Resolutions for meetings
If you are just looking for a document
You may have reached this page looking for a document rather than information. If so, you may be interested in clicking through to our collection of Minutes of directors' meetings. These are in neat packs of all the documents you need in one file, for easy print in order or separate in soft copy. Full drafting notes are provided.
All the rules
This article provides basic information about the sorts of resolutions a company may propose.
A company works by complying with a set of rules as set out in the Companies Acts. The rules cover two categories of activity. In the first place, they provide the basic "framework" within which all companies must operate.Those rules cannot be changed. They include for example, requirements as to appointment of directors and secretary; filing of accounts; matters to be recorded at Companies House; and many more.
Within this framework, (and subject to other law) you are free to operate as you wish. Your starting point is the document recording your memorandum and articles of association. More simply, you could call it your own rule book. It overlays the basic law in much the same way as a computer application overlays your operating system.
On top of that is a third overlay: how you work day to day. That too is subject to the law, but you do have great freedom. Apart from every aspect of engaging in business, you can follow strict procedures or you can please yourself. Usually, the more shareholders you have, the more useful it is to establlish strict systems of administration so that everyone knows where he is. If you are a one-man band, there is no-one to argue with how you run the company.
We want to make absolutely clear here that the Registrar of Companies (Companies House) has no obligation and certainly no resources to check up on you. Not ever. So, if you slip up, the problem will come to light only when some document you file at Companies House fails properly to record what has been done, or someone sues you in court. The result is that provided you comply with the law, you do not have to worry about dotting an “i” or crossing a “t”.
What is a resolution?
In order for everyone involved to understand the rules, you will have to hold company meetings, which also require company meetings notices.
We return to that top layer of overlay: your own rules and procedures. They should be recorded and changed over time, by votes of shareholders (also called “members”) in meetings. The words on which a vote is taken are called “resolutions”. An example is:
- “that Jane Smith be appointed as Marketing Director” or
- “that the discretionary bonus for Jane Smith for the year 2014 shall be £10,000,000" or
- “that the issued share capital of the company be increased from 1000 ordinary shares of £1 each to 10,000 ordinary shares of £1 each and that the shares be allotted as follows . . . . . “
The Companies Act 2006 requires that the minutes of every meeting of the directors shall be recorded. The record is usually referred to as “minutes”. The minutes are contained in a document giving the exact words used for each vote taken and the outcome. This is recorded whether the resolutions were passed or failed.
Many private companies manage quite well with no formal resolutions at all. They leave it to the accountant or solicitor to sort such formalities. As long as there are no disputes among the shareholders or directors, it works. However, there is no reason why far more detail about what the shareholders and directors have agreed should not be properly recorded in minutes of meetings, if only so that everyone is working towards the same goals.
We could therefore say a resolution is a motion which is debated and lost or won. When a resolution is passed, the company and the directors are bound by it - at least until a different decision is made and recorded in the minutes.
How is a vote taken?
At a meeting of shareholders, a vote is usually taken on a show of hands. A declaration by the chairman that the resolution is carried on a show of hands is all that is required for a resolution to be passed. The number of votes for or against need not be counted. However, any shareholder, no matter how few shares he votes, can demand a poll.
So a show of hands “works” only when there are a many shareholders with similar sized share holdings. If the vote is close, any shareholder with a large proportion of shares will want to be sure that due weight is given to his voting power. He will therefore call for a poll - a written vote, the results of which are calculated according to weight of shares.
In a private company with a small number of shareholders, everyone knows who owns how many shares, so the chairman can declare a resolution lost or won flexibly. If he knows Anna has 40%, and she votes in favour, but others against, there may be little purpose in declaring the resolution lost because everyone knows she will call for a poll and ask her buddies to rally round to attain 50%. The bottom line is that most articles of association specify that a resolution shall be passed by “a majority of votes” (that is shares, not people) “of those present and voting, in person or by proxy”. It follows that if a shareholder is absent and has not provided a proxy, his shares are not counted in the voting.
Any member may demand a poll unless the company's articles say otherwise.
A shareholder has an opportunity to challenge the veracity of the minutes at the beginning of the next following meeting. After that, the minutes can be challenged only on proof of inaccuracy of a fact or proof of bad faith.
Filing of certain minutes at Companies House
Each resolution passed becomes part of the minutes of the meeting at which it was passed. Most companies circularise minutes of general meetings to shareholders.
The law requires minutes recording certain resolutions to be sent to Companies House within 15 days after it has been passed. Companies House website explains exactly how to file. Resolutions to be filed are:
- Elective resolutions. Some of the resolutions are described more fully below;
- Class resolutions passed by unanimous agreement of all the members of a class of shareholders but which would otherwise have needed to be passed by a specific majority or in another manner must also be sent;
- All resolutions or agreements that effectively bind all the members of any class of shareholders though all those members have not agreed them;
- Directors' resolutions as listed just below;
- Ordinary resolutions as listed just below;
- Resolutions for voluntary winding-up. (See our guide, 'Liquidation and Insolvency' or 'Liquidation and Insolvency (Scotland)' for more information on this.).
