A resolution is a formalized decision or expression of intent made by the members or directors of a company. It becomes binding once the necessary voting majority approves it at a general meeting or by unanimous informal consent. Different types of resolutions carry varying requirements, and these are often mandated by company law or the company’s internal governing documents.
Examples of Resolutions
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Ordinary Resolution: Utilized for routine matters such as approving annual accounts or appointing directors, requiring a simple majority (over 50%).
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Special Resolution: Necessary for significant changes to the company’s structure, like amending the articles of association, requiring a 75% majority.
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Extraordinary Resolution: Less common, often associated with the approval of voluntary winding up of the company, also requiring a 75% majority.
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Written Resolution: Used to pass resolutions without holding a meeting, provided all members consent in writing.
Frequently Asked Questions (FAQs)
1. What is a General Meeting in the context of resolutions? A General Meeting refers to an assembly of a company’s shareholders, where resolutions can be proposed and voted upon. It can be an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM).
2. What happens if a resolution does not receive the required majority? If the resolution does not achieve the necessary majority, it fails to pass and will not be executed. The status quo remains unchanged.
3. Can resolutions be passed without a meeting? Yes, resolutions can be passed without a meeting through a written resolution, provided all members agree in writing.
4. What is the difference between an ordinary resolution and a special resolution? An ordinary resolution requires a simple majority (over 50%) for approval, while a special resolution requires a 75% majority and is typically used for significant changes to the company’s governing documents or structure.
5. Are resolutions binding? Yes, once a resolution is passed, it becomes binding and must be adhered to by the company and its members.
Related Terms
- Special Resolution: A resolution that requires a 75% majority to pass, often used for significant changes in the company’s articles.
- Extraordinary Resolution: Similar to special resolutions and typically used for extraordinary circumstances such as voluntary winding up of the company.
- Ordinary Resolution: Requires a simple majority to pass, used for routine company matters.
- Written Resolution: Allows members to pass resolutions without holding a physical meeting, with unanimous written consent.
Online References
- UK Companies Act 2006: Comprehensive details on legal requirements for different resolutions.
- GOV.UK - Role of information in company procedures: Guidance on administrative responsibilities including resolutions.
Suggested Books for Further Studies
- “Company Law” by Alan Dignam and John Lowry: A comprehensive guide to the principles of company law.
- “Gower’s Principles of Modern Company Law” by Paul L. Davies: Detailed exploration of company law and practice.
- “Smith and Keenan’s Company Law” by Charles Wild and Stuart Weinstein: A textbook providing an in-depth overview of company law, including resolutions.
Accounting Basics: “Resolution” Fundamentals Quiz
Thank you for diving into the intricacies of company resolutions with us. Whether tackling everyday decisions or significant transformations, understanding resolutions is crucial for effective corporate governance!
