What are the different types of Resolution which may be Passed in a Meeting of Shareholders?
n any meeting, the matters which are put for consideration are in the form of proposals and are called ‘motions’. In a meeting, any such ‘motion’ may be brought for consideration either by the chairman or by the secretary or by any other member also. Any such motion, after due discussion, is put to vote or for decision and its decision is recorded in the form of a ‘Resolution’. So, a resolution means formal recording of the wishes of the members present as expressed by voting. Resolutions are of three types :
- Ordinary Resolution
- Special Resolution
- Resolution requiring special notice.
Ordinary Resolution [Section 114(1)] : It is a resolution of which notice required under the Companies Act has been duly given and which is passed with a simple majority of the members present either in person or through proxies. Simple majority means that the votes cast in favor of the resolution exceed the votes against the resolution. It may be passed either by a show of hands or electronically or on a poll. An ordinary resolution is passed for the ordinary business transacted at the Annual General Meeting e.g.
- Consideration of financial statements and the reports of the Board of Directors and auditors;
- The declaration of dividends;
- The appointment of directors in place of those retiring; and
- The appointment of auditors and fixation of their remuneration.
There are certain items of special business which require an ordinary resolution e.g.,
- Alteration of the name of the company at the direction of the Central Government [Section 16 (1)].
- Alteration of the share capital [Section 61 (1)].
- Issue of bonus shares [Section 63 (2)].
- Removal of a director other than the director appointed by the Tribunal under Section 169 (1).
Special Resolution [Section 114(2)] : A special resolution is one which is required in transacting special business and it is required to be passed by a three fourth majority. Section 114 (2) of the Companies Act provides that a resolution shall be special resolution when:
- The intention to propose it as a special resolution has been duly specified in the notice calling the general meeting;
- The notice required under the Companies Ad, has been duly given of the general meeting; and
- The votes cast in favor of the resolution (whether by a show of hands, or electronically or by a poll) by the members present, in person or by proxy or by postal ballot are not less than 3 times the votes cast against the resolution by the members.
Special resolution is needed for the purposes such as :
- Change in the Objects Clause of Memorandum of Association.
- Change in Memorandum of Association as regards ‘Registered Office’ of a company from one State to another.’
- Alteration of the Articles of Association.
- Reduction of share capital.
- Making variation in terms of contract mentioned in prospectus.
- Changing shareholders’ rights.
- Increasing maximum number of directors beyond 15 directors.
- Removal of an auditor
- Buy-back of shares.
Resolution requiring special notice [Section 115] : It is not an independent class of resolution. Rather, it is a kind of ordinary resolution with the difference that the mover has to give a 14 days’ prior notice of the intention to move such a resolution. The company, on receipt of such a notice,will give a notice of the resolution to the members at least 7 days before the meeting in the same manner in which notice for meeting is given.
Special notice of the intention to move such resolution shall be given to the company by members holdings minimum 1% of the total voting power or
holding shares on which an aggregate of not less 5 lakhs has been paid up on the date of the notice.
Special notice is required by the Act in the following cases :
- For appointing an auditor other than the retiring auditor or for a resolution providing that an. auditor retiring shall not be re-appointed except where the retiring auditor has completed a consecutive tenure of 5 years.
- For removal of a director before the expiry of his term or for appointment of a director in place of the director so removed.