Company resolutions usually have a significant impact on the business, and it is important for companies to understand the ways to pass company resolutions. These resolutions are part of the compliance that a company has to undertake.
What Is a Company Resolution
A company resolution is a formal decision made by the directors or shareholders when they meet to make crucial decisions on company’s matters. This decision can be taken at the meeting of the board of directors or the shareholders.
The Companies Act documents all the requirements for written resolutions and all resolutions must abide by the conditions in the Act. The resolution is passed if most of the votes are in favor of a particular decision.
Who Can Make Company Resolutions
Shareholders and the board of directors are the key decision makers when it comes to company resolutions. If the resolution is passed by the shareholders, it is called a shareholder’s resolution, and vice versa when the board of directors passes their resolution.
The shareholders can 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.
NOTE: If there is only one shareholder present in the company, the shareholder will record the resolution and sign the record.
Types of Company Resolutions
A company resolution is passed when the majority of the voters give their assent. The important resolution types are as follows:
Board Resolution A board resolution is a type of formal document that identifies the various roles of the company’s offices. 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 must vote for the new member on the board
If the company wants to expand, hire new employees, or let go of many 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
Ordinary Resolutions Shareholders of the company pass ordinary resolutions. To conduct this meeting, 14 days’ prior notice must be given to all the members, and the resolutions are passed when 50% of the shareholder’s majority agrees to the formal decision. 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 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 from office before the expiry of the director’s period of office
To decide if a general meeting held is the Annual General Meeting (AGM)
To appoint or re-appoint a director who is above the age of 70 years
To declare dividends
To employ and declare the remuneration of the auditors
To elect new directors to replace retiring directors
Special resolutions are passed when there is a 75% majority in the votes cast in the meeting. Public companies need to provide written notice of 21 days (about 3 weeks) to their members regarding special resolutions and for private companies, written notice of 14 days (about 2 weeks) is required. The shareholders of the company pass special resolutions.
A special resolution 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 decide, a higher proportion will be required for more important decisions.
NOTE: A company of the special resolution is to be submitted to the Accounting and Corporate Regulatory Authority.
The following are examples during which shareholders are required to pass a special resolution:
Changing the name of the company
Changing any of the provisions that are stated in the constitution of the company
Reducing the share capital of the company
Changing the status of the company via registration
Ways to Pass Company Resolutions
There are 2 ways to pass any company resolutions as below:
Physical meetings: Businesses can pass a board resolution at a board meeting and a shareholders’ resolution at a shareholders’
In Writing: 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.
If you are looking for a professional expert on company resolutions, reach out to us for company secretarial services and we’ll be glad to help! Contact us for a free consultation today.
A board resolution is a legally binding decision or action made by directors at a board meeting while minutes are the official recordings of the proceedings of the meeting. Generally, everything discussed in the meeting will be recorded in the minute.
Do I need a director resolution for the appointment of a new company secretary?Tiwi2021-09-10T11:17:26+08:00