Definition
An ordinary resolution is a type of resolution that can be passed with a simple majority (more than 50%) of votes by company members, either voting in person or via proxy. It is commonly used in company meetings to approve standard business decisions, such as the appointment of directors, approval of financial statements, or routine business matters. No special notice is required to propose an ordinary resolution unless otherwise stated in the company’s articles of association or other governing documents.
Examples
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Annual Approval of Financial Statements: Company shareholders may pass an ordinary resolution during the annual general meeting (AGM) to approve the company’s financial statements for the previous fiscal year.
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Appointment of Directors: The election of a new member to the board of directors can be carried out through an ordinary resolution, requiring a simple majority vote.
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Dividends Declaration: Some companies may use an ordinary resolution to declare interim dividends, although final dividends often require a special resolution.
Frequently Asked Questions (FAQs)
What constitutes an ordinary resolution?
An ordinary resolution is any resolution that requires a simple majority (more than 50%) of votes cast by the members of a company to pass.
What is the difference between an ordinary resolution and a special resolution?
An ordinary resolution requires a simple majority to pass, while a special resolution requires at least 75% of the vote. Special resolutions often involve more significant changes, such as altering the company’s articles of association or approving major transactions.
When is an ordinary resolution appropriate?
An ordinary resolution is appropriate for routine business matters that do not require a higher level of approval, such as the appointment of officers, approval of normal financial practices, or day-to-day business decisions.
Do ordinary resolutions require notice to shareholders?
Generally, no specific notice is required unless stipulated by the company’s articles of association or other regulations. However, for transparency and good governance, it’s often good practice to provide notice.
Can an ordinary resolution be passed in a proxy meeting?
Yes, an ordinary resolution can be passed by members voting through a proxy, as long as the proxy votes reflect a simple majority.
Related Terms
Extraordinary Resolution: A type of resolution that requires a higher threshold than an ordinary resolution, often around 75%, but less than a special resolution.
Special Resolution: Requires at least 75% approval of the votes cast by members and is typically used for more significant changes, such as amendments to the articles of association.
Companies Act 2006: A comprehensive piece of legislation that sets out the law on company formation, governance, and compliance in the UK.
Articles of Association: The document that specifies the regulations for a company’s operations and defines the company’s purpose.
Online References
Suggested Books for Further Studies
- “Company Law” by Alan Dignam and John Lowry - Offers a comprehensive overview of company law in the UK.
- “Gower: Principles of Modern Company Law” by Paul L. Davies - A foundational text for deepening understanding of company law principles.
- “Mayson, French & Ryan on Company Law” by Derek French, Stephen Mayson, and Christopher Ryan - A trusted source for detailed, practical insights into company law.
Accounting Basics: “Ordinary Resolution” Fundamentals Quiz
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