In moments of crisis, such as allegations of misconduct or conflicts of interest, a company's board of directors must act decisively and transparently. One powerful tool at its disposal is the creation of a special committee to oversee internal investigations. This article explores the mechanics of drafting board resolutions to appoint such committees, leveraging insights and best practices from Anderson P.C., a boutique securities law firm specializing in governance and regulatory matters.

Why a Board Resolution Matters

A board resolution is more than just a formality—it serves as the legal backbone for a company’s actions. When sensitive issues arise, such as executive misconduct, resolutions ensure:

• Clarity: Clearly defining the scope and intent of the board’s actions.

• Authority: Delegating powers to individuals or committees to act on behalf of the board.

• Governance: Demonstrating compliance with corporate bylaws and fiduciary duties.

• Accountability: Documenting actions for transparency and potential future scrutiny.

Appointing a special committee through a resolution ensures that investigations are conducted impartially and in alignment with the company’s fiduciary responsibilities.

Best Practices for Appointing a Special Committee

1. Drafting the Resolution

A well-crafted resolution is essential for establishing the special committee. It should:

• State the purpose: Clearly articulate the need for the committee, such as addressing allegations or evaluating sensitive matters.

• Define the composition: Identify the committee members and ensure they are disinterested directors, free of conflicts of interest.

• Outline powers and responsibilities: Provide the committee with the authority to act independently, such as retaining external advisors or accessing company records.

2. Selecting Disinterested Directors

Disinterested directors are those who have no personal or financial interest in the matter being investigated. Their impartiality is critical to ensuring the credibility and integrity of the investigation. Anderson P.C. recommends rigorous vetting to ensure these directors can act objectively.

3. Granting Authority to the Committee

The resolution should clearly empower the committee to:

• Oversee the investigation and determine its scope.

• Hire independent legal counsel, forensic experts, or other advisors as needed.

• Make recommendations to the board regarding actions, including termination, corrective measures, or other remedial steps.

4. Establishing Oversight and Reporting Protocols

While the committee operates independently, it should maintain regular communication with the board. Define reporting intervals and expectations in the resolution to ensure the board remains informed and ready to act on the committee’s findings.

Sample Resolution for Appointing a Special Committee

Here is an example resolution for appointing a special committee:

Resolution No. [X]: Formation of a Special Committee to Oversee Internal Investigation

WHEREAS, the Board of Directors (the “Board”) of [Company Name] has been apprised of allegations of misconduct involving a senior executive;

WHEREAS, the Board recognizes the importance of addressing such allegations in a manner that is impartial, thorough, and consistent with the Company’s values;

NOW, THEREFORE, BE IT RESOLVED, that the Board hereby forms a Special Committee (the “Committee”) to oversee an independent investigation into the allegations and to recommend appropriate actions;

BE IT FURTHER RESOLVED, that the Committee shall consist of the following disinterested directors:

1. [Director Name, Email]

2. [Director Name, Email]

BE IT FURTHER RESOLVED, that [Director Name] is appointed as Chair of the Committee;

BE IT FURTHER RESOLVED, that the Committee is authorized and empowered to:

1. Retain independent legal counsel and other experts as necessary;

2. Oversee and direct the internal investigation;

3. Access all relevant documents, personnel, and resources required to fulfill its mandate;

4. Review findings and make recommendations to the Board regarding appropriate actions, including termination, corrective measures, or other remedial steps;

5. Report regularly to the Board on the progress and findings of the investigation.

BE IT FURTHER RESOLVED, that the Committee shall act independently, transparently, and in accordance with the best interests of the Company and its stakeholders.

Conclusion

Drafting board resolutions to appoint a special committee ensures that sensitive matters are addressed with integrity and professionalism. By empowering a disinterested group of directors to oversee internal investigations, companies can safeguard their reputation, maintain trust with stakeholders, and uphold their governance obligations.

If your organization is navigating similar challenges or requires assistance with governance matters, Anderson P.C. is here to provide strategic guidance. Reach out to learn how we can help.

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Attorney Advertising—Anderson P.C. is a U.S. law firm and provides this information as a service to clients, prospective clients, and other friends for educational purposes only. It should not be construed or relied on as legal advice or to create a lawyer-client relationship.

Anderson P.C. is a boutique law firm dedicated to defending clients in government investigations and securities enforcement actions initiated by the SEC, FINRA, DOJ, and other regulatory bodies. We provide focused, strategic counsel and regulatory guidance across the full spectrum of federal laws and regulations affecting broker-dealers, investment advisers, banks, asset managers, private funds, public companies, senior executives, and digital assets. Our deep expertise allows us to navigate complex legal challenges and deliver results-driven solutions tailored to our clients' unique needs.

If you have any questions or need legal assistance related to government investigations, securities enforcement actions, or regulatory compliance, please don't hesitate to contact us. Our team at Anderson P.C. is here to provide the expert guidance and support you need to navigate these complex challenges.