Resolutions and notice

Resolutions

What determines what type of resolution is required for a vote by the members?

The Act and the Insolvency Act require that certain items of business must be the subject of certain types of resolution and this may also be stipulated by the articles. However, articles may not stipulate a less rigorous requirement than the Act, and if they do the Act takes precedence and will prevail. If neither the Act nor the articles specify a particular type of resolution, it will be the subject of an ordinary resolution.

How is a special resolution passed?

A special resolution must be passed with a majority of at least 75 per cent of those voting. Votes not cast are disregarded for this purpose. So if 100 votes may be cast, 60 are cast in favour, 20 are cast against and 20 are not cast, a special resolution will be carried. Fourteen clear days notice must be given of a special resolution, and this is so whether it is to be proposed at an annual general meeting or at a general meeting. The notice must give the exact wording of the resolution and must state that it is to be proposed as a special resolution.

What types of business must be the subject of special resolutions?

This can best be explained by saying that a special resolution is required for anything that affects the relationship between the company and its members. Examples are:

To change the articles

To change the company's name (unless it is being done in accordance with a provision of the articles).

A decision of the members that the company should be wound up.

To reduce the share capital.

Do we still have extraordinary resolutions?

No we do not. The Act makes no mention of extraordinary resolutions. They were very similar to special resolutions - the only difference being the period of notice. Anything that was required to be passed as an extraordinary resolution is now required to be passed as a special resolution. A requirement in the articles that something must be passed as an extraordinary resolution is taken to mean that it must be passed as a special resolution.

What is an ordinary resolution and when is one needed?

An ordinary resolution is passed by a simple majority of those voting, disregarding those entitled to vote but who do not do so. So if 300 are present, 62 vote in favour and 61 vote against, an ordinary resolution will be carried. All resolutions are ordinary resolutions unless the Companies Act or company articles specify otherwise.

There are two events where the Act specifies the requirement for an ordinary resolution and this takes precedence over anything to the contrary in the articles. They are a resolution to remove a director before the expiry of his term of office and a resolution to remove an auditor before the expiry of his term of office.

When is special notice of an ordinary resolution required and what are the procedures?

Certain types of business require special notice to be given. When this has been done the resolution is decided by a simple majority of those voting.

Special notice must be given to the company at least 28 days before the meeting at which the resolution is to be proposed. This may be done by a member or members holding 10 per cent of the voting rights. The company must then give notice to the members of the resolution. This is normally done with the notice of the meeting. However, it may be done separately so long as members receive 21 clear days notice. In practice, it is often done for items for a forthcoming annual general meeting. Of course it is often the directors who give special notice.

Special notice is required for the following matters:

To remove an auditor before his period of office has expired, and also to appoint a new auditor before the expiry of the period of office of an auditor, to re-appoint an auditor who was appointed by the directors to fill a casual vacancy, or to fill a casual vacancy in the position of auditor.

To remove a director before the expiry of his period of office.

 
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