A company resolution is a legally binding decision made by directors or shareholders.
In the context of company law, a resolution represents a formal decision passed by the members (shareholders) or the management (directors) of a company. These decisions are crucial for governing the company's operations, structure, and future direction.
How Resolutions Are Passed
For a proposed resolution to become legally binding, it must be formally approved through a voting process.
- Voting: Directors pass resolutions at board meetings, while shareholders pass resolutions at general meetings.
- Majority Vote: If a majority vote is achieved in favour of any proposed resolution, the resolution is 'passed' and legally binding. The specific majority required depends on the type of resolution being considered.
Types of Shareholder Resolutions
Shareholders typically encounter two main types of resolutions at their general meetings:
- Ordinary Resolutions: These are used for routine business and generally require a simple majority (more than 50%) of the votes cast by shareholders entitled to vote.
- Special Resolutions: These are reserved for more significant decisions, such as changing the company's articles of association or reducing share capital. They typically require a higher majority, often 75%, of the votes cast.
Summary of Resolution Types
| Type of Resolution | Who Passes It? | Typical Majority Required | Purpose |
|---|---|---|---|
| Director Resolution | Directors | Simple Majority (>50%) | Day-to-day management decisions |
| Ordinary Resolution | Shareholders | Simple Majority (>50%) | Routine matters (e.g., appointing auditors) |
| Special Resolution | Shareholders | Higher Majority (e.g., 75%) | Major changes (e.g., amending articles) |
Resolutions provide the formal mechanism through which important company decisions are legitimised and recorded, ensuring compliance with legal requirements and corporate governance standards.
