How to Draft Effective Recitals and Preambles

Recitals and preambles are the introductory paragraphs that appear at the beginning of written resolutions, minutes, and formal corporate documents. They set out the background, context, and authority for the decisions that follow. Well-drafted recitals lend clarity and authority to a document; poorly drafted ones can create confusion or undermine the resolution they precede.

The primary purpose of a recital is to explain why a particular decision is being made. It should identify the relevant facts, the applicable authority, and the reasoning that supports the resolution. For example, a recital might note that the board has reviewed a transaction, considered the advice of management and external advisers, and determined that the transaction is in the best interests of the company.

Recitals should be factual, not argumentative. They should not attempt to persuade the reader or anticipate objections. Instead, they should neutrally describe the process followed and the considerations taken into account. This approach is more defensible in litigation and more consistent with the tone expected of formal corporate documentation.

In written resolutions, recitals often appear as a series of 'WHEREAS' clauses, each identifying a relevant fact or consideration, followed by a 'NOW, THEREFORE' or 'RESOLVED' clause that sets out the decision. In board minutes, the recital function is often performed by a brief introductory sentence or paragraph that sets out the context for the resolution.

Corporate secretaries should maintain templates for common types of recitals, but should always tailor them to the specific transaction or decision at hand. Generic or recycled recitals that do not accurately reflect the circumstances can weaken the document and expose the company to challenge. The golden rule is that every statement in a recital should be capable of being supported by evidence.

Recitals are also a powerful drafting tool for transactions that involve more than one document. A consistent set of recitals across a board resolution, a written shareholder resolution, and the underlying transaction agreement helps ensure that all documents tell the same story and that no critical fact is omitted from one but recited in another. Inconsistencies between recitals across documents are a frequent source of friction during due diligence and can cast doubt on the legitimacy of the entire transaction. The company secretary should therefore coordinate closely with external counsel to ensure that recitals are aligned, and should resist any temptation to introduce new factual statements in the resolution that are not supported by the underlying transaction record.