Resolutions of a Company and its kinds

RESOLUTIONS OF A COMPANY AND ITS KINDS

Company Resolutions are legally binding decisions made by the members, shareholder or even guarantors or by the directors of a limited company, either at board meeting or in writing. If a majority of vote is achieved in favor of any proposed resolution, then the resolution is passed by the company. In simple words a resolution is a formal way in which a company notes down the decisions that are made in a meeting of the members of the company.

There are generally three types of resolutions passed by a company :
(1) Ordinary Resolution
(2) Special Resolution
(3) Resolution requiring special notice

Section 114 of the Companies act 2013 deals with the Ordinary and Special resolutions

(1) Ordinary Resolution

An Ordinary Resolution, as the name suggests is simply a resolution which is passed when there is a clear majority which means that there is approval of more than fifty percent of the members of the company at any general meeting. The resolution could be passed by either the show of hands or by electronic means or by polls taken by the company for approval of a certain resolution discussed in the meeting. A twenty one day notice must have be given to the members or the share holders of the company before the conduction of any meeting in which the approval for the resolutions has to be taken and discussed. Any decision on any matter could be decided by the ordinary resolution in a meeting unless the companies act 2013 prohibits certain actions to be passed under ordinary resolutions or unless the article of association of the company prohibits the action or decision to be taken under ordinary resolution.

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Some of the matters which could be discussed under ordinary resolutions are –

Approval of statutory report, approval or directors report, approval of final accounts, declaration of dividends, appointment of directors, election of directors, issue of shares at discount, appointment of auditors and their remuneration, alteration of share capital, sale of the whole or part of company’s undertaking, creation of reserve funds, change in rights of share holders of any class, conversion of fully paid-up share into stocks etc.

(2) Special Resolution

A Special Resolution is a resolution which is passed by a clear majority of seventy five percent of the share-holders votes at a general meeting. The casting of the votes is done same as the casting of votes in ordinary resolutions, either by showing of hands, by electronic means or by polling, here also a twenty one day notice should be sent before the meeting is to be held informing the members and the shareholders about the commencement of the meeting and it must be intended and informed that the resolution to be passed in the meeting is to be a special resolution. The main feature of a special resolution is that the number of votes that are needed in favor of the resolution must be three times the votes that are casted against it.

Some of the decisions that are taken under special resolution are –

Alteration of the name of the company, reduction of share capitals, alteration of the objects of the company, payment of interests out of capital, alteration of article of association, fixing director’s remuneration, to bind the company by an arrangement or compromise made, voluntarily winding up of the company, alteration of article of association of the company, making the liability of the directors unlimited, appointment of inspectors to investigate the affairs of the company, application to the court for winding up, and some other more.

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(3) Resolution Requiring Special Notice

The section 115 of the companies act 2013 deals with the resolutions requiring special notice. A notice of not less than 14 days has to be provided before the conduction of the meeting of resolution which require special notice. The resolution requiring special notice could either be ordinary resolution or it could be special resolution but a special notice is required before the conduction of meetings for discussion and voting for passing of such types of resolutions.

Some of the resolutions which require special notice are –
Resolution to remove a director, Resolution to appoint as Auditor a person other than the retiring person, Resolution to fill up a casual vacancy of the director, Resolution to appoint as Director a person in place of removed director.

Whenever a resolution is passed at an adjourned meeting of a company, between the holders of any class of share in a company, or the board of directors of a company, then the resolution shall be treated as having passed for all purposes and the date of passing of the resolution should be same and it should not be deemed to be passed on an earlier date, this is stated under the section 116 of the companies act 2013.

The section 117 of the companies act deals and states the resolutions and agreements that are needed to be filled, it states that a copy of every resolution or agreement should be made with an explanatory statement explaining the details of the meeting and the resolutions and agreement passed in that meeting. IF in case the company fails to file the copy of the agreement and the resolution to the registrar within a specified period which is usually 30 days, then the company is liable to a fine with additional fees for filing the agreement and the resolution with the registrar and these provisions shall apply to all the resolutions that are passed in the general meetings of the company, whether the resolutions be ordinary or special resolution it shall apply to all.

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At last I would like to conclude that the company passes certain resolutions in the general meetings for which the company provides notice in advance informing the share-holders of the company about the resolutions to be taken in the meeting and the accordingly the casting of the votes shall be done, for ordinary resolutions more than 50 percent of approval is necessary and for special resolutions approval of 75 % of the share-holders is necessary.

Author: Harsh Chaudhary,
LLOYD LAW COLLEGE 1st year

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