on behalf of the Corporation, any and all documents, instruments, agreements, certificates, and filings as may be necessary or appropriate to carry out the intent and purposes of the foregoing resolutions, and that all actions heretofore taken by any officer or agent of the Corporation in connection with the proposed Financing are hereby ratified, confirmed, and approved in all respects;

RESOLVED FURTHER, that this resolution shall remain in full force and effect until revoked or amended by subsequent action of the Board of Directors, and that the Authorized Officers may rely on this resolution as continuing authority unless notified in writing of its revocation.

ADDITIONAL PROVISIONS

Borrowing Limitations and Conditions

☐ The Financing shall not require shareholder approval (confirm under applicable law and charter provisions)
☐ The proposed borrowing does not constitute a pledge of substantially all corporate assets requiring shareholder vote
☐ No existing loan covenants are violated by this additional indebtedness
☐ The Corporation's debt-to-equity ratio after the Financing will be: [________________________________]
☐ Interest payments shall be made from: [________________________________] (operating cash flow / designated account / other)
☐ The Financing is within the Corporation's normal course of business
☐ Board has reviewed and approved the use of proceeds as follows: [________________________________]

Key Loan Terms Summary

Prepayment Authority

RESOLVED FURTHER, that the Authorized Officers are hereby authorized to prepay, in whole or in part, any indebtedness incurred pursuant to this resolution, subject to any prepayment penalties or conditions set forth in the Loan Documents.

Reporting Requirements

RESOLVED FURTHER, that the Authorized Officers shall report to the Board of Directors at each regular board meeting regarding the status of the Financing, including the outstanding principal balance, interest paid, compliance with financial covenants, and any material developments.

MULTI-STATE COMPARISON TABLE

PRACTICE NOTES FOR ATTORNEYS

Pre-Resolution Checklist

☐ Review Certificate of Incorporation for any borrowing limitations or required shareholder approvals
☐ Review Bylaws for board action requirements (enhanced quorum, supermajority vote)
☐ Review existing loan agreements for negative covenants restricting additional indebtedness
☐ Review existing security agreements for restrictions on granting additional liens
☐ Obtain and review the Lender's term sheet, commitment letter, or loan proposal
☐ Confirm adequacy of corporate insurance coverage, including directors and officers liability
☐ Determine whether applicable securities laws are implicated (e.g., if issuing bonds or notes)
☐ Verify the Corporation's good standing in its state of incorporation and qualifying states
☐ Prepare or update the Corporation's borrowing certificate, if required by the Lender
☐ Confirm authority of signing officers under bylaws and any existing delegation of authority

Key Drafting Considerations

1. Specificity vs. Flexibility: The resolution should be specific enough to satisfy the Lender's documentation requirements while flexible enough to accommodate final negotiation of terms. Consider authorizing borrowing "on terms substantially consistent with" the term sheet rather than locking in every term.

2. Security Interests: If the Lender requires collateral, the resolution must specifically authorize the grant of liens and security interests. General language may not suffice for real estate mortgages.

3. Aggregate Limits: Include a maximum borrowing amount to protect against unauthorized expansion of the credit facility.

4. Duration: Specify whether the authority is for a single transaction or ongoing (e.g., revolving credit lines). Consider including a sunset provision.

5. Ratification Language: Include ratification of prior actions taken by officers in connection with the Financing to cure any potential gaps in authority.

6. UCC Considerations: If a security agreement is executed, ensure UCC financing statements are filed in the correct jurisdiction.

7. Guarantees: If officers or shareholders are providing personal guarantees, those should be documented separately and are not covered by this corporate resolution.

Common Lender Requirements

Most commercial lenders will require:
- Certified copy of the board resolution
- Certificate of good standing (recent, typically within 30 days)
- Certificate of Incorporation and Bylaws (or amendments thereto)
- Incumbency certificate identifying authorized signatories
- Legal opinion of borrower's counsel (for larger transactions)
- Evidence of insurance
- Financial statements (typically 2-3 years plus interim)
- Personal financial statements of guarantors (if applicable)

