A Guide to Ordinary and Special Resolutions

A resolution is a formal name for a decision made at a meeting of a company.

A meeting can be either a board of directors meeting or a general meeting of the Shareholders/Members.

Shareholders/Members of the company may own and control the company through their ownership of shares or may be members of a company without a share capital, such as a Company Limited by Guarantee.

Directors manage the business and its operations and make decisions for the company on behalf of its shareholders/members.

All resolutions must be made in accordance with a company’s own provisions e.g. their Constitution or any shareholders agreement, and relevant company laws as contained within the Companies Act 2014.

 

Shareholders/Members Resolutions

 

There are varying levels of resolution depending on the size of the decision made by a company.

Members Resolutions are formal and legally binding decisions made by the company’s members and are either referred to as ‘Ordinary’ or ‘Special’ Resolutions.

An Ordinary Resolution handles the standard actions typically associated with running a business.

This covers normal things a business would need to do, like vote on giving people new shares, changing a director, or making a small investment like an office revamp.

An ordinary resolution requires more than 50% of shareholders/members’ votes to pass.

This threshold is also called a simple majority.

A Special Resolution is, as the name suggests, for special or uncommon decisions a company takes.

Things like a Change of Constitution or Business Name, Large Capital Investment or changing the share structure of a business would require a special resolution.

A special resolution requires the approval of at least 75% of voting members in order to put it in place.

Its function is to protect minority shareholders.

Additionally, by imposing a higher threshold, special resolutions ensure that company changes are set to benefit a large majority of the shareholders.

Within the different types of resolutions, the way they are agreed or passed can affect when they come into force

A resolution can be passed at an Annual General Meeting (AGM), an Extraordinary General Meeting (EGM)or in writing.

It is important that you have reviewed your constitution and any shareholder’s agreements for specific clauses relating to notices, voting, resolutions, etc, before passing any resolutions.

 

General Meeting

 

If passing a resolution at a General Meeting, i.e. an AGM or EGM, it is important that the relevant notice periods are complied with as follows:

• AGMs require 21 clear days’ notice.
• EGMs require 21 clear days’ notice if passing a Special Resolution – alternatively, 7 days’ notice is sufficient for an Ordinary Resolution.

All general meetings of a company other than an AGM are called extraordinary general meetings (EGMs).

The directors of a company may convene an EGM whenever they consider it appropriate to do so.

A member or members holding 50% or more of the paid-up capital of the company may also convene an EGM.

Any members holding 10% or more of the paid-up share capital of the company may request the directors to convene an AGM.

Where consent is obtained by all members entitled to vote, a shorter notice period can be given.

Note: There may be extended notice periods for certain ordinary resolutions, e.g. a resolution at a general meeting to remove a director or to reappoint the auditor requires 28 days’ notice.

Voting

At a general meeting of members, voting can be done by a show of hands or by a poll.

A poll can be demanded by 3 shareholders present in person or by proxy, by any shareholder/member holding not less than 10% of the voting shares, or by the company Chairperson.

 

Written Resolutions

 

An alternative to the General Meeting is to pass a written resolution.

A written resolution can be either a unanimous written resolution or a majority written resolution.

Unanimous Written Resolution

Private limited companies can pass written resolutions unanimously.

This is regardless of what their constitution provides.

As the name suggests, all voting members of a company are required to sign a unanimous resolution.

Such a resolution is deemed to be passed on the date on which it is signed by the last member.

It then becomes effective immediately as if it had been passed at a general meeting of the company.

This type of resolution will always be used for single-member companies (where 1 person or company is the 100% shareholder).

However, written resolutions do not apply to a resolution to remove a director or a statutory auditor.

Such resolutions must be passed in general meetings.

Majority Written Resolution

In this case, once the required majority of all members entitled to vote have signed the resolution, there is a period of time to wait before it comes into being.

For a valid majority resolution to apply, all members entitled to vote on the resolution must have been circulated with the proposed text of the resolution and an explanation of its purpose.

An ordinary written resolution requires agreement by more than 50% of the members entitled to vote.

A special written resolution requires a majority of at least 75% of the members entitled to vote.

A majority written ordinary resolution takes effect 7 days after the final signature, and a majority written special resolution takes effect 21 days after unless the resolution specifies a certain effective date.

Where a date is specified, the resolution is deemed to be passed on the date specified on it.

However, that date cannot be earlier than the date of the last signature unless the members waive that right in writing.

Once the written resolution has been signed by the requisite majority, the company must notify all the members of this and the date on which it is deemed to have passed.

A Majority Written Resolution cannot be used:

• To remove an auditor
• To remove a director
• In PLC/CLG/Unlimited companies

 

Single-Member Resolutions

 

A single-member company is simply a company that has a sole member.

All powers exercisable by a company in general meeting are exercisable by the sole member without the need to hold a general meeting.

This does not apply, however, to the power to remove an auditor.

To do that, a meeting must be held, and the Auditor advised of the meeting.

The member must provide the company with a written record of any decision by way of a resolution, and the company should retain this written record.

 

Filing of Resolutions with the CRO

 

All Special Resolutions must be filed with the CRO CORE system using Form G1.

This Form must be signed by a Director of the Company once a resolution has been passed by the company members, and it must be submitted within 15 days.

Relevant Ordinary Resolutions must be filed with the CRO CORE system using Form G2.

This must be signed by a Director of the Company once the resolution has been passed by the company members.

Resolutions that need to be filed with the CRO include:

• Any special resolutions required by the Companies Act
• Increasing or decreasing the Authorised Share Capital
• Conferring authority to allot shares
• Varying rights of a share class
• Converting shares to a different class
• Winding up voluntarily
• Increasing the number of Directors

Please note this is not an exhaustive list.

Failure to file a resolution with the CRO is deemed a Category 4 offence, and the Company and any officer may be fined up to €5,000.00.

 

Directors Resolutions

 

A Directors’ Resolution is the formal record of a decision made by the directors of a company.

The scope of what decisions can be covered by a Director’s Resolution, along with the director’s powers, are set internally by the company.

During any board meeting, directors may vote on various steps the company is to take once it is within their power to do so.

They are often utilised for signing financial statements, entering contracts, using company seals, etc.

A Director resolution can also be passed in writing and can be signed in counterpart, so the original does not need to be couriered between different directors.

Director’s decisions made by written resolution must be unanimous and all eligible directors must vote on it in the same way.

Once a decision is made outside of the ordinary day-to-day running of the business, the secretary will be instructed to draft a resolution confirming the details to be signed off by the directors.

This resolution is held for company records.

Such resolutions do not have to be filed with the CRO.

Each Director will represent one vote.

Items to remember when considering a Director’s Resolution:

• There may be specific clauses in the company’s constitution relating to the quorum of directors or which director may pass certain resolutions.
• Where a director has a conflict of interest in the proposed resolution, the director may abstain from voting.
• The Chairperson gets a casting vote in the event of equal votes.
• If there is documentation to be reviewed for the relevant resolution, sufficient time to review must be allowed.
• Minutes should be drafted documenting the passing of the relevant resolution, annexing any relevant documents.

 

Practical matters

 

When drafting your company’s constitution (or evaluating any changes) you should determine which matters you want to reserve for special resolutions.

This is ultimately a commercial decision determined by your relationship with other shareholders.