What Should Actually Be in a Board Consent and What Should Not
This post uses hypothetical scenarios for illustrative purposes only. It does not describe any actual client, transaction, or representation, and is not legal advice.
A recurring pattern surfaces in document reviews for early-stage companies: a board consent arrives, and it’s clean. Really clean. The paragraphs are numbered. The language is plain English. The resolutions read like instructions rather than formal enactments. The phrase “be, and it hereby is” has been replaced with “is.” The recitals skip the “WHEREAS” convention entirely and open with a declarative statement of purpose. It reads well. It looks modern. And it is immediately identifiable as a document that was drafted by an AI tool or by someone who decided that centuries of consent draftsmanship were merely decorative.
They’re not. The formal conventions in board and stockholder consents exist because specific audiences, transfer agents, the Delaware Court of Chancery, acquirers’ diligence counsel, the SEC’s Division of Corporation Finance, rely on those conventions to confirm that a corporate action was properly authorized. Removing them doesn’t modernize the document. It removes the signals that those audiences use to process and accept the document without further inquiry.
The “In Lieu of a Meeting” Caption Serves an Evidentiary Purpose
A written consent of the board of directors of a Delaware corporation acts under Section 141(f) of the Delaware General Corporation Law, which permits the board to act without a meeting if all directors consent in writing. The caption “Action by Unanimous Written Consent of the Board of Directors in Lieu of a Meeting” is not a stylistic choice. It identifies the statutory authority under which the board is acting and establishes, on the face of the document, that the action was taken without a meeting. When a transfer agent receives this document years later as part of a stock issuance request, the caption tells the agent exactly what it’s looking at and what statutory requirement governs its validity. When a “Notice of Waiver” or “Board Resolution” or simply “Resolution” appears instead, the agent’s compliance team has to determine what the document is, what law governs it, and whether additional documentation (minutes, a meeting notice, a waiver of notice) is required.
Recitals Followed by the Resolution Chain
The structure of a consent follows a specific logic. The recitals (the “WHEREAS” clauses) establish the factual context: the company has received a term sheet, the board has reviewed the terms of a proposed financing, the company’s counsel has presented the transaction documents. These recitals are followed by “NOW, THEREFORE, BE IT RESOLVED,” which transitions from factual recitation to operative enactment. This structure isn’t ceremonial. It mirrors the deliberative process that the consent is substituting for: a meeting would begin with a presentation of facts (the recitals) followed by a motion and vote (the resolutions). The written consent compresses that process into a single document, but it preserves the analytical structure so that a reviewing court can confirm the board considered the relevant facts before authorizing the action.
When an AI-generated consent replaces this structure with numbered paragraphs (“1. The Board approves the Series A Preferred Stock financing. 2. The Board authorizes the CEO to execute all documents.”), the deliberative structure disappears. There’s no indication of what facts the board considered, no transition from consideration to action, and no textual evidence that the board’s decision was informed rather than mechanical. In a hypothetical scenario where a stockholder later challenges the board’s approval of a dilutive financing, the recitals in a properly drafted consent provide contemporaneous evidence of the board’s deliberative process. Numbered action items do not.
The “Be, and It Hereby Is” Construction
Perhaps no phrase in legal drafting attracts more modernization energy than “be, and it hereby is.” To a contemporary reader, it sounds redundant. “The issuance of 1,000,000 shares of Series A Preferred Stock is hereby approved” seems to say the same thing as “the issuance of 1,000,000 shares of Series A Preferred Stock be, and it hereby is, approved.” Why use both?
The construction serves a dual function that the simplified version collapses. “Be” is the subjunctive, expressing the board’s directive: the issuance should occur. “It hereby is” is the present indicative, making the authorization effective as of the moment the consent is executed. Together, they establish both the board’s intent (authorization) and the operative effect (immediate). This matters in contexts where the timing of board authorization is legally significant, including Section 152 of the DGCL, which requires that shares be issued for consideration determined by the board. A resolution that says shares “are approved” is less precise about when the authorization became effective than one that says the issuance “be, and it hereby is, approved,” which anchors effectiveness to the execution of the consent itself.
