What is a company resolution? Types & requirements explained

When your business is up and running, you’ll find there are certain decisions that must be made by passing a company resolution, a legally binding decision passed by directors or members.

Members make decisions by passing member resolutions. These are either ordinary resolutions or special resolutions. A special resolution requires 75% of the votes in favour, while an ordinary resolution requires more than 50% of the votes in favour. Resolutions can be approved at a general meeting or as a written resolution.

All special resolutions and some ordinary resolutions must be filed with Companies House once they’ve been approved. If you fail to file these resolutions, you’ll be committing a criminal offence, and you could be fined.

Read on to find out how directors make decisions by passing director resolutions (or “board resolutions”).

What is a company resolution?

A company resolution is a legally binding decision. Company members (shareholders or guarantors) or directors pass their own types of resolutions to make formal decisions. For example, if they want to appoint or remove a director or change the company’s articles of association.

Types of company resolutions

Both members and directors can generally propose and vote on resolutions, though the resolutions they propose and vote on are usually different.

The different types of resolution are as follows:

Member resolutions	Director resolutions
There are two types of members resolutions: ordinary resolutions and special resolutions.	Directors’ resolution (also called “board resolution”) Required for resolutions passed at a board meeting: greater than 50% unless your articles of association state otherwise
Ordinary resolution of the members. Required majority: greater than 50% of member votes	Directors’ written resolution. Required majority: unanimous unless your articles of association state otherwise
Special resolution of the members. Required majority: 75% of member votes
Ordinary and special resolutions can be passed at a general meeting or by written resolution.

The Companies Act 2006 and your articles of association will specify when to use a resolution and which one to use. You might also have covered which decisions should be made by resolution in your shareholders’ agreement, if you have one.

Why company resolutions matter for limited companies

You must use company resolutions to make important decisions about how your business is run. To be compliant, you’ll need to know which decisions require a resolution and which type of resolution to use.

Who can propose a company resolution?

Directors and shareholders can propose company resolutions. Shareholders or members need to hold at least 5% of the total voting rights in the company to propose a member resolution and require a general meeting to vote on it.

Generally speaking, any director can propose a resolution for the board’s consideration. The board as a whole can also propose resolutions to be voted on by the members.

Ordinary resolutions: when they apply and how they work

An ordinary resolution requires more than 50% of the members votes in favour to pass. You can use an ordinary resolution for routine matters that require approval from your company’s members.

You normally propose and vote on an ordinary resolution at a general meeting. Eligible members usually vote by a show of hands, but a poll may be demanded for a vote that reflects each member’s shareholding.

You can pass an ordinary resolution in writing except in a limited number of cases.

Author’s tip: If your company is limited by shares, some of your shareholders may have more than one vote. For example, if they hold multiple shares or their shares carry more than one vote each. For this reason, when a poll is conducted, you should count the number of votes rather than the number of members who voted. If the vote is by a show of hands, however, you should count the number of members who voted.

When do I need to propose an ordinary resolution?

You’ll normally need to propose an ordinary resolution to make the following decisions:

• Appoint or remove a director
• Grant additional powers to directors
• Approve directors’ loans
• Make changes to a director’s contract
• Authorise shareholders’ dividend payments
• Increase authorised share capital
• Authorise your company to purchase its own shares

You can specify in your articles of association if you want any of these decisions to be approved by special resolution rather than by ordinary resolution. The main difference is that a special resolution requires 75% votes in favour rather than more than 50%.

Special resolutions: when 75% agreement is needed

A special resolution requires at least 75% member votes in favour to pass. They’re generally used for significant changes to the company, often where using a special resolution is legally required.

You can propose a special resolution to be voted on at a general meeting or in writing.

You’ll normally need to use a special resolution to make the following decisions, in accordance with the Companies Act 2006:

• Amend your articles of association
• Change your company’s name
• Disapply your shareholders’ pre-emption rights
• Alter, add, or remove the objectives of your business
• Reduce your company’s share capital
• Change a private limited company to a public limited company (PLC), or vice versa
• Wind up the company by members’ voluntary liquidation

You can specify in your articles of association and shareholders’ agreement whether other decisions are to be made by special resolution, which are not already required to do so by law.

You might want certain decisions to be made by special resolution to minimise the risk of them being made without proper consideration or only by majority shareholders.

• What rights do shareholders of a company have?
• The role and responsibilities of a company director
• What’s the difference between company shareholders and directors?

What directors’ (or board) resolutions cover

A company’s board of directors uses directors’ resolutions, or board resolutions, to make formal, legally binding decisions. You can usually pass this type of resolution with a greater than 50% majority of votes at a board meeting, unless you’ve specified in your articles of association that a higher majority or unanimous approval is needed.

Directors usually have one vote each, which they can cast by a show of hands, proxy, or poll.

You can empower your directors to make certain decisions by board resolution in your articles of association and shareholders’ agreement.

Usually, directors use board resolutions to make routine management decisions, such as changing the company’s registered office address, relocating its statutory company registers, appointing an accountant, or entering into important contracts.

Written resolutions: an efficient alternative to meetings

You can pass written director and member resolutions as a practical and convenient alternative to passing resolutions in person. You’ll need everyone to agree to a written directors’ resolution for it to pass, unless your articles of association state otherwise. For member resolutions, you just require the required majority to approve (more than 50% if it’s an ordinary resolution or 75% or more if it’s a special resolution).

