Written Resolution

Written Resolution Companies Act 2006 Corporate Governance Special Resolution Articles of Association Private Companies
Under the Companies Act 2006, a written resolution is signed by a majority of company members and treated as effective even though it is not passed at a properly convened company meeting.
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What is a Written Resolution?

Written resolutions are a flexible way for company members to make decisions without holding a formal meeting. Introduced by the Companies Act 2006, this method allows resolutions to be proposed and decided upon through written communication, enabling faster and more efficient decision-making.

Key Features:

  • Majority Signature: A written resolution requires the signature of a majority of company members to become valid.
  • Effectiveness: Even though it is not discussed or voted on at a traditional company meeting, it is treated as valid and effective.
  • Special Resolution: Requires the support of 75% (supermajority) of members.
  • Applicability: Mainly used by private companies, though other companies can also utilize this method if permitted by their articles of association.

Examples

  1. To Approve Financial Statements:

    • A private company might use a written resolution to approve the annual financial statements, eliminating the need for a scheduled meeting.

  2. Appointment of Directors:

    • Instead of holding an extraordinary general meeting, shareholders might use a written resolution to appoint or remove directors.

  3. Change of Registered Office:

    • The company can relocate its registered office through a written resolution, getting approval from the required majority of members.

  4. Alteration of Company’s Articles:

    • Altering the articles of association itself can be executed via a written special resolution requiring 75% majority support.

Frequently Asked Questions (FAQs)

What is the Companies Act 2006?

The Companies Act 2006 is a comprehensive piece of legislation that governs all aspects of company law in the United Kingdom.

Can a written resolution be used for any decision?

No, a written resolution can’t be used for all decisions. Some decisions, such as removing an auditor or a director before their term ends, require a physical meeting.

How many members’ signatures are necessary for a written resolution?

A majority is required for an ordinary resolution, and a 75% majority is necessary for a special resolution.

Are written resolutions binding?

Yes, once the required majority of shareholders approve them, written resolutions are binding as if they were passed at a duly convened meeting.

Can public companies use written resolutions?

Public companies generally do not use written resolutions for significant decisions unless explicitly allowed by their articles of association.

  • Companies Act 2006: The principal legislation concerning company law in the United Kingdom.
  • Special Resolution: A resolution requiring the support of at least 75% of the members.
  • Articles of Association: A document that specifies the regulations for a company’s operations and defines the company’s purpose.
  • Corporate Governance: Frameworks and processes by which companies are controlled and directed.

Additional Resources

Online References

  1. UK Government - Companies Act 2006
  2. Chartered Institute of Legal Executives (CILEx)

Suggested Books

  1. Gower and Davies’ Principles of Modern Company Law by Paul L. Davies
  2. Company Law by Alan Dignam and John Lowry
  3. Mayson, French & Ryan on Company Law by Derek French

Accounting Basics: “Written Resolution” Fundamentals Quiz

### What legislation introduced written resolutions? - [x] Companies Act 2006 - [ ] Data Protection Act 2018 - [ ] Companies Act 1985 - [ ] Financial Services Act 2012 > **Explanation:** Written resolutions were introduced by the Companies Act 2006 to simplify corporate decision-making. ### What is the required support for a written special resolution to be effective? - [ ] 51% - [x] 75% - [ ] 60% - [ ] Unanimous Consent > **Explanation:** Special resolutions require the support of 75% of members to become effective. ### Can public companies use written resolutions? - [ ] Yes, without any restrictions - [ ] Yes, but only for financial decisions - [x] Yes, if allowed by the articles of association - [ ] No, public companies cannot use written resolutions > **Explanation:** Public companies can use written resolutions if their articles of association permit this method of making decisions. ### When executing a written resolution to alter the articles of association, what majority is required? - [x] 75% - [ ] 51% - [ ] Unanimous - [ ] 90% > **Explanation:** Altering the articles of association requires a special resolution, which necessitates a 75% majority. ### Does a written resolution need to be discussed at a company meeting? - [ ] Yes, always - [ ] Only if all members are present - [x] No, it does not require a meeting - [ ] Only if the majority requests it > **Explanation:** Written resolutions do not need to be discussed at a company meeting; they are valid once signed by the required number of members. ### What type of company frequently uses written resolutions? - [ ] Public companies - [x] Private companies - [ ] Government companies - [ ] Non-profit organizations > **Explanation:** Private companies frequently use written resolutions as a flexible way to make decisions without the need for formal meetings. ### Which of the following decisions cannot use a written resolution? - [ ] Approving financial statements - [x] Removing a director before their term ends - [ ] Changing the registered office - [ ] Altering the company's articles > **Explanation:** Removing a director before their term ends requires a physical meeting and cannot be executed through a written resolution. ### Must written resolutions be signed by all members to be valid? - [ ] Yes, always - [ ] Only for special resolutions - [x] No, only by the required majority - [ ] Only for certain decisions > **Explanation:** Written resolutions must be signed by the required majority of members, not all, to be valid. ### What document may influence a company's ability to use written resolutions? - [x] Articles of Association - [ ] Company's financial statement - [ ] Remuneration report - [ ] Corporate social responsibility report > **Explanation:** The articles of association may influence a company's ability to use written resolutions by specifying certain provisions and powers. ### Which term refers to the set of rules governing the conduct of a company? - [x] Corporate Governance - [ ] Corporate Social Responsibility - [ ] Corporate Finances - [ ] Corporate Ratios > **Explanation:** Corporate governance refers to the frameworks and processes by which companies are controlled and directed, encompassing rules like those in articles of association.

Thank you for exploring the concept of written resolutions under the Companies Act 2006. Through this detailed guide and challenging sample quiz, keep forwarding your understanding of corporate law and governance practices!

Tuesday, August 6, 2024
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