Most decisions taken by a company can be made by the directors, but some have to be referred back to its shareholders. This may be because:
the Companies Act requires it;
the company’s articles of association require it; or
a specific agreement (such as a shareholders’ agreement or, if you have outside investors, a subscription agreement) requires it.
The Companies Act or your articles will tell you the type of decision or ‘resolution’ that the shareholders will need to make. There are two types of shareholder resolution. Different majorities are required to pass each.
Resolutions can be passed at a meeting or, provided the procedure in the Companies Act 2006 is followed, by a resolution in writing in lieu of a meeting, to which a certain proportion of the shareholders have signified their agreement. Take advice.
The two types are:
Ordinary Resolutions
These are resolutions passed by a simple majority of votes cast at the relevant shareholders’ meeting. If passed at a meeting, fourteen days’ notice is required of it, unless the shareholders agree to shorter notice.
If passed by written resolution, a simple majority of the votes of all the members is required.
Special Resolutions
These are resolutions passed by a majority of not less than three quarters of the votes cast at the relevant shareholders’ meeting. If passed at a meeting, fourteen days’ notice is required of it, unless the shareholders agree to shorter notice.
If passed by written resolution, a majority of not less than three quarters of the votes of all the members is required.
Click here to see a table showing the main decisions that are usually reserved to the shareholders, and the sort of resolution normally required for each.
The table assumes that a company has one class of shares. It also assumes that there are ‘usual’ articles. If your company has more than one class of shares, or if you are in any doubt whether a matter requires shareholder approval or, if it does, the type of resolution required, take advice.
