Introduction
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. They 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. In order for everyone involved to understand the rules, you will have to hold company meetings, which also require company meetings notices.
Secondly, the Companies Acts provide for many areas where you could say "suggestions" are made as to how the shareholders and directors run the company. The mass of day-to-day work is regulated only by broad principles. Certain specific matters are regarded as more important and the company must make choices and record them at Companies House. These include for example:
· Who shall be directors,
· What will be the company's business year end,
· And what shares have in fact been issued.
This second set of categories are regulated by the company's own "rules" too, as set out in any number of minutes of meetings. Minutes start life as "resolutions, as the following text explains.
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 goal.
About resolutions
Crown copyright is acknowledged where appropriate.
What is a resolution?
A resolution is an agreement or decision made by the directors or members (or a class of members) of a company. When a resolution is passed, the company is bound by it.
A proposed resolution is a motion. If the necessary majority is not obtained, then the motion fails.
How is a vote taken?
The vote on a resolution in a general meeting (or in a meeting of a class of members) is taken according to the rules in the company's articles of association. Generally it is by a show of hands. Any member may demand a poll unless the company's articles say otherwise. 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.
Who must receive copies of a resolution before and after approval?
Notice of the intention to propose a resolution must be sent to company members. If a company has auditors, they must also be sent copies - or otherwise notified of the contents - of all proposed statutory written resolutions (see 'different types of resolutions' below).
Companies House must be sent a copy of any resolution listed in the list below. The resolution must be:
· In printed form (or in another form approved by Companies House); and
· Delivered to Companies House within 15 days of the date it was made or passed by the company.
What resolutions need to be sent to Companies House?
A copy of every resolution or agreement listed below must reach Companies House within 15 days after it has been passed, including:
· Special and extraordinary resolutions,
· 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 resolutions
1) Directors' resolutions
These are only used by directors at board meetings. The following directors' resolutions must be filed at Companies House:
· A resolution to change the company's name in response to a direction from the Secretary of State under section 31(2) of the Companies Act 1985;
· A resolution to alter the memorandum of association of a company ceasing to be a public company following the acquisition of its own shares;
· A resolution by the directors of an old public company to re-register as a plc;
· A resolution to allow title (meaning the right to benefit from ownership) to be evidenced and transferred without a written document.
2) Ordinary resolutions
These are used for all matters unless the Companies Act or the company's articles of association require another type of resolution. They are passed by a simple majority of members who are entitled to vote at a meeting. Voting may also be allowed by a member's substitute known as a proxy. The length of notice required for an ordinary resolution depends on the kind of meeting at which the resolution is to be discussed. An ordinary resolution may be passed at short notice using the same arrangements as apply to special resolutions.
The following ordinary resolutions need to be filed at Companies House:
· Resolutions to give, vary, revoke or renew an authority to the directors to allot shares;
· Resolutions to give, vary, revoke or renew an authority to the company to make a market purchase of its own shares;
· A resolution to prevent or reverse a directors' resolution to allow title of shares to be evidenced or transferred without a written document;
· A resolution to authorize an increase of share capital. This type of resolution must be sent with Form 123 (notice of increase in nominal capital).
3) Extraordinary resolutions
These 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.
4) Special resolutions
A special resolution requires a 75% majority. It is required for important matters such as alterations to the memorandum or articles of association, a change of name, or a reduction of capital to be approved by the court. As per section 283 of the Companies Act 2006, when special resolution of private company is passed as a written resolution it must state that it is proposed as a special resolution.
A general meeting of a private company must be called by notice of at least 14 days (21 days in the case of annual general meeting of public company). The company’s articles may require a longer period of notice. A meeting at which a special resolution (or an ordinary or extraordinary resolution) is to be proposed may be held at shorter notice with the agreement of the members entitled to attend and vote at the meeting. Agreement to short notice of the meeting must be by a majority in number of the member having a right to attend and vote at the meeting, being a majority who:
· Together held not less than the requisite percentage in nominal value of the shares giving voting rights(excluding any shares in the company held as treasury shares); or
· In the case of a company without share capital, together represent not less than the requisite percentage of the total voting rights at that meeting of all the members.