Tax and Regulatory Considerations

• Interest expense deductibility may be limited under IRC § 163(j) (business interest expense limitation -- generally limited to 30% of adjusted taxable income)
• Debt-to-equity ratio may affect characterization of the instrument as debt vs. equity (thin capitalization concerns)
• State usury laws may cap interest rates -- verify the maximum permitted rate in the applicable jurisdiction
• SBA loan programs have specific documentation requirements (SBA Form 1919, 1920, etc.)
• Environmental due diligence (Phase I/Phase II assessments) may be required for loans secured by real property
• Imputed interest rules under IRC Sections 1274 and 7872 may apply if the stated interest rate is below the applicable federal rate
• Original issue discount (OID) rules may apply if the loan is issued at a discount

Common Types of Borrowing Arrangements

Post-Closing Compliance Obligations

After closing the Financing, the Corporation should be aware of the following ongoing compliance obligations typically found in commercial loan agreements:

1. Financial Covenants: Maintain specified financial ratios (e.g., debt service coverage ratio, leverage ratio, current ratio, minimum net worth)
2. Reporting Covenants: Provide periodic financial statements (monthly, quarterly, annual), tax returns, and compliance certificates
3. Negative Covenants: Restrictions on additional indebtedness, liens, asset sales, dividends, changes of control, and related-party transactions
4. Affirmative Covenants: Maintain insurance, pay taxes, comply with laws, preserve corporate existence
5. Default Triggers: Monitor for events of default, including payment defaults, covenant breaches, material adverse changes, and cross-defaults with other loan agreements
6. UCC Filing Renewals: UCC financing statements must be renewed (continued) every five years to maintain perfection of the lender's security interest

SIGNATURE AND CERTIFICATION BLOCK

This Unanimous Written Consent is effective as of [__/__/____].

DIRECTORS:

Name: [________________________________]
Signature: ______________________________
Date: [__/__/____]

Name: [________________________________]
Signature: ______________________________
Date: [__/__/____]

Name: [________________________________]
Signature: ______________________________
Date: [__/__/____]

Name: [________________________________]
Signature: ______________________________
Date: [__/__/____]

Name: [________________________________]
Signature: ______________________________
Date: [__/__/____]

SECRETARY'S CERTIFICATE OF RESOLUTION

I, [________________________________], the duly elected and acting Secretary of [________________________________] (the "Corporation"), a [________________________________] corporation, hereby certify that:

1. I am the Secretary of the Corporation and am authorized to execute this Certificate.

2. The foregoing resolutions were duly adopted by the unanimous written consent of the Board of Directors of the Corporation, effective as of [__/__/____], in accordance with the provisions of [________________________________] (applicable state statute) and the Corporation's Bylaws.

3. The resolutions have not been amended, modified, or revoked and remain in full force and effect as of the date of this Certificate.

4. The Corporation is duly organized, validly existing, and in good standing under the laws of the State of [________________________________].

5. The following persons are the duly elected or appointed officers of the Corporation, holding the offices indicated opposite their names, and the signatures set forth below are their genuine signatures:

6. The Corporation's Certificate of Incorporation and Bylaws do not contain any provision restricting the authority of the Board of Directors to authorize the borrowing described in the foregoing resolutions, except: [________________________________] (describe any restrictions, or state "None").

7. The execution and delivery of the Loan Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary corporate action.

IN WITNESS WHEREOF, I have hereunto set my hand and affixed the corporate seal of the Corporation as of [__/__/____].

______________________________
[________________________________]
Secretary

[CORPORATE SEAL]

SOURCES AND REFERENCES

• Delaware General Corporation Law, Title 8, Del. Code (DGCL)
• § 122(13): Specific powers including borrowing
• § 141(a): Board management authority
• § 141(f): Board action by unanimous written consent
• § 271: Sale, lease, or exchange of assets
• Model Business Corporation Act (MBCA)
• § 3.02(7): General powers including borrowing
• § 8.01: Board of directors requirement and functions
• § 8.21: Board action without meeting
• California Corporations Code § 300(a), § 307(b)
• New York Business Corporation Law § 202(a)(5), § 701, § 708(b)
• Texas Business Organizations Code § 2.101(3), § 6.201, § 21.401
• Florida Statutes § 607.0302(3), § 607.0801, § 607.0821

This template is provided by ezel.ai for informational purposes only. It does not constitute legal advice and should not be used as a substitute for consultation with a qualified attorney.