SPEEDREAD: We have set out a quick summary of the main points that private companies should be aware of to enable them to use written resolutions, with an explanation of what is usually needed and how they will be passed.
Private companies are able to pass shareholders’ resolutions by way of written resolutions rather than holding a general meeting. This can be a useful tool for getting things done as first, not all the shareholders need to attend a meeting (which itself can be quite a feat to organise) and second, in order to pass the resolution not all shareholders need to consent.
There is a set procedure set out in Chapter 2 of Part 13 of the Companies Act 2006 (the ‘Act’) which must be followed if a company wishes to pass a resolution by way of a written resolution. This must always be read in conjunction with a company’s Articles of Association as they may set out further requirements, although the Articles of Association cannot override the statutory procedure for passing written resolutions. If a written resolution is passed but the correct procedure has not been strictly complied with, the resolution is still valid but an offence is committed and the officers of the company can be fined.
In a nutshell:
- An ordinary resolution will be passed as a written resolution if signed by shareholders representing a simple majority (i.e. over 50%) of the total voting rights of eligible shareholders.
- A special resolution will be passed as a written resolution if signed by shareholders representing not less than 75% of the total voting rights of eligible shareholders. The written resolution must state that it is a special resolution.
Procedure:
The Act contains procedures for the circulation and passing of written resolutions. Resolutions may be proposed as written resolutions either by the directors or the shareholders. Where directors propose the resolution, it is best to have board minutes evidencing the decision. Where shareholders wish to propose a resolution they must represent not less than 5% (or such lower percentage as specified in the Articles of Association) of the total voting rights of all shareholders entitled to vote on the resolution. They must request the directors circulate the resolution.
A copy of the resolution must be sent to all ‘eligible shareholders’ either in hard copy, electronic form or through a website. Eligible shareholders are the shareholders who would have been entitled to vote on the resolution on the circulation date of the resolution. The Act set out the details and requirements of how to circulate via electronic means and a website. The Articles of Association also need to be looked at if a company wishes to send a resolution by electronic form or through a website. In as far as you are able to, the copies must be sent at the same time to all the eligible members. Alternatively, if it is possible to do so without undue delay, the same copy of the resolution may be sent to each such members in turn. The copy of the resolution must be accompanied by a statement informing the member how to signify agreement to the resolution and about the lapse date (i.e. the date by which the resolution must be passed if it is not to lapse).
Passing the resolutions:
A written resolution will be passed when the required majority of eligible shareholders have signified their agreement to it. For the purposes of written resolutions each shareholder has one vote for each share held. Special resolutions and ordinary resolutions may be sent in the same document, although they may be passed at different times, due to the voting thresholds. To get around this, it is possible to make some conditional upon others being passed, or propose all the resolutions as special resolutions.
The document signifying the shareholder’s agreement must be received by the company in either hard copy or electronic form. If the company has provided contact details with the resolution, it is deemed to accept the resolution agreement that way, unless a contrary indication is given at the time.
A shareholder’s agreement to a written resolution, once signified, may not be revoked. A proposed written resolution lapses if it is not passed before the end of the period specified for this purpose in the company’s Articles of Association or, if none is specified, the period of 28 days beginning with the circulation date. The circulation date is the date it is first sent to the members. The agreement of a shareholder to a written resolution is ineffective if signified after the expiry of that period.
Exceptions:
There are two resolutions which cannot be passed by written resolution. These are:
- the removal of a director before the expiration of their period of office; and
- the removal of an auditor before the expiration of their term of office.
These decisions require actual meetings with special notice provisions.
Filings:
Copies of all resolutions must be kept with the company’s statutory books for a period of ten years from the date of passing the resolution. A copy of special resolutions must be sent to Companies House. Some, but not all, ordinary resolutions must be sent to Companies House. Any resolutions required to be filed with Companies House must be filed within 15 days after they are passed. Companies may file a print of the resolution rather than the resolution itself, but the print must be signed by a director or the company secretary.
Further information:
This is just a summary of the main issues and as such may not include all the requirements necessary for each company. For detailed advice specific to your company, please get in touch with your usual Dixcart Legal contact or email advice@dixcartlegal.com.
