Meetings and Resolutions
Governance
Meetings and Resolutions
Syllabus tag: KASNEB CPA | Intermediate Level | CA21 Company Law | Topic 7 Meetings and Resolutions
Lesson objectives
By the end of this topic, you will be able to:
- Distinguish ordinary, special and written resolutions
- State the majorities and notice each requires
- Identify matters requiring a special resolution
- Explain when special notice is required
- Describe how members may requisition a meeting
Why this matters
Company decisions are only valid if taken in the right form. A resolution passed by the wrong majority, or without the right notice, is ineffective however sensible it was — and questions in this paper turn on exactly that.
Types of resolution
| Resolution | Majority required | Typical use |
|---|---|---|
| Ordinary | More than 50% of votes cast | Routine business |
| Special | Not less than 75% of votes cast | Fundamental changes |
| Written | The relevant majority, without a meeting | Private companies only |
Note what the percentages are of. They are of the votes cast, not of the total membership. A resolution can pass on a small turnout provided the meeting is quorate.
What requires a special resolution
The Act reserves the 75% threshold for changes to the company itself:
- Altering the articles of association
- Changing the company's name
- Re-registering from private to public, or the reverse
- Reducing share capital
- Winding up voluntarily
The pattern is worth seeing: a special resolution is required where the decision changes the bargain the members signed up to. Ordinary business is left to a simple majority.
Where a special resolution is proposed at a meeting, the notice must contain the text of the resolution and state expressly that it is a special resolution. A written special resolution must say so on its face.
Written resolutions
A private company may pass a resolution in writing without holding a meeting. Members signify agreement in the prescribed way, and the required majority is the same as it would have been at a meeting.
Two matters cannot be dealt with by written resolution:
- Removal of a director before the end of their term
- Removal of an auditor before the end of their term
The reason is the same in both cases. Each has a right to be heard, and a written procedure would deny them the meeting at which to exercise it. The exclusion protects the person whose position is at stake, not the company.
A written resolution may be proposed by the directors or by the members. Failure to circulate it correctly does not invalidate a resolution otherwise passed, though the company and any defaulting officer may be fined.
:::checkpoint The board of a private company wishes to remove a director quickly and proposes to do so by written resolution to avoid the delay of convening a meeting. Explain why this is not permitted and what the board must do instead. :::
Special notice
Special notice is not a type of resolution. It is an additional requirement of 28 days' notice to the company before certain resolutions may be moved, so that the person affected can respond.
It is required for:
- Removing a director before the end of the term
- Removing an auditor before the end of the term
- Appointing an auditor other than the retiring one
In each case the company must notify the person concerned, who may make written representations and speak at the meeting. The pattern across the Act is consistent: where a person can be removed by simple majority, they are given a hearing in exchange.
Convening meetings
Directors may convene a general meeting at any time.
Members holding the prescribed proportion of paid-up voting capital may require the directors to convene a meeting. If the directors fail to do so within the statutory period, the members may convene it themselves at the company's expense.
The court may order a meeting where it is otherwise impracticable to hold one — for example where a quorum can never be achieved because one member refuses to attend.
That last power matters in deadlocked companies, where the alternative would be paralysis.
Notice, quorum and voting
Notice must state the time, date, place and general nature of the business. The required period depends on the company and the resolution, and short notice is possible with the consent of the prescribed majority.
Quorum is fixed by the articles, subject to the Act. Business transacted without a quorum is invalid.
Voting is initially by show of hands, where each member present has one vote regardless of shareholding. A poll may be demanded, and on a poll votes follow shareholding.
That difference decides outcomes. A majority shareholder outvoted on a show of hands will demand a poll, and win. The show of hands is a convenience; the poll reflects the real balance of ownership.
Proxies may attend, speak and vote on behalf of a member.
Minutes
Minutes of general meetings and of directors' meetings must be kept. Directors' minutes must be retained for at least ten years from the date of the meeting, and are evidence of the proceedings until the contrary is proved.
:::checkpoint At a general meeting a resolution is carried on a show of hands by nine votes to three. The three dissenters together hold 70% of the shares. Explain what they should do and what the outcome will be. :::