Complete Guide to Limited Company Resolutions

Limited Companies just like every other company make decisions that are crucial to the smooth running of the business. While some decisions are minimally sensitive and can be taken by the directors of the company as assigned to them, others are moderately and highly sensitive and must be reported to the articles of association and the Companies House.

To make new decisions, make changes or alterations to already existing documents, details, or protocols within a limited company, then a resolution must be passed. Different types of resolutions can be passed depending on how important the proposed decision is. However, all resolutions passed must be done with transparency and adequately.

In this guide, you’ll get to understand all you need to know about limited Company resolutions including the types of resolutions, how it’s being passed, how to keep records of resolutions, how to file them with the Companies House, and so on.

What are Limited Company Resolutions?

Limited Company resolutions are a form of legal agreement made on a course of action or decisions made by members of a limited company. They are official decisions agreed upon by members of a company following a general meeting or legal writings (written resolution).

Resolutions must be made with specific rules and regulations taking cognizance of the guidance contained in the Companies Act 2006, Articles of Association, and the shareholder's agreement.

Usually, most of the daily transactional decisions of a Limited Company can be made by the director, however, some cogent company decisions are beyond the director’s role and must therefore be taken by the shareholders or members. These types of decisions require that a resolution must be passed.

To pass a resolution either in meetings or in writing, members are expected to cast their votes in support or against a proposed action. If a decision is minimally important to the Company, then an above 50% vote is required to pass the resolution. In cases when the decisions are critical or crucial, then an above 75% vote must be achieved to pass the resolution.

Types of Limited Company Resolutions

Resolutions passed within a limited company are of varying types. Here are the types of resolutions that we have.

1. Ordinary Resolution

An ordinary resolution is one that is used for routine activities or decisions. They are a type of resolution that requires approval of more than 50% for it to be passed. They are therefore legal decisions that need approval by the simple majority and they are most times used by shareholders to make decisions that are beyond the power of the directors.

Usually, ordinary resolutions are proposed in the general meeting where every member has to vote by showing a hand or by poll. Alternatively, it can also be proposed and passed in written form.

Once a proposed ordinary resolution gets more than 50% support i.e. when more than 50% of members vote for or support a particular course of action or proposed decision, it is passed. Many shareholders within a company could have more than one vote if they have multiple shares or if their shares value more than one. That is why it is necessary to note that the outcome of a proposed decision is dependent on the number of voting shares that voted for or against an action rather than the number of members that voted. So we could say it is members’ shares that are counted and not necessarily the members. Below are some decisions or actions that require an ordinary resolution to be passed.

• Distributing new shares
• Paying dividends
• Approving directors loan
• Appointing a director
• Removing a director
• Altering or making changes to the director's contract
• Appointing and removing a secretary
• Granting powers to directors

While an ordinary resolution can be used to remove a director, the resolution cannot be passed in writing but should be done in a meeting.

2. Special Resolution

Special resolutions are used to make decisions that are extremely sensitive to the company. Decisions that require special resolutions are made available in the Companies Act 2006 and every company's articles of association. For a special resolution to be passed, then the proposed decision must be accepted by more than 75% of members or shareholders.

Special resolutions are usually used for matters that are beyond the directors and that cannot be resolved with ordinary resolutions. The Companies Act 2006 provides a list of decisions that require a special resolution. These include:

• Making changes to the article of association.
• Altering the shareholder's agreement.
• Changing the company name
• Altering the Organization's Goals and objectives
• Making changes to the company's share capital
• Allotting new shares
• Appointing board chairperson
• Changing the status of the company (changing a private limited company to a public limited company and vice versa).
• Approving a transfer of shares
• Restructuring of the Company.
• Winding up of the Company
• Approving compensation of directors

Although these special resolutions outlined above are common to many Limited companies, there are still some decisions that might need a special resolution. Such decisions must be concisely stipulated in the articles of association.

3. Written Resolution

A written resolution is one that is passed in writing rather than casting votes in a meeting or in person. They are a more convenient way of passing resolutions because members do not need to organize and attend a meeting before decisions are made. A written resolution can either be ordinary or special, meaning it can be used for making decisions that require ordinary or written resolution.

Written resolution most times can be proposed by a shareholder who owns at least 5% of the voting right of a company. It is essential to note that all proposed decisions within a private limited company can be made with a written resolution. However, a director and auditor cannot be removed with a written resolution. Also, Public Limited Companies do not use a written resolution.

Written resolutions are efficient because members do not have to go through the administrative task of organizing a meeting. More so decisions can easily be made even if shareholders are in different nations of the world.

How to pass a Written Resolution?

