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Company Formation Home Page >> Directors and Secretaries Guide >> Limited Company ResolutionsUK LIMITED COMPANY RESOLUTIONS. WHAT IS A RESOLUTION? This section is about different types of company resolution. It explains what they are and the differences between them. It also tells you which resolutions need to be filed at Companies House. Please note that this is only intended as a brief introduction to the subject, so you should read it in conjunction with the relevant law. A resolution is an agreement or decision made by the directors or members (or a class of members) of a company. When a resolution is passed, the company is bound by it. A proposed resolution is a motion. If the necessary majority is not obtained, then the proposed resolution fails.
Important note: Avoiding "Veil Piercing" Claims. Be sure that you always conduct business through and in the name of your entity rather than in your own name (unless you are a sole proprietor). Failure to follow the rules for the entity allows creditors to try to deny you liability protection because you did not really conduct business as an entity. Always have the entity adopt resolutions to authorise action, even if there is only "ratification" after the fact. Use the proper form of entity signature by always signing documents in representative capacity as an agent of your entity: "XYZ LTD, by John Q. Smith, Managing Member." Use proper signs, advertisements and business cards showing an entity rather than an individual (e.g., "John Smith, President, ABC, LTD" rather than "John Smith, Owner/Proprietor"). Use proper fictitious name filings. Avoid commingling your business and personal funds in the same bank account. Pay business and personal bills from separate accounts. Maintain separate personal and business bank accounts. Prepare notes and other documentation of all loans between the business and its owners. Your entity must have a minimum capitalisation reasonably adequate for the business to be conducted. Insurance counts. Don't sign contracts or make commitments for the business until you have filed the correct papers to organise it, since you will be personally liable. The liability shield of the limited company or limited liability partnership does not exist until the entity exists through a filing in the state capital.
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RESOLUTIONS - THE BASICS. WHAT IS A RESOLUTION? A resolution is an agreement or decision made by the directors or members (or a class of members) of a company. When a resolution is passed, the company is bound by it. A proposed resolution is a motion. If the necessary majority is not obtained, then the proposed resolution fails.
HOW IS A VOTE TAKEN? The vote on a resolution in a general meeting (or in a meeting of a class of members) is taken according to the rules in the company's articles of association. Generally it is by a show of hands. But any member may demand a poll unless the company's articles say otherwise. A declaration by the chairman that the resolution is carried on a show of hands is all that is required for a resolution to be passed. The number of votes for or against need not be counted.
WHAT RESOLUTIONS NEED TO BE SENT TO COMPANIES HOUSE? A copy of every resolution or agreement listed below must reach Companies House within 15 days after it has been passed. Special resolutions and extraordinary resolutions. Also, resolutions or agreements passed by unanimous agreement of all the members but which would otherwise have needed to be passed as special resolutions or as extraordinary resolutions.
ELECTIVE RESOLUTIONS. ALSO, RESOLUTIONS REVOKING ELECTIVE RESOLUTIONS Class resolutions passed by unanimous agreement of all the members of a class of shareholders but which would otherwise have needed to be passed by a specific majority or in another manner. Also, all resolutions or agreements that effectively bind all the members of any class of shareholders though they have not been agreed by all those members.
DIRECTORS' RESOLUTION These are only used by directors at board meetings. The following directors' resolutions must be filed at Companies House: a resolution to change the company's name in response to a direction from the secretary of state under Section 31 (2) of the Companies Act 1985. A resolution to alter the Memorandum of Association of a company ceasing to be a public company following the acquisition of its own shares. A resolution by the directors of an old public company to re-register as a Public Limited Company. A resolution to allow title (meaning the right to benefit from ownership) to be evidenced and transferred without a written document.
ORDINARY RESOLUTIONS These are used for all matters unless the Companies Act or the company's articles of association require another type of resolution. They are passed by a simple majority of members who are entitled to vote at a meeting, notice of which has been properly given. Voting may also be allowed by a member's substitute known as a proxy. The length of notice required for an ordinary resolution depends on the kind of meeting at which the resolution is to be discussed.
The following ordinary resolutions need to be filed at Companies House: a resolution to give varies, revoke or renew an authority to the directors to allot shares. A resolution to give varies, revoke or renew an authority to the company to make a market purchase of its own shares. A resolution to prevent or reverse a directors' resolution to allow title of shares to be evidenced or transferred without a written document. A resolution to authorise an increase of share capital.
EXTRAORDINARY RESOLUTIONS These are required for certain matters, for example modifying the rights of classes of shareholders or winding-up. They are passed by at least 75% of the members who vote on the motion, in person or by proxy (where allowed) at a general meeting. The length of notice required for an extraordinary resolution will depend on several factors, including the type of meeting to be held.
