Resolutions of a Company and its Kinds – Company Law

RESOLUTIONS OF A COMPANY AND ITS KINDS

RESOLUTION:

It’s simply a firm decision to do or not to do something. A resolution may be defined as an agreement or decision made by the directors or members of a company. A proposed resolution is a motion. When a resolution is passed a company is bound by it. The resolutions could be on just about any subject in case of Board meetings since they are ultimately responsible for running the Company. The Act generally specifies the matters in respect of which resolutions are required to be passed by the members in general meetings .It can be broadly categorized in two types i.e. Ordinary Resolution & Special.

KINDS OF RESOLUTION:

According to section 114 of the company’s act 2013 resolution are of two kinds

1)Ordinary: resolution is set to be ordinary when the vote cast in favour of it at a General Meeting of a company exceeds the votes if any cast votes against the resolution. In simple words it means a resolution passed by a simple majority of shareholders present and voting.

2)Special Resolution: This type of resolution requires the support of three fourth majorities of shareholders and the President and entitled to vote at a meeting. The votes cast in favour of the resolution should not be less than three times the number of votes if any caste votes against the resolution. It is also important that the intention to propose the resolution as a special resolution should have been specified in the notice calling the General Meeting and the notice itself should have been given in accordance with the provisions of the act.

In the case of VG Balasundaram v. New Theatre Carnatic Talkies Pvt Ltd (1993) the court held that the requirements of the section are mandatory and non fulfillment would make the resolution ineffective.

See also  Blasphemy Law in India

▪︎But in some cases question have arisen whether it is necessary for the validity of a special resolution that it should be passed as notified to the members or whether it can be passed with amendments at the meeting. In these kind of scenarios a notice was circulated of the intention to propose at the extraordinary General Meeting a special resolution to cancel the companies share premium account on the ground that the amount credited to the account has been lost and it was subsequently realized that the figure standing to the credit of the account also included a small amount arising from recent issue which was definitely not lost.  At the meeting the form of the resolution had to be altered so as to provide not that the account had been cancelled but that it had been reduced to a certain amount.

In the case of Pearce Duff & Ltd the court agreed that a need for amendment main genuinely arise and the same should be allowed within reasonable limits correction of grammatical or clerical errors is allowed but it were the need for an amendment of substantive nature is feared the notice itself should carry a warning that the resolution shall be passed subject to such amendments as may be determined at the meeting and therefore amendment of even a slide substance would invalidate the resolution.

▪︎For a decision relating to almost every important matter affecting the constitution Administration and affairs of a company the act has prescribed the formality of a special resolution the support of a three fourth majority of shareholders being requisite for passing special resolution the requirement is able to take care and protect the interest of a substantial group of shareholders.

RESOLUTIONS REQUIRING SPECIAL NOTICE

According to section 115 there may be provision in the act or articles requiring special notice of any resolution. The notice of the intention to move such resolution has to be given to the company by such number of members who are holding not less than 1% of the total voting power h r holding shares on which such aggregate sum not exceeding rupees 500000 as may be prescribed has been paid then the company has to give notice to the members in the prescribed manner such resolution is called an ordinary resolution requiring special notice this is necessary to enable the company to comply with statutory obligation of informing the members of the resolution. This information has to be served on the members at least 7 days before the meeting such notice is necessary.

See also  Difference between Holder and Holder in due course

In the case of Padley v. Inland Waterways Assn Ltd (1976) the court held that removing a director or an auditor for proposing the appointment of a new director every member has a right to give a special notice of this kind relating to a proposed resolution but he does not have the right to have the resolution included in the agenda of the meeting and less in supported by as many members as can requisition a meeting or can ask for circulation of members resolution.

RESOLUTION PASSED AT ADJOURNED MEETING :

According to section 116 of the act if a resolution is passed at an adjourned meeting of the company or at any class meeting of members or board of directors it is treated as having been passed on the date on which it was in fact passed and not on any earlier date.

CIRCULATION OF MEMBERS RESOLUTIONS:

Where certain members of a company desire to propose a resolution at the company’s meeting requisition may be served on the company requiring it to give the members notice of the resolution. The requisitionists have to deposit at the registered office of the company two or more companies of the requisition signed by all of them. Whether requisition requires notice of a resolution to be given to the members at must be deposited six weeks before the meeting in any other case two weeks before and then they have to deposit with the requisition a sum reasonably sufficient to meet the expenses of the requisition. Finally when these requirements are complied with, the company becomes bound to notify the members of the intended resolution

See also  A brief about Delegated Legislation in India

In the case of Naresh Kumar Jain V. UOI (1997) the consenting shareholders did not sign as requisitionists and instead give power to a single shareholder to represent them at the meeting; the court held it not to be a sufficient compliance with section 188.

REGISTRATION OF RESOLUTIONS AND AGREEMENTS:

According to section 117 of the act a copy of every resolution for any agreement relating to the matters specified in subsection 3 together with the explanatory statement required by section 102 if any which was annexed to the notice calling the meeting has to be fixed with the registrar within 30 days of the passing of the resolution for making of the agreement. The manner of and fees for filing is to be prescribed and the time factor is for the in the care of section 403 a copy of every resolution which has the effect of altering the articles and a copy of the agreement has to be embodied in or annexed to every copy of the articles issued after the alteration or making of the agreement. Any failure in this respect make the company punishable with fine not less than 500000 but may extend to 2500000 and every defaulting office including the liquidator if any is punishable with fine not less than 100000 extending up to 500000.

Author: sarthak udaipuria,
ICFAI LAW SCHOOL HYDERABAD, 4TH YEAR

Leave a Comment