A shareholders’ resolution is a formal decision of the company voted on by the shareholders, traditionally during a meeting of the shareholders or by written resolution. It is a type of company resolution; the other is a board resolution which is passed by the board of directors. Shareholders’ resolutions are traditionally passed during the Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM).
How to do it
Step 1: Identify the type of resolution required
Company resolutions are needed whenever there is a formal decision to be made. The kind of resolution needed (whether special or ordinary), and by whom (whether the board of directors or shareholders), is determined by the companies legislation and the company constitution (sometimes called articles of association).
The rule of thumb is that the board of directors can make all the decisions for the company. The exceptions are the decisions which must be taken by the shareholders (as defined by the legislation or company constitution).
In addition, the rule of thumb is that most decisions can be passed either by general meeting or by written resolution. The exceptions are the decisions which the legislation or company constitution requires to be passed at a general meeting.
An ordinary shareholders’ resolution can be passed by simple majority (50%) and has minimal regulatory requirements. Examples of company decisions which usually require ordinary resolutions include:
Removing a director before the end of their term of office
Approving matters that would otherwise be approved at an annual general meeting
A special shareholders’ resolution requires reaching a voting majority threshold of eligible votes cast (generally 75%) and may have additional meeting notice and regulatory filing requirements. Examples of company decisions which usually require special resolutions include:
Changes to a company’s constitution or articles of association
Change of company name
Reduction in share capital
A unanimous shareholders resolution requires 100% of the eligible votes cast.
Step 2: Draft the required written resolution
It is not always convenient to convene a general meeting. In this case, a company can choose to pass a resolution by written means.
Note: if an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM), i.e. a meeting of shareholders, is convened to make a company decision, the decision should be recorded in the minutes of the general meeting instead.
Depending on the company decision at hand, there are a number of written resolution formats. You can use Zegal’s document builder to assist you in drafting a compliant written resolution.
Here are just a few of the many resolutions available on the platform:
Step 3: Adopt the decision as a shareholders’ resolution
In order to validate the decision, the shareholders resolution will need to be adopted by the required number of shareholders (as defined by the type of the resolution and regulation, such as ordinary, special, or unanimous).
In order to adopt the resolution, shareholders traditionally sign the written resolution or agree to it in writing. It is convenient to make use of e-signing where possible for this purpose. Zegal’s built-in e-signing makes this a seamless process.
4. [If required] Update the relevant government department or registry
Some company decisions, whether taken during a general meeting or by written resolution, require appropriate filing with the government department or registry.
In these cases, there will usually be a deadline following the adoption of the resolution by which the necessary documentation will need to be submitted.