Corporate Resolution

A corporate resolution is a formal written statement adopted by the governing body of a business entity — the board of directors of a corporation, the managing members of an LLC, or the trustees of a trust — that authorizes the entity to take a specific action. In mortgage note investing, corporate resolutions are required throughout the transaction lifecycle to establish that the individual signing documents on behalf of the entity has been duly authorized to do so.

Why Corporate Resolutions Exist

When an individual buys a mortgage note in their own name, there is no question of authority — they sign, they are bound. But when an LLC or corporation is the buyer, the entity itself cannot physically sign anything. A human being signs on the entity's behalf, and the counterparty (the seller, the servicer, the title company, or the bank) needs proof that this person has the power to commit the entity to the transaction.

The corporate resolution provides that proof. It is a documented record showing that the entity's governing body formally voted to authorize:

• The specific transaction or category of transactions
• The specific individual(s) empowered to act
• Any limitations on that authority (dollar thresholds, approval requirements, etc.)

Without a valid resolution, a counterparty has no assurance that the person claiming to represent the entity actually has the power to bind it. Contracts signed without proper authorization can be challenged, and closing delays caused by missing resolutions are among the most common preventable problems in note transactions.

When Corporate Resolutions Are Required

Note investors operating through an entity will encounter resolution requirements at several points:

What a Corporate Resolution Contains

A standard corporate resolution for a note transaction includes:

• Entity name and state of formation — the full legal name of the LLC or corporation
• Date of the resolution — when the governing body adopted it
• Recitals — a brief statement of context (e.g., "WHEREAS, the Company desires to purchase certain mortgage loan assets...")
• Resolved clauses — the specific actions being authorized, using precise language (e.g., "RESOLVED, that [Name], as Managing Member, is hereby authorized to execute any and all documents necessary to complete the purchase of...")
• Authorized signers — the names and titles of individuals empowered to act
• Signatures — signed by the members, managers, or directors who voted to adopt the resolution
• Certification — often a separate page where the secretary or manager certifies that the resolution was duly adopted

Corporate Resolution vs. Operating Agreement

The corporate resolution and the operating agreement serve different but complementary functions:

The operating agreement may grant a managing member broad authority to act on behalf of the LLC, which can reduce the need for individual resolutions on routine transactions. However, counterparties — especially banks, title companies, and institutional sellers — frequently require a standalone resolution regardless of what the operating agreement says. Having a template resolution ready to customize and execute on short notice avoids closing delays.

Best Practices for Note Investors

Keep a template on file. Draft a general-purpose resolution template with your attorney that you can adapt for each transaction. The template should cover common actions: purchasing loans, selling loans, opening accounts, engaging vendors, and executing modifications.

Use blanket resolutions for recurring activities. Rather than drafting a new resolution for every individual loan purchase, consider a blanket resolution that authorizes the managing member to "purchase mortgage notes and execute all related documentation" within defined parameters. Many institutional sellers and servicers accept this format.

Maintain a resolution book. Store all adopted resolutions in an organized file — digital or physical — alongside the operating agreement, formation documents, and EIN letter. When a counterparty requests proof of authority, you can produce it immediately rather than scrambling to draft one at the last minute.

Ensure resolutions match the entity on title. If you operate multiple entities or have transferred assets between entities, verify that the resolution corresponds to the entity that is the actual party to the transaction. A resolution from "ABC Holdings LLC" does not authorize someone to sign on behalf of "ABC Note Fund LLC."

Update resolutions when membership changes. If the entity adds or removes members, managers, or authorized signers, adopt a new resolution reflecting the current governance structure. Outdated resolutions naming former members can create title and enforceability issues.