Directors of a private limited company make the majority of daily routine decisions – without the express need to get a company agreement.
But, certain situations require the directors or entitled shareholders to vote or ‘pass a resolution’. Voting determines whether to make the changes.
As a rule, passing a company resolution would be a requirement to:
- Change your company name.
- Remove a director.
- Change the company constitution and articles of association.
- Change the share structure of your company.
In most cases, resolutions only need a majority of shareholders to agree. This simple type of voting is a process called getting an ‘ordinary resolution’.
Often, a show of hands at a meeting is enough to pass a resolution. Limited companies use ordinary resolutions for most of the routine changes. A typical example would be to increase share capital.
But, some decisions might require a greater majority. An example would be changing the articles of association. If so, passing a resolution can require a majority of 75% (or 95%). This is a process called ‘special resolution’ or an ‘extraordinary resolution’.
Company shareholders (and auditors where relevant) need to know any time there will be a vote on a resolution. Thus, you must inform them about the request to get agreement from your company.
Note: The company memorandum and articles of association should inform you whether you need a resolution, and the type needed. Special or extraordinary resolutions need filing with Companies House within 15 days of passing them.
How Shareholder Voting Works
There is a set way to work out the majority in shareholder voting for special and extraordinary resolutions. You must count the number of shares that give the owner their right to vote. Thus, you do not count the number of shareholders.
Example of Shareholder Voting:
A company issues 100 shares to three (3) shareholders. One of the shareholders owns seventy (70) shares whereas the other two own fifteen (15) shares each.
In this example, there would be a 70% majority for whatever company changes the shareholder with 70 shares agrees with.
How to Hold a Company Resolution
It is not always necessary to arrange a meeting to pass a resolution. As a rule, you can confirm the resolution in writing – providing enough shareholders or directors have told you that they agree to it.
Even so, you must write to all the company shareholders informing them of the outcome of any resolution taken.
ALSO IN THIS SECTION
Making Changes | Check who to notify if you want to make a change to your private limited company.
Change Company Name | How to change your limited company name or address at Companies House.