3 Major Types of Resolutions in a Company - Business Finance Articles

Resolutions are communications embodying the views or intentions concerning some important matter. They are not addressed to anyone in particular and are drafted in the third person. A company resolution may be defined by Pitfield, as “a formal declaration of the will or wishes of the company”.

In this article,

Kind of Resolutions

Ordinary Resolution

An ordinary resolution is one that is passed by a simple majority of members entitled to vote such a resolution is used for ordinary routine business at a general meeting of the company.

The notice is served in writing to each member for 21 days.

Ordinary Resolution Objective

This resolution is passed for the following purposes:

To pass the accounts
To appoint the directors
To recommend the dividend
To appoint or remove the managing agents
To appoint the auditors and to fix their remuneration
To adopt the statutory Report
To authorize the issue of shares at a discount etc
To permit a director or his firm to hold an office of profit
To permit a director or his firm to hold an office of profit

Special Resolution

This resolution is passed by a majority of not less than three-fourths of such members who are entitled to vote and who do vote, A copy of the resolution must be filed with the registrar’s office within fifteen days from the date of its adoption.

Under section 2 (36) the notice is given to each member for 21 days with the copy of resolution.

The objective of Special Resolution

The following types of business are conducted by special resolution.

To reorganize the share capital of the company
To change the name with the permission of the Central Government
To alter the articles of the Association
To reduce the share capital of the company
To sanction additional remuneration to managing agents
To appoint inspectors to investigate the affairs
To transfer the registered office from one state to another
To initiate winding up by the court
To sanction payment of interest out of capital during construction
To create reserve liability
To turn a private company into a public company

Extra Ordinary Resolution

An extraordinary resolution is one which is passed by a majority of not less than three-fourths of such members entitled to vote as are present in person. Proxy is also considered if it is allowed by the Articles of Association. A copy of this resolution must be submitted to the registrar within 15 days from passing thereof.

Fourteen days notice must be sent to each member for such resolution. The notice specifies the intention to propose the resolution as an extra ordinary resolution.

The objective of such a Resolution

To remove the director from the office
To wind up a company voluntarily on the ground that it cannot continue its business due to heavy liabilities
To appoint another director in the place of the removed director

Important Note

For all kinds of meetings and resolutions proxy and quorum will be considered as follows:

Proxy

The proxy may also be accounted for if it is allowed by the Articles of Association Proxy form will be sent by the secretary along with notice of the resolution of the meeting.

Quorum

The Articles of Association will describe rules about quorum. If it is silent then under section 160, in the case of a private company two members present personally who represent not less than twenty-five percent of the total voting power, either of their own account or as proxies. In the case of a public company, not less than three members present personally who represent not less than twenty-five percent of the total voting power, either of their own account or as proxies.

Methew Harbor

Matthew is a Co-Founder at BusinessFinanceArticles.org. Matthew was a floor manager at a local restaurant in Wales. He lost his job after the pandemic and took initiative to make a team and start the project.