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August 12th 2013 / BY: Wisteria

What are Company Resolutions?

To ensure that your company functions correctly and remains compliant with relevant legislation and in particular the Companies Act 2006 it is important that any decisions made by shareholders are done so properly, which includes using the appropriate resolutions. The main types of resolution are:

Ordinary Resolution

Ordinary resolutions are used for activities that can be classed as routine business, such as approval of the company accounts and in some cases can also serve as approval of other actions, such as the removal of a director. Any resolution that is not a special resolution is classed as an ordinary resolution. An ordinary resolution is passed by a majority vote of shareholders.  Ordinary resolutions should be filed with Companies House, although there are few cases where this applies. One example is an ordinary resolution for the allotment of new shares. Furthermore various ordinary resolutions require special notice, such as certain decisions relating to the appointment or removal of the auditor or the removal of a director before the expiry of their period in office.

Special Resolution

Special resolutions are required for a number of actions as per the Companies Act 2006 or the Articles of Association for a company. Actions which must be passed by special resolution include alterations to the company’s Articles of Association, a change of the company’s name or a reduction in the company’s share capital. A company wishing to pass a special resolution must give at least 14 days’ notice of the meeting and the notice must specify that the purpose of the meeting it to propose a special resolution. Special resolutions require a three-quarters majority of votes.

Written Resolutions

The Companies Act 2006 states that for private companies anything which may be done by resolution passed at a general meeting can instead be passed by a written resolution. In order for the written resolution to be passed it must be signed by the appropriate percentage of members who would have been able to vote at a meeting. The percentage is still dependent upon whether it is an ordinary or special resolution. A written resolution may not be used to approve the removal of a director or auditor before their term in office has expired.

Ensuring that the correct resolution is used to pass decisions is essential because if a resolution is passed incorrectly or there are flaws in the procedure, such as with the notice, quorum of members or vote, the resolution may be invalid and therefore not binding. Furthermore for private limited companies, passing a written resolution may save time and therefore be more efficient than organising a general meeting in some cases.

If you are unsure of how to administer a particular decision for your company our company secretarial department can advise as to which should be used and can complete the process for you.