Resolutions govern the decisions made by firms under the 2013 Companies Act. As the board members manage the business, a resolution can be based on any vote or board meeting. Ordinary Resolutions and special resolutions are the two types of decisions that shareholders or the board of directors of a company may make.
Table of Contents
What is an Ordinary Resolution?
An ordinary resolution is an official decision made by the members or shareholders of a corporation or organization at a meeting. It is used for regular or uncontroversial issues and is approved by most present and voting. Ordinary Resolutions can be used to decide on topics such as choosing directors, adopting financial accounts, and approving company bylaws amendments.
An ordinary resolution approved is enforceable against all shareholders or members of the corporation or organization, whether or not they were present at the meeting or cast a vote in favour of it. The Resolution is included in the meeting’s minutes. Usually, a copy is submitted to the concerned regulatory body or governmental agency.
Matters that require an ordinary resolution
- Electing new directors or removing existing directors
- Acceptance of financial reports
- approving amendments to the business’s articles of incorporation
- A merger or acquisition’s approval
- Acceptance of an employee stock option plan
- Acceptance of a capital or dividend payout
- Auditor Appointment
What is a Special Resolution?
An official decision made during a meeting by the shareholders or members of a corporation or organization is known as a special resolution. Unlike an Ordinary Resolution, it must receive a majority of votes to approve, typically at least 75% or more. Special Resolutions are often utilized for more critical or controversial issues that demand more support from members or shareholders.
A quorum must be reached at the meeting to pass a special resolution, and most of those in attendance and voting must support it. The quorum is typically outlined in the company’s bylaws or articles of association.
No matter who was present at the meeting or voted in favour of the Resolution, a special resolution is binding on all shareholders or members of the company or organization once approved. The Resolution is included in the meeting’s minutes, and a copy is usually submitted to the appropriate governmental or regulatory authority.
Matters that require a special resolution
- Changing the name of the company
- Increasing sanctioned share capital
- Modifying the company’s articles of association
- Approval of a share buyback
- Modifying the business model of the company
- Acceptance of the sale of a significant asset
Procedure to pass a resolution
A vote or show of hands may adopt or reject resolutions at a general meeting. The Resolution is approved, and the decision is final if the votes are in favour.
The number of voting shares, not the number of shareholders, must be counted to assess whether the necessary majority has been obtained. The majority of shares will have one vote each, but shareholders can possess different numbers of shares. Some firms may have other share classes with more than one vote.
Additionally, suppose the Resolution is put to the vote at a general meeting. In that case, the proportion of “yes” votes is calculated based on the number of attendees with voting rights rather than the total number of voting rights in the corporation.
But, if the Resolution had been put to a formal vote, it would have required the approval of at least three shareholders to represent more than 50% of the company’s total voting rights.
The Resolution is approved if it receives the required number of votes. The proposed Resolution is only accepted if the necessary majority of votes is accepted.
Difference between ordinary and special Resolution
|Ordinary Resolution||Special Resolution|
|A simple majority is needed when moving a resolution at a general meeting; this type of motion is called an Ordinary Resolution.||Resolutions are called Special Resolutions when a supermajority must approve them at the general meeting.|
|If 51% of the members approve, it is finished.||Upon approval by 75% of the members, it is finished.|
|As specified by the criteria of company law, it deals with an ordinary or particular business.||Focus on particular business transactions.|
|Everyone must receive the notice.||The notice must be given, and it must be apparent that a Special Resolution will be passed.|
|Sometimes, a copy of the ordinary Resolution must be filed with the ROC.||The ROC must receive a copy of the Special Resolution in MGT-14.|
A company cannot make decisions on its own. Owners of the corporation are its shareholders, and directors are responsible for its management. Directors and shareholders must make decisions regarding day-to-day operations and business expansion. Resolutions are essential to a business; a firm must make decisions by passing resolutions. To avoid facing the consequences of breaking the law, every corporation must follow the rules governing Resolution.