Guidance on Company Resolutions - prior to the CA 2006

A resolution is an agreement made by the directors or members of a company. When a resolution is passed the company is bound by it. The vote on a resolution in a general meeting is taken in accordance with the rules in the company’s articles of association. 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.

A copy of every resolution or agreement listed below must reach Companies Registry within 15 days after it has been passed.

• Special resolutions and extraordinary resolutions
• Elective resolutions
• Class resolutions passed by unanimous agreement of all the members
• Directors’ resolutions
• Ordinary resolutions
• Resolutions for voluntary winding up

Resolutions - different types:

Directors’ Resolutions

These are only used by directors at board meetings. The following directors’ resolutions must be filed at Companies Registry

• A resolution to change the company’s name
• 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 reregister as a plc
• A resolution to allow title (meaning the right to benefit from ownership) to be evidenced and transferred without a written document

Ordinary Resolutions

These are used for all matters unless the Companies Order 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, notice of which has been properly given.

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.

The following ordinary resolutions need to be filed at Companies Registry:

• A resolution to give, vary, revoke or renew an authority to the directors to allot shares
• A resolution 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 authorise an increase of share capital

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, at a general meeting.

Special Resolutions

These are passed at a general meeting of which at least 21 days’ notice specifying the intention to propose a resolution as a special resolution has been given. As with an extraordinary resolution, 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.

A meeting at which a special 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 and resolution must be by:

• The majority of members in number who also hold at least 95% in nominal value of the shares giving voting rights; or
• In the case of a company without share capital, the majority of members in number who also represent at least 95% of the total voting rights; or
• In the case of a meeting called as the annual general meeting, all the members

Private companies may pass an elective resolution 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 Registry.

Elective Resolutions

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 must be given unless all members entitled to attend and vote at the meeting agree to a shorter period. These may be passed by private companies only.

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 AGM's
• To dispense with the laying of accounts and reports before the members in general meeting
• To allow the majority required to authorise 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

Written Resolution

A written resolution signed by all the members, 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. To pass a written resolution, a meeting is not required and no prior notice is necessary. But the resolution can only be passed by unanimous agreement of all the members who, at the date of the resolution, would be entitled to attend and vote at a meeting that would otherwise have been held to pass it.

A copy of the proposed written resolution must be sent to the company’s auditors - or they must otherwise be notified of its contents - at or before the time the resolution is supplied to the members for signature.

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.

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
• 100 or more shareholders whose paid-up capital averages at least £100 each

Shareholder resolutions are voted on at a company’s annual general meeting.