While they may not be appropriate for all circumstances, written resolutions can be more efficient than in-person resolutions. You won’t have to organise, attend, or record a meeting, and you can make decisions without everyone needing to be present.

Author’s tip: A PLC can’t pass written member resolutions. You can’t use a written resolution to remove a director or an auditor.

Filing requirements with Companies House

Your directors must file a copy of any special resolution, and certain ordinary resolutions, that you pass at Companies House within 15 days of it being approved. The following are examples of ordinary resolutions that directors must also file at Companies House:

• Grant authority to your directors to allot shares
• Renew, vary, or revoke your directors’ authority to allot shares
• Authorise your company to purchase its own shares
• Renew, vary, or revoke your company’s authority to purchase its own shares
• Redenominate shares

You might need to file other documents with Companies House alongside your resolution. For example, if your resolution made changes to your articles of association, you’ll need to file a copy of your updated articles of association alongside the approved resolution.

If you don’t file these resolutions with Companies House, you’re committing a criminal offence and could be fined.

Author’s tip: Director resolutions do not need to be filed at Companies House.

Recordkeeping obligations for company resolutions

You must record any resolutions passed at a general meeting or at a board meeting in the meeting minutes. You should keep your meeting minutes and copies of approved written resolutions at your company’s registered office address or at a single alternative inspection location (SAIL address) for at least 10 years from the date of the resolution. A SAIL address is a physical location where you can store statutory records that isn’t your registered office address.

How to pass a company resolution

You can either pass a company resolution at a meeting of your members or in writing. Here we explain the general steps you need to take to pass a company resolution.

Procedure for passing resolutions at a meeting

You should follow these steps to pass a resolution at a meeting of your company’s members:

• Send a copy of the proposed resolution and notice of the general meeting to all eligible members and your auditor (if you have one), either in written or electronic format.
• State in your notice of the general meeting its time, date and location, and include an agenda. You must also explain that it’s being called to propose a resolution and what that resolution is about.
• Give 14 days’ notice of a meeting to pass an ordinary or special resolution.
• At the meeting, your company’s members can vote by a show of hands or by a poll. If the required majority of votes is cast in favour of the resolution, it’s passed, and its decision becomes legally binding.
• When a resolution is voted on at a meeting, the percentage of votes for and against is based on the total voting rights present at the meeting rather than the total voting rights in the company.
• Remember, some of your shareholders may not have voting rights. Only shareholders who have voting rights can vote on resolutions.
• If you’re using a poll, count the number of shares that have voted, not the number of members that have voted. If you’re using a show of hands, count the number of members who have voted.
• If a member can’t attend the meeting, they can appoint a proxy to vote on their behalf.
• Record the outcome of the vote in the meeting minutes.
• Keep a copy of the meeting minutes and the resolution at your registered office address or single alternative inspection location (SAIL address) for at least 10 years from the date of the resolution.
• If you passed a special resolution, file it with Companies House within 15 days of it passing. If you passed an ordinary resolution, check whether you need to file it with Companies House. You can use a Companies House template to notify it of a resolution.

How to pass a written resolution

Members with at least 5% of the total voting rights propose a written resolution. Alternatively, the directors can circulate a written resolution. You should follow these steps to pass a written resolution:

• Directors send all eligible members a copy of the resolution within 21 days. They can send a hard copy by post, or an electronic copy by email, or make the resolution available on a website.
• The resolution should include what it proposes: whether it’s an ordinary or special resolution, the deadline for voting, and clear instructions on how to vote.
• The legal deadline for passing a written resolution is 28 days from the date it was circulated.
• Members agree to the resolution by either signing the hard copy, replying to the email, or confirming on the website (provided the method of approval complies with the company’s articles of association).

Common mistakes to avoid when passing company resolutions

You should avoid the following common mistakes when passing company resolutions:

• Not sending notice of the meeting
• Not providing information about the resolution in the notice of the meeting
• Not sending a copy of the resolution to your auditor, if you have one
• Determining the votes at the meeting as a percentage of the total voting rights in the company, rather than the total voting rights present at the meeting
• Not allowing members who can’t attend the meeting to appoint a proxy
• Not recording the outcome of the resolution vote in the meeting minutes
• Not filing a special resolution with Companies House within 15 days of it passing
• Not filing certain ordinary resolutions with Companies House. The Companies Act states which ordinary resolutions should be filed with Companies House.

Common scenarios where resolutions are required

The following is an example of a decision you might need to take that must be made by passing a company resolution.

You want to change your articles of association

• Propose a special resolution
• Circulate a copy of the resolution to all eligible members and your auditor. Include a copy of the new articles that are being adopted.
• If you’re going to hold a meeting to vote on the resolution, give at least 14 days’ notice.
• Include in the notice of the meeting its time, date and location. Explain what the resolution is about and that you want to vote on it at the meeting.
• If 75% of members vote in favour, the resolution has passed.
• If the vote was held at a meeting, record its outcome in the meeting minutes.
• Keep a copy of the meeting minutes at your registered office address or SAIL address for at least 10 years after the resolution has passed.
• File a copy of the special resolution, together with the articles of association, with Companies House within 15 days of it being approved.

Putting your resolutions into action

You need to understand when and how to use company resolutions to make important decisions about how your business is run.

Need help putting your resolutions into action? You can register your company or access expert support with Quality Company Formations.