Special Resolutions – practical tips

The Companies Act 2006 provides a legal framework under which companies operate including how decisions are made. Under the Companies Act 2006 when a company makes important decisions this generally has to be made by way of resolutions which are passed at meetings (by show of hands or by proxy). Resolutions Resolutions are either ordinary

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The Companies Act 2006 provides a legal framework under which companies operate including how decisions are made.

Under the Companies Act 2006 when a company makes important decisions this generally has to be made by way of resolutions which are passed at meetings (by show of hands or by proxy).

Resolutions

Resolutions are either ordinary resolutions (those that require a simple majority) or special resolutions (those that require a 75% majority).

Special Resolutions

Special resolutions are considered in Section 283 of the Companies Act 2006 and are used for important transactions which generally include:

  • an amendment to the company’s articles of association (to the extent permitted by the Companies Act 2006);
  • a reduction in share capital;
  • authority for the allotment of securities by the directors without or subject to modified restrictions;
  • approval of certain off-market purchases by a company of its own shares;
  • to approve the issue of shares and / or securities;
  • re-registration of an unlimited company as a limited company or vice versa;
  • to approve the grant of rights;
  • to ratify any actions by the company or its director(s) in excess of their authority (to the extent permitted by the Companies Act 2006);
  • a change to the company’s name;
  • to authorise the grant of financial assistance;
  • to authorise compensation for directors;
  • to change the registration of a company to another jurisdiction;
  • to revoke a resolution;
  • a winding up of the company by the court; and
  • a winding up of the company voluntarily.

If the resolution is being passed as a written resolution then it is important that the written resolution states that it a special resolution.

Procedure for calling meetings to consider resolutions

A general meeting at which a special resolution is being proposed may be held without the usual notice requirement (14 or 21 days – unless the company’s articles of association say otherwise).

However in order to have such a meeting at short notice a majority of members (each of whom must be entitled to attend and vote at the meeting i.e. those who together hold between 90-95% of the shares in the case of a private company and those who hold 95% of the shares of a public company) must vote in favour of there being a meeting at short notice.

At any meeting at which a special resolution is submitted to be passed, a declaration by the chairman that the resolution is passed is conclusive unless a poll is demanded. Within 10 days of adopting a special resolution a company must deliver a statement describing the result of the vote and the consent process, whilst (when passed) a copy of the special resolution must be filed with the registrar of the company.

dserota-sb For advice on drafting any form of company resolution or on company law issues generally, please get in touch with me. You may also find our page on shareholder rights helpful. 

commercial law • Debbie Serota

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