More practically, transfer agents, FINRA, and state securities regulators see thousands of board consents annually. The “be, and it hereby is” construction is recognized on sight as a properly formed resolution. Its absence doesn’t make a consent invalid, but it does make it unfamiliar, which in turn creates processing questions, follow-up requests, and delays.
The Schedule of Shares in Stockholder Consents
When a corporate action requires stockholder approval, the written consent must be signed by holders of the minimum number of shares required under the charter and applicable law. A stockholder consent should include a Schedule of Shares that lists each signing stockholder, the class and series of shares held, and the number of shares. This schedule serves two functions. First, it establishes on the face of the document that the requisite vote was obtained. Second, it creates a record that can be reconciled against the stock ledger as of the record date.
AI-generated stockholder consents frequently omit this schedule, presenting instead a single signature block with a line for the stockholder’s name and a generic representation that the signer holds “sufficient shares” to approve the action. This is inadequate for two reasons. A representation about sufficiency without identifying the shares doesn’t allow independent verification. And when the consent is reviewed years later in diligence, the absence of a share schedule forces the reviewer to reconstruct the cap table as of the consent date, cross-reference the stock ledger, and independently confirm that the signing parties held the required shares. A five-minute schedule at the time of signing prevents hours of diligence work later.
Omnibus and Ratification Resolutions
A well-drafted consent typically concludes with two types of catch-all resolutions. The omnibus resolution authorizes the company’s officers to take all actions and execute all documents necessary or desirable to effectuate the resolutions adopted in the consent. The ratification resolution ratifies and confirms all actions previously taken by the company’s officers that are consistent with the intent of the resolutions.
These resolutions look like boilerplate, and they are, in the sense that they appear in virtually every properly drafted consent. But they perform a real function. The omnibus resolution provides legal authority for the ministerial acts that follow a board decision: filing an amended charter with the Delaware Secretary of State, issuing stock certificates, signing ancillary transaction documents. Without it, each of those acts would require a separate resolution specifically authorizing the officer to take that specific action. The ratification resolution addresses the common situation where officers begin implementing a transaction before the formal consent is circulated, as when a CEO signs a term sheet before the board’s formal approval. The ratification resolution confirms that those preliminary actions are within the scope of the board’s authorization.
AI-generated consents sometimes omit both, producing a consent that authorizes the specific transaction but leaves the implementing officers without documented authority for the follow-on steps. In a hypothetical diligence review, the absence of an omnibus resolution raises a question: was the officer who filed the amended charter actually authorized to do so? The answer is probably yes as a matter of law (officers generally have implied authority for ministerial acts), but “probably yes” is not the answer a diligence reviewer wants to give their client.
Signature Blocks and Entity Formalities
The signature block of a consent should include the director’s full legal name, the capacity in which they are signing (as a director of the company, not in their individual capacity), and, for entity directors (such as a corporate general partner of a fund that holds a board seat), the full entity name, the signatory’s name, and the signatory’s title. AI-generated consents routinely produce simplified signature blocks: a name and a line. For individual directors this is usually sufficient, but for entity directors it can create ambiguity about whether the signatory had authority to bind the entity, which in turn creates questions about whether the director’s consent was validly given.
The broader point is that board consent formality is functional infrastructure, not decorative tradition. Each convention, the caption, the recital-to-resolution structure, the “be, and it hereby is” construction, the schedule of shares, the omnibus and ratification resolutions, the complete signature blocks, exists because a specific downstream audience relies on it. Removing these conventions in the name of modernization or readability produces a document that is easier to read and harder to use.
The practical takeaway for founders and in-house counsel reviewing AI-generated consents: if the consent doesn’t look like it came from a law firm’s files, that’s not because your AI tool has improved on the form. It’s because the AI tool has removed the elements that make the form work. Put them back. The corporate governance forms that experienced practitioners use have evolved over decades for reasons that survive the shift to AI-assisted drafting.
If you are reviewing board or stockholder consents and want to ensure they meet the standards that transfer agents, courts, and diligence reviewers expect, feel free to reach out to our firm manager, Magda, at Magda@montague.law, or fill out our contact form. Mention you read this post.
