As per the Companies Act 2006, various decisions in a company should be made with the use of resolutions. These decisions are commonly those that are sensitive or very important and under company law, they should be passed by the use of a special resolution.
What is a special resolution?
A special resolution is just another resolution made by the shareholders of a company. It should also have at least 75% of the votes of all the shareholders. The difference between a special resolution and an ordinary resolution is that an ordinary resolution can be passed by a simple majority vote from the shareholders. A special resolution is needed especially since it can help with making good decisions and making sure that essential changes are given better consideration. This type of resolution is used to help protect the shareholders who are the minority from any essential decisions that are made without the right consideration. It should also help protect them from essential decisions that are made without consensus.
What type of decisions need to be passed via a special resolution?
Under the Companies Act 2006, there are some decisions that would need a special resolution to be enacted by the company. Below is a list of examples of typical decision that need a special resolution in order to be enacted: • Changing the name of the company • Amending the articles of association • Reducing the share capital of the company • Disapplying the pre-emption rights of shareholders • Some cases when the company so happens to purchase its very own shares • Changing the status of the company via registration (like changing an unlimited company and making it a limited company) • Approving issuance of securities • Approving issuance of shares • Approving grant of rights • Authorizing financial assistance grants • Authorizing directors’ compensation • Revoking any resolution.
How are special resolutions passed?
There are two ways that a special resolution is passed. The first one is via a show of hands or a poll during a shareholders’ general meeting. This should be done alongside other businesses that the company may have to discuss during the gathering. This meeting can be held even if there is not the regular notice that is required which is 14 or 21 days, except if the articles of association of the company says different. This may be short notice so it is important that most of the shareholders should vote to be in favor of such a meeting. The second one would be through a resolution of shareholders’ that has been put into writing.
A special resolution is there to protect the company for making hasty decisions that would have a big impact on the company and its employees.
published under Business Address Guides