The requisite percentage is:
· In the case of a private company, 90% or such higher percentage (not exceeding 95%) as may be specified in the company’s Articles;
· In the case of public company, 95%.
Private companies may pass an elective resolution (see question 5 below) to reduce the majority required to authorise short notice of a meeting and notice of a resolution, to not less than 90%.
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.
5) Elective resolutions
These may be passed by private companies only and for five specific purposes - see below. 'Elective resolutions' must be passed by unanimous agreement in general meeting of the company by all the members entitled to attend and vote at the meeting in person or by proxy. A period of 21 days' notice of the resolution(s) must be given unless all members entitled to attend and vote at the meeting agree to a shorter period.
Elective resolutions may be used for the following purposes only:
· To amend the duration of the authority of directors to allot securities;
· To dispense with the holding of annual general meetings;
· To dispense with the laying of accounts and reports before the members in general meeting;
· To allow the majority required to authorize short notice of a meeting and notice of a resolution to be reduced from 95% to a lower figure but not less than 90%;
· To dispense with the annual appointment of auditors.
6) Written resolutions
A written resolution or a resolution of any class of members, may be passed by a private company to resolve anything which could have been passed by the company in general meeting. However, this power cannot be used 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 private company must send written resolution to every eligible member in hard copy form, in electronic form or by means of a website. Eligible members are those who, at the circulation date of the resolution, would be entitled to attend and vote at a meeting that would otherwise have been held to pass it. Circulation date of written resolution is the date on which first copy or copies of resolution are sent to the members. The copy of the resolution must be accompanied by a statement informing the member how to signify agreement to the resolution and as to the date by which the resolution must be passed if it is not to lapse. When a resolution of a private company is to be passed as a special resolution, it must be stated that it was proposed as a special resolution. In case of written resolution, every member has one vote and if the company has share capital, every member has one vote in respect to each share or each £10 of stock held by him. A member signifies his agreement to a proposed written resolution when company receives from him or from someone acting on his behalf an authenticated document, identifying the resolution to which it relates and indicating his agreement to the resolution. Authenticated document must be sent to the company in hard copy form or in electronic form. A member’s agreement to a written resolution, once signified, can not be revoked. An ordinary resolution is passed by simple majority and a special resolution requires 75% majority. A written resolution is passed when the required majority of eligible members have signified their agreement to it. A proposed written resolution lapses if it is not passed before the end of the period specified in the company’s articles. If period is not specified in the company’s articles it is 28 days beginning with the circulation date. The validity of the resolution, if passed, is not affected by a failure to comply with related act.
A private company is required to circulate the resolution and any accompanying statement (not more than 1000 words) if it has received the request from members representing 5% or such lower percentage specified in the company’s articles of the total voting right of all the members entitled to vote on the resolution. Members can do request in hard copy or in electronic form. Company must send first copies of circulation of resolution not more that 21 days after receiving the request from members. The expenses of the company in circulating the resolution must be paid by the member who requested the circulation unless the company resolves otherwise. A company is not required to circulate a members’ statement if, on an application by the company or another person who claims to be aggrieved, the court is satisfied that the right is conferred by sectipon292 and that section are being abused.
A provision of the articles of a private company is void in so far as it would have the effect that a resolution that is required by or otherwise provided for in an enactment could not be proposed as a written resolution
7) Class resolution
When a company proposes to pass a resolution that affects one class of share only, then it will usually need to obtain the consent of a majority of the holders of the class of share. This can be obtained in writing or by passing an extraordinary resolution at a separate class meeting.
8) Shareholder resolution
A company has a duty to circulate resolutions proposed by shareholders and intended to be moved at an annual general meeting if a certain number of members request it. The number of members necessary is:
· Members having 5% of the voting power of the company; or
· 100 or more shareholders whose paid-up capital averages at least £100 each.
The resolution may be circulated at the expense of the members making the request, unless the company resolves otherwise. Sections 314 to 317 and 338 to 340 of chapter 3 of Part 13 of the Companies Act 2006 also place other conditions on the circulation of proposed shareholders' resolutions - e.g. the time within which the request must be deposited at the company's registered office before the annual general meeting etc.
Shareholder resolutions are voted on at a company's annual general meeting in the same way as other resolutions.
| 
