The Companies Act 2006 requires certain decisions to be made by resolutions. This means shareholders are required to vote on whether or not they think a particular proposal or change should take place. In this article, we set out everything you need to know about special resolutions.
What is a special resolution in company law?
In English company law, a special resolution refers to a formal decision made by the shareholders of a company on certain important matters. It’s governed by the Companies Act 2006 and is used for significant decisions that require the approval of a larger majority of shareholders than a regular resolution.
What percentage of shareholders is needed to pass a special resolution?
A special resolution must be passed by at least 75% of eligible shareholders with the right to vote on the matter in question.
When are special resolutions required?
Special resolutions are typically required for matters such as making significant changes to a company's articles, altering the company's name, approving certain types of corporate transactions (e.g., mergers or acquisitions), authorising share buybacks or reductions, and winding up or liquidating the company.
Additionally, they are legally required to alter the company's share capital, change the company's status (e.g., converting a private company to a public company), and grant or extend pre-emption rights.
What’s the difference between an ordinary resolution and a special resolution?
Below are the key differences between an ordinary resolution and a special resolution:
Majority requirement
- An ordinary resolution typically requires a simple majority of more than 50% of the votes cast by eligible shareholders
- A special resolution requires at least 75% of the votes cast by eligible shareholders
Matters addressed
- Ordinary resolutions are used for routine or less significant matters, for example, appointing directors, approving annual financial statements, or declaring dividends
- As stated above, special resolutions are reserved for more significant matters that impact the company's structure, constitution, or long-term direction
Legal effect
- Once an ordinary resolution is passed, it represents the shareholders' decision and is legally binding on the company. But it can be legally challenged
- A special resolution carries more weight and can’t be easily challenged or reversed, providing greater certainty and stability
How do I file a special resolution at Companies House?
Below is a step-by-step guide to filing a special resolution at Companies House:
1. Draft the special resolution according to the requirements outlined in the Companies Act 2006 and the company's articles of association. Ensure that the resolution is worded correctly and includes all necessary details.
2. Hold a general meeting to present the resolution and allow shareholders to vote.
3. After obtaining shareholder approval, you need to complete a form provided by Companies House. You may need to provide additional supporting documentation; for example, if the resolution involves changes to the company's articles of association, the updated version must be submitted.
4. Once the form and supporting documents are prepared, submit them to Companies House. This can be done electronically through the Companies House website or by post.
Can a special resolution be passed without a meeting?
In some cases, private companies can pass special resolutions by written resolution. All that matters is that the 75% approval threshold is met. Certain decisions, for example, removing a director, must be made via a general meeting.
Can a special resolution be amended?
It’s generally not possible to amend a special resolution once the shareholders have passed it. This is because they’re considered binding decisions of the shareholders, and altering them after the fact would undermine the certainty and finality of such resolutions. Special resolutions may be amended if there’s a provision to do so in the company’s articles or if one party successfully seeks a court order to set it aside.
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A special resolution in company law is a formal decision made by shareholders on significant matters that require a larger majority of approval than an ordinary resolution. With a minimum requirement of 75% of eligible shareholders voting in favour, special resolutions address important issues such as changes to a company's articles, corporate transactions, share capital alterations and winding up or liquidating the company.
We can provide you with advice and guidance to help you navigate the complexities of all aspects of company law. For assistance with company special resolutions or other corporate legal matters, book a free 15 minute consultation with one of our expert lawyers or call us on 020 3808 8314 to find out more.
Additional resources
- What is commercial mediation?
- What is a statutory declaration?
- How does a merger affect shareholders?
- Why Shareholders' Agreements are important?
In closing
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