What is the proper date for a written consent of a Board of Directors?  Whether it be for record keeping, corporate formalities, public disclosure or to avoid the perception of option backdating, this question is an important one.

The U.S. Attorney General's and the Securities and Exchange Commission's case against former Comverse executives provides that it is improper to treat a unanimous written consent as being effective "as of" a date earlier than the date the last signature was obtained.  The Comverse case involved a unanimous written consent for the proposed stock option grant by the Compensation Committee.  No written consent that was signed in connection with a stock option grant identified the specific date on which any Committee member had signed his or her name to the consent.  No written consent identified the date on which any stock option grant had officially been acted upon by the Committee.  The sole date reflected on the unanimous written consents was the "as of" date.  The SEC has taken the position that the grant date for stock option grants is the date on which the directors sign the consent and cannot be some earlier date specified in an "as of" sentence in the consent. 

Also, it appears that the SEC is questioning the practice of not including a date line next to each signature line.  It is perceived as a practice that is intended to facilitate backdating.

As a best practice, companies should make written consents of directors effective as of the date that the last signature is obtained.  After all, under Delaware law, a written consent of directors is not effective unless all directors sign it.

OUR TAKE

  • Given all the attention over the last few years on stock option grants, the best practice with written consents generally is not to date a written consent a prior date and make it look like it was done as of that prior date.
  • Do not treat a unanimous written consent as being effective "as of" an earlier date than the date the last signature was obtained.
  • Make a written consent of directors effective as of the date that the last signature is obtained.
  • Use date lines.
  • If a resolution legitimately needs to have retroactive effect, and that is appropriate (e.g., it would not be appropriate for a stock option grant), expressly provide for the retroactive effect in the text of the specific resolution, while still showing the date or dates the consent was actually signed.