Company Resolution Agreement (Blank)

Company resolutions

Commentary

General requirements for passing resolutions. 

Voting on resolutions. 

Ordinary resolutions. 

Special resolutions. 

Actions requiring special resolution..

Overview

A resolution is the formal means by which decisions are made by a meeting of company members. There are two types of resolutions: ordinary and special. The Corporations Act 2001 (the Corporations Act) requires many decisions that affect a company to be made by resolution, some of which must be by special resolution. In addition, the constitution of a company may also require that other decisions be made by either an ordinary resolution or a special resolution.

General requirements for passing resolutions

The general requirements under the Corporations Act for the passing of any resolution are:

The resolution—

is passed at a meeting, which is properly convened and satisfies the quorum requirements, and

is entered in the books kept by the company for that purpose within one month after the meeting is held.

The minutes must be signed by the chair of the meeting at which the resolution was passed or by the chair of the next meeting. Non-compliance with these requirements could invalidate the outcome of the resolution.

Voting on resolutions

Where a company has share capital, a member has one vote for each share held subject to any rights or restrictions attached to any class of shares.  For a company without share capital, every member is entitled to one vote. The chair has a casting vote, and if a member, also a member’s vote.

Ordinary resolutions

Ordinary resolutions are not specifically defined in the Corporations Act and require only a simple majority to pass (i.e. more than 50% of the members present at the meeting, either in person, or by proxies, if allowed by the constitution).

Some of the matters on which an ordinary resolution is sufficient are:

• election/re-election of directors
• appointment of an auditor
• acceptance of reports at the annual general meeting
• strategic, commercial decisions
• increase or reduction in the number of directors
• passing a board limit resolution (for public companies).

Special resolutions

The notice of meeting sent to members advising them of the meeting must set out an intention to propose the special resolution and state the special resolution. This is in addition to the other information required to be provided in a notice of a meeting including the place, date and time of the meeting, the general nature of the meeting’s business and information about proxy votes where applicable.

Generally, notice of a meeting to members of a company must be given 21 days before the meeting is to be held. A listed company must give a least 28 days notice. Shorter notice can be given where members with at least 95% of the votes that may be cast at the meeting agree beforehand. However, the provision for shorter notice does not apply to a resolution to remove or appoint a director or to remove an auditor.

Notice of a meeting to members of a registered scheme must be given at least 21 days before the meeting is to be held. Registered schemes can’t give shorter notice.

Passing a special resolution at a meeting

At least 75% of the votes cast by members entitled to vote on a special resolution must be in favour of the resolution for it to be passed. However, it will not always be necessary for the members to physically meet in order to consider the resolution.

Passing a special resolution without holding a meeting

A proprietary company with more than 1 member can pass a resolution by circulating a document and having all the members entitled to vote sign a statement on the document that they are in favour of the resolution.

Where two or more people hold shares together, each member of a joint membership must sign. The resolution is passed when the last member signs (i.e 100% of members entitled to vote agree). A ‘circulating resolution’ cannot be applied to a resolution to remove an auditor. The 75% requirement for votes in favour of the special resolution only applies when a company holds a physical meeting.

A proprietary company with only one director who is also the only member of the company can pass a resolution just by signing a document setting out the resolution.

Actions requiring special resolution

1. Modification or repeal of the company constitution or a provision of the constitution (s136(2) of the Corporations Act).
2. Change the name of the company (s157(1)).
3. Change of company type (e.g. from a public company limited by shares to a proprietary company limited by shares) (s162(1)).
4. Setting out the procedure for varying or cancelling the rights attached to the shares in a class of shares (for companies with share capital) or the rights of members in a class of members (for a company limited by guarantee). This applies only if the company does not have a constitution or the constitution does not set out the procedure (s246B(2)(c)).
5. Issue of preference shares with appropriate rights attached (unless the company’s constitution already provides for it) (s254A(2)).
6. Conversion of ordinary shares into preference shares (s254G(2)).
7. Limited company may provide that the whole or a part of its unpaid share capital may be called up only if the company becomes externally administered (s254N(1)).
8. Give different dividend rights or shares in the same class (s254W(1)(b)).
9. Selective reduction of share capital (s256C(2)).
10. Shareholder approval for selective buy-back of shares (s257D(1)(a)).
11. Financial assistance for the company to acquire shares in the company itself (s260B(1)).
12. Approval by an Australian company listed on the stock exchange for a company that will be a subsidiary of the listed company allowing financial assistance to be given to the subsidiary to acquire shares (s260B(2)).
13. Company resolves to be wound up by the Court (s461(1)(a)).
14. Company resolves to be wound up voluntarily (s491(1)).
15. Liquidator seeks sanction from the company for any action or any purpose he or she thinks fit (s506(1)(f)).
16. Powers and duties of liquidator (s506(1A)(b)).
17. Giving the liquidator of the company power to accept shares or other items as consideration for sale of the property of the company (s507(2)).
18. Confirming that an arrangement entered into between the creditors and the company is binding on the company if the company is about to be wound up or is in the course of being wound up (s510(1)(a)).
19. Company wants to transfer its registration to registration under a law of a State or Territory instead (s601AI).
20. Members of a registered scheme modifying, repealing or replacing their constitution (s601GC(1)).

In most cases, the passing of a special resolution must be lodged with ASIC on Form 205 ‘Notification of resolution’ or Form 2205 ‘Notification of resolutions regarding shares’. Changes must be notifed within 14 days.