Different types of resolution
Resolutions are passed under the s 281 of the Companies Act 2006. They are explained in sections 282 and 283 of the Act. Different types of resolution will apply in different situations. What follows here is not only an explanation of the two or three categories of resolution in law, but rather an explanation of terms commonly used.
- Directors' resolutions
A meeting of directors is commonly referred to as a “board meeting”. The word “board” has no special meaning in law. When we refer to a board meeting we mean simply a meeting of the directors.
A directors' resolution may require either a simple majority of votes or approval by all of the Directors, depending on what is laid down in the articles. A simple majority is most common. The directors can agree a resolution to “fix” any aspect of the management of the company.
- Members’ ordinary resolutions
In most private companies, the important decisions are made by the members and not by the shareholders. An ordinary resolution is used for all matters unless the Companies Act or the company's articles of association require any other type of resolution. Net Lawman offers simple company administration packs of forms and made up examples of what is required to achieve a particul;ar purpose. These packs cover all the most common requirements. They are listed at Company Secretarial & Administration Documents.
- Members’ extraordinary resolutions
There is no such thing as an extraordinary resolution. Rather confusingly, it is sometimes necessary to call an extraordinary general meeting in order to deal with something immediately. The term “extraordinary” means only that the meeting is not the annual general meeting. To put it another way, every meeting other than the annual general meeting, is an extraordinary meeting.
Extra ordinary shares are required for certain matters, for example modifying the rights of classes of shareholders or winding-up. They are passed by at least 75% of the members who vote on the motion, in person or by proxy (where allowed) at a general meeting. The length of notice required for an extraordinary resolution will depend on several factors, including the type of meeting to be held. They may be passed at short notice under the same arrangements as for special resolutions. However, the Companies Act 2006 is silent about Explanatory Resolutions.
- Special resolutions
There is a small number of business matters which are considered so important as to require a 75% majority. They are “special resolutions”.
The resolution will be effective only if not less than 21 days notice is given to the company, and 14 days given to the members, specifying the intention to propose the resolution as a special resolution. The business transactions listed below require a Special Resolution:
- where the article of association of the company require a special resolution;
- alteration to the document of memorandum and articles;
- change of company name;
- reduction of paid up/issued capital;
- sanction of arrangement between a company and its creditors;
- voluntary winding up;
When a resolution alters the memorandum or articles of association of a company, a copy of the amended document must also be filed at Companies House.
- Written Resolutions
Companies are owned by shareholders far apart. Electronic commerce has transformed the way we do business. To keep up with these trends, the Act provides for “written resolutions” that is law-speak for “virtual meetings”. In other words, a meeting can take place via the Internet, or in any other way. However, what matters is that the business of the meeting is recorded and if necessary, the minutes are filed at Companies Hose. That is the element that concerns the lawmakers, and not whether you can wave to someone 5000 miles away while you talk. That is the reson for the reference to written resolutions, and not to virtual meetings.
A resolution need not be passed only at a meeting. A private company may resolve anything in writing too. (There is one exception: to remove a director or auditor before the end of their term of office). A meeting is not required and no prior notice is necessary. A resolution may be proposed as a written resolution by the directors or by the members. The company must send the proposed resolution to every eligible member either in hard copy form, in electronic form or by means of a website.
The requirements as to notice and so on, are the same as for a physical meeting.
As we have said, minutes recording the passing of certain resolutions, must be filed at Companies House. When such a resolution is put to the members, it may be put either at a physical meeting or in writing. The company may not opt out of the legal requirement to provide for “in writing”.
- Class resolution
If a proposed resolution affects only one class of shareholders out of two or more, then obviously those who are unaffected have no vote. Such a resolution is a “class resolution”.
A class resolution is put to a “class meeting”. That does not mean you have to set up a different meeting physically. It just means that when the chairman has closed one meeting, he opens the next with everyone sitting where they are.
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
Contact us about this article
We would love to hear what you think about this article and how we could improve it. Please do let us know. However, we shan't be able to reply to your specific questions. If you have a question about a document, please contact us.
Leave feedback about this page
If you have noticed a bug or a mistake on this page, or just want to give us feedback, we'd love to know. Nothing is too small or too big. Send your message on this feedback page.
What our clients say about us...
"Net Lawman has helped me through several procedures. The documents in plain English, the drafting service and the delightful customer service means I can get the job done properly, at a price that doesn't affect a small businesses bottom line. Thank you!"
"Thanks very much! I found your website Netlawman very usefull. I am sure to recommend your website to others as well. And I will in the future use other documents. Cheers"
"Easy to find documents and good explanations for each What I wanted. Quick delivery. Saved money on legal fees."