A company resolution can be described as a formal written document that records important decisions taken either by the board of directors or shareholders of the company, recording what the company will action or do next. In order for a company to act or transact, the appropriate resolution setting out the scope of the intended action or transaction must be tabled for approval by either the board of directors or the shareholders of the company.
Resolutions are also essential for corporate governance purposes. This is the document that will serve as proof that a specific decision was proposed, considered and approved. By virtue of resolution being approved, it empowers the company through the board of directors and/or shareholders to act or transact and bind the company. If no resolution exists and the company subsequently enters into a specific transaction (which required approval either at a board of directors or shareholders level), such transaction is deemed unlawful, and unauthorized, unless the company’s memorandum of incorporation or the shareholders agreement provides otherwise.
Types of Resolutions
The two main types of resolutions that are used are, (1) Ordinary resolution; or (2) Special resolution.
An Ordinary Resolution is applicable for decisions that need to be made regarding the day-to-day running and operations of the company. For an Ordinary Resolution to be passed, a simple majority of more than 50% is required. An Ordinary Resolution is traditionally tabled for approval at general meetings.
Typical decisions for passing of Ordinary Resolutions are:
- Issues pertaining to the day-to-day running of the company;
- Increasing the authorized share capital of the company;
- Giving the company authority to purchase its own shares;
- Removal of a director in terms of s71 of the companies Act, 2008;
- Re-appointment and appointment of a director;
- Approval of annual accounts;
- Authorizing director loans; and
- Appointment of a public officer or company secretary.
A Special Resolution is applicable for decisions or matters that are specially reserved. For a Special Resolution to be passed, it will require the consent of no more than 75% of the members who are in favour of the resolution.
Typical decisions for a passing of a Special Resolutions are:
- Amending the memorandum of incorporation of the company;
- acquisition of any material business or material assets outside of the ordinary course of the company’s business;
- providing any guarantee or suretyship for a third party;
- incurring of any liability other than in the ordinary course of conduct of the company’s business;
- name change of the company;
- entering into any contract or transaction by the company outside the ordinary course of its business;
- directors’ remuneration; and
- issuing of any shares.
For more information or if you require assistance in drafting the appropriate resolution or identifying the type of decision that requires either an Ordinary or Special Resolution, please do not hesitate to contact BBP Law Attorneys. We will gladly schedule a meeting and provide you with the necessary legal assistance and guidance required.