Company resolutions

A resolution is the formal means by which decisions are made by a meeting of company members. There are two types of resolutions: ordinary and special. The Corporations Act 2001 (the Corporations Act) requires many decisions that affect a company to be made by resolution, some of which must be by special resolution. In addition, the constitution of a company may also require that other decisions be made by either an ordinary resolution or a special resolution.

General requirements for passing resolutions

The general requirements under the Corporations Act for the passing of any resolution are:

• The resolution—
  —is passed at a meeting, which is properly convened and satisfies the quorum requirements, and

  —is entered in the books kept by the company for that purpose within one month after the meeting is held.

• The minutes must be signed by the chair of the meeting at which the resolution was passed or by the chair of the next meeting.

Non-compliance with these requirements could invalidate the outcome of the resolution.

Voting on resolutions

Where a company has share capital, a member has one vote for each share held subject to any rights or restrictions attached to any class of shares.

For a company without share capital, every member is entitled to one vote. The chair has a casting vote, and if a member, also a member’s vote.

Proxy documents for members of listed companies

A notice of meeting for a meeting of members of a listed public company:

• must specify a place and a fax number; and
• may specify an electronic address for the purposes of receipt of proxy appointments.

Listed companies are required to record the total number of proxy votes exercised validly and how those votes were exercised in the minutes of meeting of members, in respect of each resolution in the notice of meeting.

These requirements apply despite anything in the company’s constitution.

Ordinary resolutions

Ordinary resolutions are not specifically defined in the Corporations Act and require only a simple majority to pass (i.e. more than 50% of the members present at the meeting, either in person, or by proxies, if allowed by the constitution).

Some of the matters on which an ordinary resolution is sufficient are:

• election/re-election of directors
• appointment of an auditor
• acceptance of reports at the annual general meeting
• strategic, commercial decisions
• increase or reduction in the number of directors.

Special resolutions; calling a meeting of members of a company or registered schemes

The notice of meeting sent to members advising them of the meeting must set out an intention to propose the special resolution and state the special resolution. This is in addition to the other information required to be provided in a notice of a meeting including the place, date and time of the meeting, the general nature of the meeting’s business and information about proxy votes where applicable.

Generally, notice of a meeting to members of a company must be given 21 days before the meeting is to be held. A listed company must give a least 28 days notice. Shorter notice can be given where members with at least 95% of the votes that may be cast at the meeting agree beforehand. However, the provision for shorter notice does not apply to a resolution to remove or appoint a director or to remove an auditor.

Notice of a meeting to members of a registered scheme must be given at least 21 days before the meeting is to be held. Registered schemes can’t give shorter notice.

Holding the meeting

It will not always be necessary for the members to physically meet in order to consider the resolution.

A proprietary company with more than 1 member can pass a resolution by circulating a document and having all the members entitled to vote sign a statement on the document that they are in favour of the resolution. Where two or more people hold shares together, each member of a joint membership must sign. The resolution is passed when the last member signs. A ‘circulating resolution’ cannot be applied to a resolution to remove an auditor.

A proprietary company with only one director who is also the only member of the company can pass a resolution just by signing a document setting out the resolution.

Passing a special resolution

At least 75% of the votes cast by members entitled to vote on a special resolution must be in favour of the resolution for it to be passed.

Advising ASIC about special resolutions

In most cases, the passing of a special resolution must be lodged with ASIC on Form 205 Notification of resolution or Form 2205 Notification of resolutions regarding shares.

Fro more detail about what forms you must use to notify the ASIC about special resolutions passed for various purposes click here.