A Comprehensive Guide to Limited Company Resolutions in the UK
In private limited companies, directors typically handle routine decisions, but for significant matters beyond their authority, shareholders must make the decision. Shareholders pass these decisions through shareholder resolutions, which can be done either at a general meeting or in writing.
There are two types of resolutions: ordinary and special. Shareholders must vote in favor of the proposed action for it to pass. Below, we explain the differences between ordinary and special resolutions and how to pass them in a limited company.
Key Takeaways:
- Ordinary Resolutions: Used for routine decisions (e.g., paying dividends), requiring more than 50% of votes in favor to pass.
- Special Resolutions: Applied to significant matters (e.g., amending articles of association), requiring at least 75% of votes in favor.
- Filing Requirement: Special resolutions must be submitted to Companies House by post within 15 days of being passed.
What are ordinary resolutions?
Ordinary resolutions are used for routine or standard decisions in a limited company. Shareholders pass them when more than 50% of the eligible votes are in favor.
What are special resolutions?
A special resolution requires a majority vote of at least 75% to pass. These resolutions address more complex matters, which is why a higher majority is needed. Not all shareholders may have voting rights, so only those with voting privileges participate in shareholder resolutions.
A written resolution is an alternative method for passing a resolution. Instead of a meeting, the resolution is passed in writing, with shareholders confirming their approval by signing a document. Directors or shareholders holding at least 5% of the voting rights in the company can propose written resolutions.
Public limited companies (PLCs) cannot use written resolutions under any circumstances.
Decisions that require company resolutions
The Companies Act 2006 and the company’s articles of association define the directors’ powers and which decisions require an ordinary resolution. Common decisions made by ordinary resolution include:
- Paying dividends
- Appointing and removing directors
- Approving directors’ service contracts
- Approving directors’ loans
- Allotting new shares
Note: Written resolutions cannot be used to remove a director or auditor.
Special resolutions are typically used for:
- Altering the articles of association
- Changing the company name
- Restructuring the company
- Disapplying shareholders’ pre-emption rights
- Winding up the company
Shareholders may request a special resolution for other matters, as specified in the articles of association.
What is the notice period for proposed company resolutions?
1.Proposed Company Resolutions at a General Meeting
The notice period for proposing ordinary or special resolutions at a general meeting is 14 days. However, if the resolution involves removing a director or auditor, a special 28-day notice is required. The director or auditor must be informed, and specific procedures must be followed.
2.Proposed Written Resolutions
There is no fixed “notice period” for written resolutions. Shareholders must receive a copy of the resolution and a statement outlining how to indicate their agreement and the deadline for approval. Written resolutions must be passed within 28 days from when they are distributed, or they will lapse.
Who must receive a copy of proposed company resolutions?
Proposed resolutions must be sent to all eligible members (those entitled to vote) and the company auditor (if applicable). If a resolution to remove a director is proposed at a general meeting, the director facing removal must also receive a copy.
How to pass company resolutions
In private limited companies, resolutions can be passed at a general meeting either by a poll or a show of hands. Alternatively, they may be passed via written resolutions, where shareholders indicate their agreement in the manner specified by the company. Once the required number of votes is obtained, the resolution is passed and legally binding.
How are votes counted?
To determine if the required majority has been achieved, the number of voting shares, not the number of shareholders, must be counted. Although most shares carry one vote each, shareholders may own varying quantities of shares, and some companies may have multiple share classes, each with different voting powers.
If votes are counted via a show of hands at a general meeting, the rule “one member, one vote” applies. A poll can be demanded to account for the actual number of votes each shareholder holds.
If the resolution is voted on at a general meeting, the number of votes ‘for’ is considered as a percentage of the total voting rights of those present, not the total voting rights of the company. For example, in a company with four equal shareholders, if one shareholder is absent, two of the remaining three shareholders need to vote in favor for an ordinary resolution to pass.
How to record company decisions
Companies must record decisions through minutes of all general meetings and copies of any resolutions passed. These records should be kept at the registered office or SAIL address for at least 10 years and be available for inspection. Statutory company records and registers must also be updated as required.
Filing resolutions with Companies House
Special resolutions must be submitted to Companies House by post within 15 days of being passed. Ordinary resolutions generally do not need to be submitted to Companies House but should be stored in the company’s records. However, some ordinary resolutions, as outlined in the Companies Act 2006, must be submitted, so verify this in advance.
How long must a company keep copies of resolutions?
Copies of company resolutions and meeting minutes must be retained for at least 10 years from the date they are passed. These records should be stored at the company’s registered office or SAIL address and made available for inspection upon request.
Do you have any other questions?
This guide covered the essentials of limited company resolutions in the UK, including the differences between ordinary and special resolutions, the process for passing resolutions, and the filing requirements with Companies House. We also explained voting procedures, how to record company decisions, and the retention of resolutions and meeting minutes.
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