Board resolutions are passed by the members of the company i.e., the individuals who include their names on the register of members of the company. These company resolutions are legally binding decisions made by the members (shareholders or guarantors) or directors of a limited company. They are required when formal decisions need to be made on matters beyond the scope of day-to-day business operations, such as appointing or removing a director or altering the articles of association.
Under the Companies Act 1956, there are two types of resolutions. They are:
- Ordinary Resolution
- Special Resolution
An ordinary resolution applies to a resolution adopted by a simple majority of members of the organization. On the other hand, a special resolution is an agreement, approved by a three-fourth majority of the business members.
Ordinary Resolution
As per the provisions of Section 114 (1) of the Companies Act 2013, “A resolution shall be an ordinary resolution if the notice required under this Act has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case may be, in favor of the resolution, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.”
In other words, the resolutions which are passed at a general meeting by a simple majority are called ordinary resolutions, i.e., where the votes cast for the resolution is more than the votes cast against the resolution.
Matters Requiring Ordinary Resolution as per Company Act 2013
- Where Registrar direct to change the name of the company within 3 months.
- Where Central Government direct to change the name of the company within 3/6 months.
- Alteration of Memorandum of Association (Increase /Consolidate/ sub-divide/ convert/ cancellation of Share Capital).
- Capitalization of Company profit or Reserves to issue fully paid bonus shares.
- Unlimited company to provide for reserve share capital on conversion into a limited company.
- Accepting deposits from the public.
- Ordinary Business transacted at Annual General Meeting only.
- Fixing of Remuneration of Cost Accountant.
- Appointment of Alternate Director.
- Removal of Director before the expiry of the term except Director appointed by Company Law Tribunal/ Board.
- Contribution to Charitable Trust in excess of 5 % of its Average Net Profit for 3 immediately preceding financial years.
- Restricted Noncash transactions involving Directors require the approval of shareholders.
- Appointment of Managing Director, Whole Time Director, a Manager, subjected to provision of Section 197.
- Remuneration to be paid to the Directors.
- In case of Voluntary wound up of Company.
- Appointment of Official Liquidator and fixing his Remuneration.
- To fill Casual Vacancy in office of Official Liquidator caused by way of Death, Resign or Removal.
- Official Liquidator call General Meeting to get the sanction of the company.
- Approval of report of Official Liquidator by Shareholders for approval.
Special Resolution
As per the provisions of Section 114 (2) of the Companies Act 2013, a resolution shall be a special resolution when:
- The intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation was given to the members of the resolution;
- The notice required under this Act has been duly given; and
- The votes cast in favor of the resolution, whether on a show of hands or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by a postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.
Therefore, in general, Special Resolution is a resolution in which the votes cast in favor of the resolution must be three times higher than the votes cast against it. There are certain things, which can be done by the company only if a special resolution is affirmed at the duly constituted general meeting. The notice of the general meeting should be duly given to the members, and the notice should contain the intention to purpose the resolution as Special Resolution to be mentioned specifically.
Matters Requiring Special Resolution as per Company Act 2013
- Alteration of Article of Association while converting from Private Limited to Public Limited and Vice Versa.
- To change the Registered office of the company outside the Local limits of the city, town, or village.
- For Alteration of Memorandum of Association of the Company.
- For Alteration of Article of Association of the Company.
- Change in the Object Clause of Memorandum of Association of the Company.
- To issue Global Depository Receipt in any Foreign Country.
- Issue of Sweat Equity Shares (Except this share cannot be issued at discount).
- For issuing further shares to Employees of the Company under the scheme of Employee Stock Option Plan & to determine the terms of issuing Debentures convertible into shares.
- Reduction of Share Capital.
- Buy-Back of Shares.
- To issue Debenture convertible into shares, wholly or partly.
- Removal of Auditor appointed U/s 139 before expiry of his term and after approval of Central Government.
- Appointment of more than 15 Directors.
- Reappointment of Independent Director for a further period of 5 years.
- Member of the company may by Special Resolution specify any lesser number of Companies in which a Director of the Company may act as Director.
- Restriction on power of Board, Loans and Investment by the Company.
- Appointment of persons aged 70 years or more as Managing Director, Whole Time Director or Manager.
- To pay Remuneration to Directors in excess of Schedule V.
- To apply to Central Government for conduction Investigate the affairs of the Company.
- To apply to Serious Fraud Investigation Office for conduction Investigate the affairs of the Company.
- To make an application to Registrar for Striking off the name of Company.
- Approval of Scheme of Merger and Amalgamation.
- Winding up of Company by Tribunal, For Voluntary Winding Up of Company.
- Official Liquidator call General Meeting to get the sanction of the company.
- To grant power to Official Liquidator to accept Shares ets as Consideration for sale of Property of the Company.
- Company Liquidator to exercise certain powers subject to sanction by Special Resolution and Prior approval of Tribunal.
- For Adoption of Table F in Schedule I (Article of Association)
Formats for various kinds of board resolutions under the Companies Act 2013.
This article is written by M Nikitha. The author can be contacted via email at nikitha@bnblegal.com
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