Company Resolutions: What are They?

What is a Company Resolution?

A company resolution is a formal decision of the company made at meetings of the board of directors, or at meetings of the shareholders.

Who can Make Company Resolutions?

Company resolutions can be passed by 2 groups of people:

1. Shareholders
2. Board of directors

When shareholders make a formal decision, it is known as a shareholder resolution. When the board of directors makes a formal decision, it is known as a board resolution. However, in a company which has only one shareholder, a resolution is passed by the shareholder recording the resolution and signing the record.

Types of Company Resolutions

Company resolutions are needed whenever there is a formal decision to be made. The kind of resolution needed (whether special or ordinary), and by whom (whether the board of directors or shareholders), is determined by the Companies Act and the company constitution.

Board resolutions

The board of directors of a company manage the business of the company, and section 157A of the Companies Act provide that directors make all decisions for the company, except those the Companies Act or the memorandum and article of association of the company require the shareholders to make.

The board of directors make formal decisions of the company by passing board resolutions. Board resolutions are needed for decisions of the company, where the Companies Act or the company constitution specifies that they are needed, or where external parties request for them.

For example, banks may require a board resolution to prove that an employee has the authority to take a loan for the company. Board resolutions are passed by a simple majority (i.e. more than 50%), unless otherwise stated in the company constitution.

Examples of decisions where the company can pass a board resolution, in accordance with the Companies Act:

• Opening a corporate bank account and authorising employees for transactions
• To appoint an audit committee

For more information, read our article on board resolutions in Singapore.

On the other hand, shareholders can make two types of resolutions. The two types are special resolutions, and ordinary resolutions.

Special resolutions

A special resolution is a formal decision passed by at least 75% majority of the votes cast at a meeting. Generally for public companies, 21 days’ written notice must be given for the meeting. For private companies, 14 days’ written notice must be given. However, the meeting can be held at shorter notice if members who hold at least 95% of the voting rights agree. In addition, the company must lodge a copy of all special resolutions at ACRA.

Typically, special resolutions are needed when the decision to be made is especially important. Examples of decisions where the company must pass a special shareholder resolution, in accordance with the Companies Act, include decisions to:

• Change any provision in its constitution
• Change its name
• Reduce its share capital

Ordinary resolutions

An ordinary resolution is a formal decision passed by a simple majority (i.e. more than 50%) of the votes cast at a meeting. 14 days’ written notice must be given for the meeting. However, the meeting can be held at shorter notice if members who hold at least 95% of the voting rights agree.

Examples of decisions where the company has to pass an ordinary resolution, in accordance with the Companies Act, to:

• Remove a director before the expiration of his period of office
• Appoint or re-appoint a director who is above 70 years of age
• Decide that a general meeting is the annual general meeting of the company

How to Pass a Company Resolution

At physical meetings

Traditionally, resolutions are passed at physical meetings of the company’s shareholders or board of directors. Board resolutions may be made at a meeting of the board of directors, while shareholders’ resolutions may be made at a general meeting of shareholders.

By written means

It may not always be convenient to hold physical meetings with the relevant parties physically present. A company can choose to pass a resolution by written means instead. In the event that a significant number of voters disagrees with passing the resolution through written means, Section 184D of the Companies Act provides that holders of 5% of the voting rights can require that a physical meeting be convened instead of proceeding with the written resolution.

If you need assistance preparing company resolutions, consider engaging a professional corporate secretarial firm.

This article was written by Averill Chow

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