Special resolution is a resolution that is used in the case of decisions important for the company, such as changing the terms of the company agreement, the associations statute, or introducing other significant or fundamental changes in the organization. Extraordinary resolutions are generally required only in specific situations required by law. Exact data is different in different countries, depending on the legal norms of the state. In economic or commercial law, an extraordinary special resolution is a resolution adopted by the shareholders of the company by a majority of votes than is required to adopt a simple resolution. Under the ordinary law, this is more than half of the votes, while the special act has up to 75% of the votes of members of the board. (According to the UK Companies Act of 2006). A special resolution on very important decision-making procedures can really help to ensure that the proposed changes are better addressed and are taken for the good of the company and those involved in running or working for that purpose.
Requirements for the enactment of a special resolution
For the resolution to come into force, it must meet several basic assumptions:
- A special resolution must approve not less than 75% of votes cast by voting members, be it at the hand show, or electronically or by vote, as the case may be (whereas a simple resolution requires only the invalid majority). In the absence of the possibility of the appearance of a member of the board, it is personally possible to vote through a proxy.
- A special provision usually requires no less than 21 days to notify board members about the intention to propose a resolution.
- Special provisions that need to be submitted to the competent authority (e.g. Company Registrar in the United Kingdom under the 2006 Act), within 15 days of approval.
- The intention to submit a resolution as a special resolution must be duly specified in the notification sent to the meeting.
Examples of use the special resolution
The most common examples of the use of a special resolution are:
- Change of the company name.
- Change in the companys statute.
- Reduction of the companys share capital.
- Refusal of the shareholders right of priority.
- Some cases in which the company acquires its own shares.
- Change of company status through registration, for example from an unlimited company to a limited liability company (or vice versa).
- Liquidation of the company voluntarily (or by court).
- Other fundamental changes in the companys statute or organization.
The Companies Act also allows taking other decisions by way of a special resolution, even if they can usually be passed by a simple resolution. In addition, the articles of association may also specify other transactions in which special provisions are required such a provision may be included in the companys statute, if shareholders want an additional level of protection against certain decisions taken rashly. A special resolution is a good solution in particular when a company is constantly developing and often takes innovative decisions that strongly affect the company's future.
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Author: Magdalena Rewers