Definition
A special resolution is a formal decision passed by the shareholders or members of a company. For a special resolution to pass, it must be approved by at least 75% (sometimes referred to as a supermajority) of the votes cast by members entitled to vote (either in person or by proxy). Key procedural requirements include giving members at least 14 days’ notice of the meeting where the resolution will be considered, and the notice must clearly specify the terms of the resolution being proposed.
Examples
- Changing the Articles of Association: Amending the internal regulations governing the operations of the company.
- Approving a merger or acquisition: Approving significant corporate actions, such as merging with another company or selling substantial company assets.
- Winding up the company: Deciding to voluntarily dissolve the company.
Frequently Asked Questions (FAQs)
Q1: What is the purpose of a special resolution? A1: A special resolution is used to make critical decisions that can significantly impact the company’s structure and operations, ensuring that such decisions are made with a substantial consensus among shareholders.
Q2: What is the difference between a special and an ordinary resolution? A2: An ordinary resolution requires a simple majority (usually over 50%) of votes cast to pass, while a special resolution requires at least 75% of votes cast. Ordinary resolutions are used for routine decisions, whereas special resolutions are for more significant or fundamental changes.
Q3: What kind of notice is required for proposing a special resolution? A3: Members must be given at least 14 days’ notice. The notice must include details of the special resolution, so members fully understand the implications before voting.
Q4: Can a special resolution be passed without a physical meeting? A4: Yes, companies can often pass special resolutions through written resolutions if allowed by their governing documents and applicable laws.
Q5: Are special resolutions necessary for approving all major decisions? A5: Not all major decisions require a special resolution; it depends on the nature of the decision and the specific requirements laid out in the company’s Articles of Association and applicable laws.
Related Terms
- Ordinary Resolution: A resolution approved by a simple majority (over 50%) of shareholders. Used for routine matters.
- Quorum: The minimum number of members needed to be present for a meeting to be legally valid.
- Proxy Voting: A method that allows shareholders to vote without being physically present at the meeting.
- Articles of Association: A document that outlines the rules for the operation of the company and defines the company’s purpose.
Online References
- UK Companies Act 2006 – Detailed legal framework outlining the requirements for special and ordinary resolutions.
- Investopedia - Resolution – General overview of different types of resolutions in corporate governance.
- Company Law Club – A resource for various aspects of company law, including resolutions.
Suggested Books for Further Studies
- “Company Law: Theory, Structure, and Operation” by Brian Cheffins
- “Principles of Corporate Governance” by Adrian Cadbury
- “Corporate Governance in the UK: Challenges and Opportunities” by Simon Witney
Special Resolution Fundamentals Quiz
### What percentage of votes is required to pass a special resolution?
- [ ] 50%
- [ ] 66.67%
- [ ] 70%
- [x] 75%
> **Explanation:** A special resolution must be approved by at least 75% of the votes cast by members entitled to vote.
### How much notice must be given to members before proposing a special resolution?
- [ ] 7 days
- [ ] 10 days
- [x] 14 days
- [ ] 21 days
> **Explanation:** Members must receive at least 14 days' notice of the meeting at which the special resolution is proposed.
### Can a special resolution be passed without a physical meeting?
- [x] Yes, if allowed by the governing documents
- [ ] No, a meeting is required
- [ ] Only under emergency circumstances
- [ ] Only with court approval
> **Explanation:** Special resolutions can often be passed through written resolutions if the company’s governing documents and applicable laws permit.
### What type of decisions usually require a special resolution?
- [x] Significant changes to company structure or operations
- [ ] Routine operational decisions
- [ ] Minor amendments to internal policies
- [ ] Day-to-day management decisions
> **Explanation:** Special resolutions are required for significant changes such as amending Articles of Association, mergers, or winding up the company.
### What spelling designation must be included in the notice of meeting for a special resolution?
- [x] The details of the special resolution
- [ ] Appropriate dress code for the meeting
- [ ] Historical meeting decisions
- [ ] The resignation of an officer
> **Explanation:** The notice of a meeting must give specific details of the special resolution being proposed to ensure full transparency to all voting members.
### When conducting the vote, what is the minimum majority required for an ordinary resolution?
- [ ] 33.33%
- [x] 50%
- [ ] 66.67%
- [ ] 75%
> **Explanation:** An ordinary resolution requires approval by a simple majority, which is typically over 50% of the votes cast.
### What document outlines the procedure and requirements for passing resolutions in a company?
- [ ] Financial Statements
- [x] Articles of Association
- [ ] Annual Report
- [ ] Company Newsletter
> **Explanation:** The Articles of Association define the rules for company operations and include procedures for passing various types of resolutions.
### What role do proxy votes play in passing a special resolution?
- [x] They allow shareholders to vote without being physically present
- [ ] They count as one-third of a vote
- [ ] They are used only in extraordinary circumstances
- [ ] They must be cast by company directors
> **Explanation:** Proxy voting allows shareholders to participate in the voting process without attending the meeting in person, which can be crucial in meeting the required majority for a special resolution.
### Is a supermajority required for an ordinary resolution?
- [x] No, a simple majority is sufficient
- [ ] Yes, at least 66.67%
- [ ] Yes, at least 75%
- [ ] Ordinary resolutions do not require a vote
> **Explanation:** Ordinary resolutions typically require only a simple majority (over 50%) of the votes cast.
### Which of the following is NOT a typical use of a special resolution?
- [ ] Amending the Articles of Association
- [ ] Approving a merger
- [ ] Winding up the company
- [x] Approving the company's annual budget
> **Explanation:** Approving the company's annual budget is usually handled through ordinary resolutions, whereas significant structural changes like amending the Articles or winding up the company require a special resolution.
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