A resolution of a company is the formal decision of a company made by the board of directors or the shareholders.
There are generally 3 types of resolutions that can be passed.
- Board Resolution
- Ordinary Resolution
- Special Resolution
The resolution can be passed at a physical meeting or by written means. Since it can be challenging to get all required parties to come for a physical meeting, a resolution may be passed through written means. However, Section 184D of the Companies Act states that if 5% or more of shareholders disagree to passing a resolution through written means, then a physical meeting must take place. For private companies, a 14 day written notice must be given to all who are required to attend the meeting and for public companies, the notice period is 21 days. Do note that if members with at least 95 per cent of the voting rights agree, then the notice can be shortened.
1) Board Resolutions
The Board Resolutions are made by the board of directors. These resolutions are made for matters concerning the management of the company. Section 157A of the Companies Act provisions that the directors of a company can make all decisions for the company except those which the Companies Act or Constitution states must be made by shareholders. In a nutshell, board resolutions are documented decisions made by the directors of a company for matters which do not require the intervention of the shareholders. To understand what decision requires the shareholders’ decisions, we must refer to the constitution of the company.
An example of when a Board Resolution will apply is when the company opens a bank account.
2) Ordinary Resolution
An Ordinary Resolution is a documented decision made by the shareholders. This formal decision requires at least 50 per cent of the votes to be passed.
An example of when an Ordinary Resolution by Shareholders will apply is the removal and appointment of a director.
3) Special Resolution
A Special Resolution is a documented decision made by the shareholders. This formal decision requires at least 75 per cent of the votes to be passed. Special resolutions must be lodged with ACRA. Typically, Special Resolutions are needed for especially important decisions.
A few examples of when a Special Resolution by Shareholders will apply is the change in company name, a change in the constitution or a reduction in share capital.
Please note that while all companies are governed by the same Companies Act, the constitution may vary between companies. Thus it is important for the directors, shareholders and secretary to clearly understand and apply the company’s constitution correctly.
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Acra Filing Agent
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