Any kind of decision done within a company must be made using resolutions. That is according to Companies Act 2006. These decisions are usually those which can be sensitive or very important to the company and are under company law. Passing these should make use of special resolutions.
Special resolution: What is it?
Shareholders of a company are the ones who make resolutions, including special resolutions. A special resolution must have 75% of the votes of shareholders at the very least and these should be in favor of the decision. This is what makes a special resolution what it is. There are ordinary resolutions and this is passed by having a majority vote of the shareholders, which is just over 50% of the total votes cast.
Companies need special resolutions. They can greatly help a company with making the best decisions. They also ensure that important changes in the company are given the right consideration.
This kind of resolutions are used by companies to ensure that shareholders who are considered to be the minority are protected from all important decisions which can be made without carefully considering them. A special resolution also helps protect these shareholders from important decisions which can be made without any consensus.
Only certain areas are covered by special resolutions. A shareholder (or more) who account for 25% of the total shares of the company can effectively oppose a resolution.
What are decisions should be passed using a special resolution?
Some transactions need a special resolution to pass, as per Companies Act 2006. The following are some examples.
- Company name change
- Reduction of company’s share capital
- Cases when a company simply purchases shares that are its own
- Amendment of a company’s articles of association
- Disapplication of pre-emption rights of all shareholders
- A company’s status change via registration (an example would be making an unlimited company become a limited company)
- Approval of issuance of securities
- Approval of grant of rights
- Authorization of directors’ compensation
- Revocation of any current resolution
- Authorization of grants for financial assistance
- Approval of issuance of shares
How is a special resolution passed?
A special resolution can be passed in two ways. The first one would be through a show of hands or through a poll that is held during a general meeting of shareholders. This is usually done along with other businesses that a company may be discussing during that event. This meeting is held despite not having any of the required regular notice which usually is 14 or 21 days. Of course, this period would depend on the company’s articles of association. Since it is on short notice, it is highly important that majority of a company’s shareholders should be in favor of having such a meeting.
The second way to pass a special resolution would be via a resolution from the shareholders which has been put in black and white.
Companies understand the importance of special resolutions. These should be used properly and followed to the letter by the company. Company Address knows this and is willing to help you out with your company formation to help get some things off your plate while you focus on the important ones.
published under Business Address Guides
