Resolutions are records of formal agreement or decisions of shareholders or directors or managers, to carry out certain changes, generally denoted or prefixed by the word “RESOLVED”.
Examples of such are: changing of name of the company, alteration of share capital, appointment of directors or managing directors, shifting of registered office of the company, etc.
The members of the company (i.e. the shareholders and other stakeholders) shall be required to vote on the resolution and the resolution will be passed once the required majority approves the resolution.
The two types of resolutions are:-
- Ordinary Resolution
- Special resolution
Ordinary Resolutions: A resolution that is not extraordinary, special or an elective resolution, like approval of accounts, which require only simple or ordinary majority to be passed, may or may not be required any notice of their proposal.
Few particulars which require passing of ordinary resolution at the Annual General Meeting or Extra-Ordinary General Meeting are as below:
- Appointment of Statutory Auditors and fixing their remuneration u/s 224(1)
- Alteration of Share capital of the company u/s 94
- Appointment of Additional Directors u/s 260
- Appointment of Managerial Personnel and fixing their remuneration u/s 269 and SCH XIII
- Consideration of accounts, balance sheets and reports of Board of Directors and auditors u/s 210 and u/s 215
- Declaration of Dividend u/s 205
- Appointment of Directors in place of those retiring
Special Resolutions: Any extraordinary resolution in relation to an important decision, such as for altering the terms of memorandum or articles of association, or making some other key or fundamental changes in the company.
In other words, it shall be a special resolutions when:
- The intention to propose the resolution as a special resolutions has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolutions,
- The notice required under this Act has been duly given of the general meeting,
- The votes cast in favour of the resolutions (whether on a show of hands ,or on a poll, as the case may be) by the members who are being entitled to do so,
- Vote in person, or by proxy (where proxies are allowed) are not less than three times (i.e., 75%) the number of votes against the resolutions by members so entitled and voting.
Few particulars which require passing of special resolutions at the Extra-Ordinary General Meeting are as below:
- Shifting of Registered office from one state to another state u/s 17
- Alteration of Articles of Association u/s 31
- Increase in Authorized Share Capital and consequently alteration of Articles of Association u/s 94
- Purchase of company’s Own shares or Specifies securities u/s 77A(2)
Circular resolution u/s 289
Pre-conditions for passing a circular resolutions
- Any act required to be done by the Board , apart from the acts which are specifically required to be done by calling a meeting of the Board , may be done by the Directors by passing a circular resolutions,
- Any resolutions passed by circulation would not mete out with the need for holding a meeting once, at least in three months, as mandated under section 285,
- In any case, if the number of Directors present in India is less than the number which is necessary to form the Quorum, had there been a meeting of the Board or the members, the resolution by circulation stands prohibited.
Procedure for Documentation for passing a circular resolutions:
- The draft of the resolution, in duplicate, shall be circulated with all necessary papers (if any) to all the directors then in India and the usual address in India, of Directors who at that time are abroad.
- The circular shall have to be approved/disapproved by majority of all the directors and return the duly signed copy to the company. In case some directors are outside India, at the time of circulation of the resolution, then majority of those in India can approve the resolution, provided that such majority is not less than the number of the quorum.
- A copy of the circular resolution shall be enclosed to the agenda of the immediately next Board Meeting mentioning in the notes that the said resolution was voted for, or against by so many numbers of Directors and that it was passed by majority of Directors.
Matters requiring sanction at the Board Meeting & not by mere circulation
- Filling of casual vacancy in the Board u/s 262
- U/s 292, the power to make:
- To make calls on shares
- To issue debentures
- To borrow money otherwise than by debentures
- To invest the funds of the company
- To make loans.
- Sanction of the Board for certain contracts in which particular directors are interested u/s 297
- Disclosure to the Board of Director’s interest in the transaction of the company u/s 299
- Disclosure of a Director’s shareholding to the Board u/s 308
- Approval of the appointment of a person as a Managing Director or Manager in more than one company u/s 316 & 386
- Sanctioning of inter-corporate loans, investments, guarantee and other security u/s 372-A.