SPECIAL RESOLUTIONS These are passed at a general meeting of which at least 21 days' notice specifying the intention to propose a resolution as a special resolution has been given. In Scotland, the 21 days may include the day of the meeting. As with an extraordinary resolution, a special resolution requires a 75% majority. It is required for important matters such as alterations to the memorandum or articles of association, a change of name, or a reduction of capital to be approved by the court.
A meeting at which a special resolution (or an ordinary or extraordinary resolution) is to be proposed may be held at shorter notice with the agreement of the members entitled to attend and vote at the meeting. Agreement to short notice of the meeting and resolution must be by: the majority of members in number who also hold at least 95% in nominal value of the shares giving voting rights; or in the case of a company without share capital, the majority of members in number who also represent at least 95% of the total voting rights; or in the case of a meeting called as the annual general meeting, all the members. Private companies may pass an elective resolution to reduce the majority required to authorise short notice of a meeting and notice of a resolution, to not less than 90%. When a resolution alters the Memorandum or Articles of Association of a company, a copy of the amended document MUST also be filed at Companies House.
ELECTIVE RESOLUTIONS These may be passed by private companies only and for five specific purposes. 'Elective resolutions' must be passed by unanimous agreement in general meeting of the company by all the members entitled to attend and vote at the meeting in person or by proxy. A period of 21 days' notice of the resolution(s) must be given unless all members entitled to attend and vote at the meeting agree to a shorter period.
Elective resolutions may be used for the following purposes only: to amend the duration of the authority of directors to allot securities. To dispense with the holding of annual general meetings. To dispense with the laying of accounts and reports before the members in general meeting. To allow the majority required to authorise short notice of a meeting and notice of a resolution to be reduced from 95% to a lower figure but not less than 90%. To dispense with the annual appointment of audit.
WRITTEN RESOLUTION A written resolution signed by all the members, or a resolution of any class of members, may be passed by a private company to resolve anything which could have been passed by the company in general meeting. However, this power cannot be used to remove a director or auditor before the end of their term of office.
To pass a written resolution, a meeting is not required and no prior notice is necessary. But the resolution can only be passed by unanimous agreement of all the members who, at the date of the resolution, would be entitled to attend and vote at a meeting that would otherwise have been held to pass it. The date of a written resolution is the date on which the last member signs. The signatures of each member do not need to be on a single document.
A copy of the proposed written resolution must be sent to the company's auditors - or they must otherwise be notified of its contents - at or before the time the resolution is supplied to the members for signature. A breach of this requirement would be a criminal offence but would not affect the validity of the resolution. This requirement does not apply to companies that do not have auditors. The statutory written resolution procedure is in addition to anything the company's articles say about written resolutions.
CLASS RESOLUTION When a company proposes to pass a resolution that affects one class of share only, then it will usually need to obtain the consent of a majority of the holders of the class of share. This can be obtained in writing or by passing an extraordinary resolution at a separate class meeting.
SHAREHOLDER RESOLUTION A company has a duty to circulate resolutions proposed by shareholders and intended to be moved at an annual general meeting if a certain number of members request it. The number of members necessary is: members having 5% of the voting power of the company; or 100 or more shareholders whose paid-up capital averages at least £100.00 each.
The resolution may be circulated at the expense of the members making the request, unless the company resolves otherwise. Sections 376 and 377 of the Companies Act also places other conditions on the circulation of proposed shareholders' resolutions. For example, the time within which the request must be deposited at the company's registered office before the annual general meeting.
FILING OF RESOLUTIONS The Act requires copies of certain resolutions to be filed with the registrar of companies at Companies House within 15 days of being passed (Section 380). The resolutions that must be filed include the following: any special resolution, any extraordinary resolution, any elective resolution; and a number of ordinary resolutions specified in Section 380(4).
If any of the above are done by written resolution, they must still be filed. In addition any agreement that has some effect as a resolution (e.g. a shareholder agreement which has the effect of modifying the articled) must also be filed under Section 380.
DATE A RESOLUTION IS PASSED The date on which a resolution is passed is the date of the meeting or, if the resolution was passed at an adjourned meeting, the date of the adjourned meeting (Section 381). However, where the business of a meeting is suspended for the purposes of conducting a poll at the later date, the date of the resolution will be the date on which the result of the poll is ascertained, unless the articles provide otherwise. If a resolution is passed by written resolution, it is passed on the date the last member sign it.
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Directors and Secretaries Guide
Limited Company Resolutions
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