Resolutions for limited company meetings

Lawpack on March 27, 2020

What is a company resolution?

A company resolution is an official record of the decision of the directors or members of a company.

Once a resolution is passed, the company is bound by it. If a majority is not reached, then a resolution has not been made.

What kind of resolutions can be made?

Under the Companies Act, there are two categories to which resolutions can be assigned

The first centres on fixed issues that cannot be altered, such as the requirements for appointing a director or matters to be recorded at Companies House, among others.

The second revolves around issues that can be changed and which are generally accepted as suggestions, rather than hard facts.

These can deal with topics including ideas for how directors and shareholders run the company.

While the resolutions set out under the first category are subject to the Companies Act, those set out in the second category are merely enforced under the company’s own rules.

What are the benefits of resolutions?

Recording company resolutions in minutes is a positive way of sharing company procedure across the board and ensuring everyone is working towards the same goal.

How is a resolution made?

The company’s articles of association set out the way a vote on a resolution is conducted during a general meeting or a meeting of class members.

Typically a vote is taken by a show of hands, but any member can demand a poll unless company policy states otherwise.

Although the vote is not counted, the resolution is only passed when the chairman declares a majority vote in favour of the resolution.

Company members, and where relevant auditors, must be given notice of the intention to propose a resolution.

Must they be submitted to Companies House?

Company resolutions must be submitted to Companies House in print form, or via an approved Companies House form, within 15 days of being passed.

What other types of resolutions are there?

There is a number of different kinds of company resolutions which include:

  • Director’s resolutions: These are only used by directors at board meetings and they must be filed at Companies House. There are certain criteria that make up this sort of resolution but it includes a change in company and a move by directors to convert the old public company into a plc.
  • Ordinary resolutions: These are standard resolutions that are used for all issues unless the Companies Act or the firm’s articles of association need to implement another type of resolution.
  • Extraordinary resolution: As the title suggests, these are more uncommon types of resolutions that must be passed by a minimum 75 per cent majority vote. An instance where this kind of resolution might be relevant is for changing the rights of classes of shareholders.
  • Special resolutions: Similarly, these require a 75 per cent majority vote and deal with important issues that include changes to articles of association.
  • Elective resolutions: These apply to private companies only and are limited to five specific purposes.
  • Written resolutions: These may be proposed by the director or members and no prior notice nor a meeting is required. They apply to private companies who must issue a copy of the resolution in print form or electronically to every eligible member.
  • Class resolution: This applies to company resolutions proposed that will affect only one class of share and they can be obtained in writing or by passing an extraordinary resolution at another class meeting.
  • Shareholder resolution: These are required when resolutions are proposed by shareholders and are due to be moved at an annual general meeting if a certain amount of members request it.

Any companies wishing to save time making resolutions should consider downloading Lawpack’s Ready-Made Company Minutes & Company Resolutions ebook, which includes all the templates a limited company needs.

This book of templates has been updated to include reforms made to the Companies Act 2006.

Other information

 

 

The role of limited company directors

Lawpack on March 27, 2020

When you form a limited company, your role as company director is to promote the success of the limited company and to manage the limited company on behalf of the shareholders.

Company directors have extensive powers to manage the limited company, which are delegated by the shareholders in the Articles of Association. But shareholders can dismiss limited company directors by passing an ordinary company resolution at a shareholders’ meeting.

Shareholders holding a simple majority (either alone or collectively with other shareholders) of the issued shares of the company will be able to remove a director and control the board. This is providing that 28 days before the shareholders’ meeting, notice has been given to the limited company of the resolution, and the limited company in turn has given the members notice of the resolution 21 days before the shareholders’ meeting.

When managing a limited company, directors are obliged to act in good faith and in the best interests of the limited company.

They must avoid placing themselves in a position where there is, or could be, a conflict between their personal interest and their duty to the limited company. They must exercise skill and care in their role as limited company directors.

Company directors’ duties are now set out in limited company legislation. A company director’s general management duties are to:

  • Act in accordance with the limited company’s constitution and exercise their powers for proper purposes
  • Act in a way to promote the success of the limited company for the benefit of the members as a whole
  • Exercise independent judgment
  • Exercise care, skill and diligence
  • Declare to the other company directors the extent of any interest in a proposed transaction or arrangement with the limited company

In addition, a limited company director must avoid conflicts of interest and must not accept benefits from third parties.

Sometimes the limited company directors and shareholders are the same people, although there is no requirement that they should be.

Shareholders can, with the Court’s consent bring a derivative claim on the limited company’s behalf against a company director who is in breach of his/her duties or is negligent.

Limited company directors and board meetings

Generally, the company directors manage the limited company and decisions will be taken at board meetings.

Limited company management legislation sets out rules on how limited company board meetings should be run:

Board Meeting Rule #1

The Articles of Association are likely to specify that at least two limited company directors must be present at board meetings (unless there is only one director, when that person will form a quorum).

Board Meeting Rule #2

All the limited company directors in the UK must receive reasonable notice of a board meeting. Company resolutions are passed by a majority of the company directors at the board meeting.

Board Meeting Rule #3

A record of board meetings must be kept. The record is known as ‘board minutes’.

Board Meeting Rule #4

If the directors don’t wish to hold a board meeting, they can pass a written company resolution, provided that all the directors sign that company resolution.

The company resolution is dated when the last director signs it and it’s entered in the board minutes book.

In practice, the day-to-day management of the limited company will be delegated by the board of directors to one or more of them, so that it’s unnecessary to hold board meetings on many matters.

But certain company management activities will require the company directors to act collectively in a board meeting (e.g. issuing shares to shareholders).

Appointing limited company directors

The first company directors are named in the limited company formation documents (Form IN01) filed with Companies House. The company directors are appointed on incorporation of the limited company (i.e. the date on the Certificate of Incorporation).

Additional company directors may be appointed by either the board of limited company directors or the shareholders.

Anyone can be a limited company director so long as they have not been disqualified, are not an undischarged bankrupt, and are over 16.

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