Auditing Unwritten Founder Commitments Against Contemporaneous Corporate Documents
Auditing unwritten founder commitments against corporate documents measures the evidentiary distance between recollected promises and formal board records.
written ratification
Meaning
Formal acts of confirming a prior unauthorized or informal decision provide the legal weight necessary for corporate validity. A written ratification occurs when a board of directors or shareholders officially approve an action that was previously taken without the required formal vote. This process retroactively cures the defect in the original decision and makes it binding on the company.
Resolution Content
The document must clearly state which action is being approved and why the ratification is necessary. In a written ratification, the board acknowledges that a founder or officer acted on behalf of the company and that the board now adopts that action as its own. This might include signing a lease, hiring a necessary employee, purchasing equipment, or issuing shares before the paperwork was ready.
The record ensures that the company cannot later disown the act to avoid its obligations.
Corporate Governance
Maintaining a clean audit trail requires that every large decision is backed by a formal resolution. The written ratification fills the gaps in the minute book that often occur during the fast-paced founding years. Accountants and investors look for these documents during due diligence to ensure that all corporate actions were properly authorized.
Without this proof, the company’s past transactions could be challenged as invalid.
Legal Finality
Once the document is signed and dated, the previous act is treated as if it were authorized from the start. The written ratification provides the finality needed to close out old matters.