When a particular member comes up with a proposed course of action or decision, the proposed decision is circulated to other eligible members within 21 days. The proposed decision should specify the details of the resolution, how members should cast their votes, whether the resolution is ordinary or special, and the deadline for casting votes.

The proposed resolution can be sent to all members in hardcopy form and through email or website. Once received by members, they would respond to the proposed resolution by signing the document or making a confirmation, or signifying their votes through email.

4. Directors Resolution

Directors’ resolutions, also called board resolutions, are official decisions made by directors of a limited company. Usually, directors are expected to cast their votes in meetings or writings and once the simple majority (more than 50%) is in support of the decision, then the resolution is passed.

There are limitations to the type of decisions that can be made by the directors of the company and this is usually stated in the articles of association and the company agreement. These decisions include day-to-day activities and managerial decisions like appointing an accountant, managing contracts, and entering a new contract with important customers, etc.

Sections contained in a Director or Board Resolutions.

The following sections should be contained in a director's resolution.

• Date and Resolution Number: The date and resolution number should be on top of the document. Resolution numbers should be consecutive, so if it's the first board meeting, you can choose a way to number the company's resolutions.
• Title of the Resolution: Next is to provide a title of the resolution. This should be in accordance with the motion or proposed decision on the ground.
• Points discussed: Each point discussed should also be documented paragraph by paragraph. This should be done in an official manner and must be maintained all through the resolution.

5. Final Resolution

The final resolution or decision agreed by the directors should be in the last statement of the resolution. After all other points have been discussed, the resolution should follow.

• Names of directors(those who voted for and against a proposed action)

Next is to list the names of the directors who are present and voted during the meeting. You should also provide a space where they would provide their votes for or against the motion.

• Signature and date

Lastly, the directors and the board president should sign the resolution and provide the date they signed.

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How are Votes Counted before Passing a Resolution?

As earlier mentioned, before a resolution can be passed, then a certain percentage of the votes must be attained. To ascertain if the required percentage of votes has been reached, then the number of voting shares is being counted and not the number of shareholders. Most shares in the company will have one vote but shareholders could have varying quantities of shares and this automatically means that their vote depends on the quantity, class, and value of shares.

More so, if the proposed decision is made in a meeting, then the number of voting shares present at the meeting should be counted and not the total voting shares of the company.

Usually, resolutions within a Limited company can be passed either by poll or show of hands, and once the required percentage of voting is reached, the resolution can be passed and legally bound.

Once this is done, copies of the resolutions must be sent to the Companies House within 15 days when they are passed. Any important company document or details that have been altered or changed after resolution must also be forwarded to the Companies House.

Who Should Receive a Copy of a Proposed Limited Company Resolutions?

Once there are proposed resolutions on the ground, they should be sent to the members or shareholders and the auditor if necessary. The resolutions can be sent in printed format or as a softcopy. In situations where the decision to be made involves the director, then they should have a copy too.

How to Keep and Record Company Resolutions

All resolutions reached in general meetings should be recorded in the Company’s minutes. Both the minutes and resolution should be kept at the company’s registered office for at least 10 years starting from the date of resolution for inspection when needed.

Filing Resolutions with the Companies House

Whenever there is a change in your Limited Company registered details or some document, you would be required to notify the Companies House. Special resolutions must be sent within 15 days when they are passed. Importantly, the resolutions must be sent physically and not through electronic means.

Although most ordinary resolutions passed might not need to be sent to the Companies House. There are a few exceptions of ordinary resolutions you could be required to keep with your company record and to send to the Companies House. These include:

• Giving authority to the company to buy its shares.
• Authorizing the directors to distribute shares
• Renewing the authority for the company to buy its own shares
• Redenomination of shares

Apart from these, some other vital documents like the articles of association, when altered, need to be filed with the Companies House.

Frequently Asked Questions

Do I need to Keep copies of the resolution?

Yes, it is legally required that you keep all copies of resolutions.

How long should a limited company keep copies of resolutions?

Copies of resolutions should be kept for at least 10 years counting from the date when they are passed. They should be kept with copies of the minutes of meetings and be stored at the company’s registered office or SAIL address.

Is it Important to file resolutions with Companies house?

Certain types of resolutions like special resolutions must be filed with the Companies House within 15 days when they're passed.

Conclusion

Making vital decisions are important aspect of a company. Unlike a sole proprietor who makes decisions alone, the decision-making process and procedures could be tedious for members of a Limited Company. However, through the effective use of company resolutions, the burden can be eased to the minimum. Need some help with company resolution? Contact one of our experts here at Incorpuk for help on how to go about it.