What is a Company Resolution?
A company resolution is a kind of formal decision made by the directors or shareholders when they meet to make crucial decisions regarding the company’s matters. This decision can be taken at the meeting of the board of directors or the shareholders. The requirements for the written resolution are stated in the Companies Act. All the resolutions must abide by the conditions stated in the Companies Act. The resolution is passed if the majority of the votes are in favor of a particular decision.
Who can make Company Resolutions?
The directors of a company and shareholders can make important decisions regarding the company resolution at the board meetings. If the shareholders pass the resolution, then it is known as a shareholder’s resolution. If the board of directors passes the resolution, then it is a board resolution.
If there is only one shareholder present in the company, the shareholder will record the resolution and also sign the record. The shareholders may only pass written, ordinary, and special resolutions. The collective decisions of the directors are made at the board meetings or through the resolution in writing.
What Types of Company Resolutions are there?
A company resolution is formal, contains unusual decisions, and is taken in favor of the company and its members. Resolutions are passed when a majority of voters give their assent. The following are the most important resolution types:
- Board Resolution
A board resolution is a type of formal document that identifies the various roles of the company’s offices. This resolution is the result of the board of directors’ meeting or the votes that are made by the board members. The board of directors of a private company manages the day-to-day activities of the company. According to Section 157A of the Companies Act, the directors of the company make every decision related to the business of the company except for the ones in which the participation of the shareholders is also required. Board resolutions are made in the following cases:
- When the company has to vote for the new member on the board
- If the company wants to expand, hire new employees,or let go of a large number of working employees
- For purchase of intellectual property rights
- During share sales
- During the passing of resolutions that will affect the business or members in some critical way
Board resolutions are usually required for decision-making when the company’s constitution, the Companies Act, or any external parties demand such. A board resolution may be required to open a company’s bank account or to form an audit committee.
Should a Singapore-based company plan to open a corporate bank account, a board resolution is required. This resolution must be passed with a simple majority to open the bank account. Some of the essential points regarding the opening of a corporate bank account include the following:
- The authorized signatories or the directors of the companies can open the corporate bank account. The organization needsto mention the authorized signatories in the board resolution related to the company’s c
- The corporate bank account will separate personal and business finances; thus,it will bring many potential benefits to your business.
- While separating personal and companybank accounts, one will not be held accountable by the creditors for fraud or any debt. Business performance, profits, and losses can also be monitored.
- The bank used for the corporatebank account should be the one whose schemes best suits the The initial deposit in the various banks of Singapore can be as low as S$500 or as high as S$3,000. A few banks may allow the lack of minimum balance, while others may require nearly S$5,000.
The company owners can evaluate every bank and apply online to open the bank account in the name of their business. Several documents need to be deposited for the purposes of management of business finances. Therefore, a board resolution plays a crucial role in making a vital decision to benefit the company.
- Ordinary Resolutions
Shareholders of the company pass ordinary resolutions. They are passed when 50% of the shareholder’s majority agrees to a particular formal decision. To conduct this meeting, 14 days’ prior notice must be given to all the members. The meeting can also be held if the members of the limited companies who possess 95% of the voting rights agree to it. An ordinary resolution is applicable for all types of business transactions except for specific business transactions. It does not include the transactions that require a special majority or special resolution as stated in the Articles of Association or Companies Act.
An ordinary resolution is passed by way of a simple poll or raising of hands. In this vote, the majority includes the number of members voting, not the proxies or the members who abstain from voting. Here are a few examples of when ordinary resolutions are important:
- To remove the director fromoffice before the expiry of the director’s period of office
- To decide ifa general meeting held is the Annual General Meeting (AGM)
- To appoint or re-appoint adirector who is above the age of 70 years
- To declaredividends
- To employand declare the remuneration of the auditors
- To elect new directors to replace retiring directors
By taking one of the examples where shareholders need to decide that the general meeting is the AGM actually, then they have to pass the ordinary resolution. This AGM includes the following:
- When the business organization need to update shareholders about the financial health of the company
- The shareholders can raise the queries regarding the financial performance of the company
- The ordinary resolution helps to make an ordinary meeting an AGM
- Special Resolutions
Special resolutions are passed when there is a 75% majority in the votes cast at the meeting. Public companies need to provide written notice of 21 days to their members regarding special resolutions; private companies, written notice of 14 days. The shareholders of the company pass special resolutions.
Special resolutions are needed to discuss sensitive or exceptional matters related to the company. An organization needs to provide the Accounting and Corporate Regulatory Authority (ACRA) with a copy of its special resolution.
A special resolution also safeguards the rights of minority shareholders against any critical decisions made without appropriate consideration. For the passing of a special resolution, a business can use a show of hands, a poll, or a written resolution. Although a 75% majority is required to make a decision, a higher proportion will be required for more important decisions.
The following are examples during which shareholders are required to pass a special resolution:
- Changingthe name of the company
- Changingany of the provisions that are stated in the constitution of the company
- Reducingthe share capital of the company
- Changingthe status of the company via registration
Ways to pass company resolutions
- Physical meetings:Businesses can pass a board resolution at a board meeting and a shareholders’ resolution at a shareholders’
- Written form:If a company is not able to hold a physical meeting, it may instead pass a written resolution. Section 184D of the Companies Act states that 5% of those who hold voting rights can demand a physical meeting.
A company resolution helps the board of directors or shareholders to pass specific resolutions and make important decisions regarding the financial health of the company. If the owners are not aware of the format or decision-making process, they can always seek company secretarial services to obtain more insight. Companies which are interested in this regard can contact the advisers from Paul Hype Page & Co. Our advisers will provide you full insight about company laws.
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