What is a company resolution?
A resolution is a formal and legally binding company decision or action made by its members (ie shareholders). Resolutions are often contained in legal documents.
Resolutions must be made in accordance with a company’s rules and relevant laws (many of which are contained within the Companies Act 2006). The rules by which a company is run and administered are set out in its Articles of Association and Memorandum of Association, which form its constitution.
Resolutions can be made at general meetings (eg ordinary and special resolutions) or in writing (ie written resolutions). Our Shareholder resolution can be used to pass company resolution at a general meeting and in writing.
What decisions require a resolution?
Most decisions beyond decisions about the normal day-to-day running of a business will require a resolution. Resolutions also need to be passed for any decisions that affect the constitution or rules of a company. Examples of decisions requiring resolutions include:
changing directors' powers
changing the name of a company
changing the articles of association
changing the share structure
A company’s articles will normally state whether a resolution is required for a certain decision and may determine the type of resolution needed (eg ordinary or special).
What is an ordinary resolution?
Ordinary resolutions are the basic type of resolution. They’re used for routine changes and only need a simple majority (more than 50%) of shareholders to agree on a decision. This type of resolution can be passed with a show of hands at a meeting. Some decisions which must be ordinary resolutions or which are usually passed as ordinary resolutions are:
appointment or removal of company directors
authorising directors’ loans
amending the powers of directors or changing their employment contracts
What is a special resolution?
Special resolutions (occasionally known as 'extraordinary resolutions' in companies’ constitutions) are often needed for more important decisions or decisions affecting the constitution of a company. Special resolutions require at least 75% of shareholders to agree on a decision. Decisions made by special resolution include:
changing the name of the company
making changes to the articles of association
changing a private company to a public company (or changing a public company to a private one)
Companies may set other, higher majority thresholds that certain types of resolutions must meet (eg 80%), but only if the law (eg the Companies Act 2006) doesn’t specify that this kind of decision must be an ordinary or a special resolution (eg if the Companies Act 2006 were to state that a certain type of decision just requires a ‘resolution’).
What is a written resolution?
General meetings for shareholders are normally required to pass resolutions. However, private companies can pass some decisions in writing without the need for a meeting. Ordinary or special resolutions can be passed by written resolution if the usual thresholds are met (ie a simple majority for an ordinary resolution or at least over 75% for a special resolution). Shareholders should signify their agreement to the resolution and, when the required majority threshold is met, the resolution is passed.
Certain shareholder decisions cannot be reached by written resolution. For more information, read Written resolutions.
What records must be kept?
Resolutions that are passed in a meeting should be accurately recorded in the minutes of the meeting. Minutes serve as evidence of meeting proceedings and must be kept at the company's registered office or Single Alternative Inspection Location (SAIL) for at least 10 years. Furthermore, all shareholders should receive written notification of any resolutions.
If records are not adequately kept, an offence will have been committed. The company must make all records or decisions available for inspection and keep them at the company's registered office or other specified location (ie the SAIL). Every director who doesn't meet this requirement will have committed an offence, which could result in a fine of up to £1,000.
Sending resolutions to Companies House
Certain types of resolutions must be filed at Companies House. A completed resolution, signed by the shareholders, (or a copy of it, signed by a director or the company secretary) should be sent to Companies House within 15 days of its being passed (ie voted on). The types of resolutions that must be filed include:
any special resoltuions
any unanimous resolution (ie resolutions that require all shareholders to agree) that, if not agreed as a unanimous resolution, would not have been effective unless passed as a special resolution
any resolution effectively binding an entire class of shareholders even though the resolution was not agreed to by all those shareholders
Notification can be achieved using the Government’s form for Giving notice of a special, written or ordinary resolution.