A special resolution is a formal decision made by a majority of no less than 75% of the members of a company. This type of resolution is reserved for extraordinary matters that have a significant impact on a company.
We discuss special resolutions in detail below, including the types of circumstances where they are typically required. We also outline the procedure you need to follow to pass a special resolution in a UK company limited by shares or guarantee.
Special resolutions in a limited company
The Companies Act 2006 sets out strict decision-making rules that all UK companies must follow. One of these is the requirement of members (shareholders or guarantors) to make certain company decisions by special resolution.
A special resolution is a legally binding decision that is supported by at least 75% of eligible members’ votes. This means that, for the decision to stand, a minimum of 75% of votes held by the members of a company must be cast in favour of the matter in question.
Special resolutions are generally required for corporate matters of great importance and consequence – the types of decisions that are made only in rare circumstances. More routine company decisions are dealt with by ordinary resolution (of the members) or board resolution (of the directors).
Types of decisions made by special resolution
Special resolutions are reserved for extraordinary decisions affecting a company’s constitution, structure, share capital, long-term direction, or the rights of shareholders or guarantors.
In accordance with the Companies Act 2006, a special resolution is required in the following circumstances:
- Amending the articles of association or adopting a new set of articles
- Changing the company name
- Disapplying pre-emption rights of shareholders
- Carrying out a reduction of share capital
- Approving a share buyback, where the company buys back its own shares from shareholders
- Authorising company re-registration to change its legal status – e.g. converting a private company to a public limited company
- Changing the prescribed particulars of rights attached to shares
- Selling the company
- Winding up the company by members’ voluntary liquidation
You can stipulate other types of decisions requiring a special resolution in your company’s articles of association or shareholders’ agreement. For example, those that would typically be passed by an ordinary resolution or a board resolution.
It is also possible to specify a higher majority vote for certain decisions (e.g. 80%, 90%, etc.), or even unanimous agreement. The members of a company have the power to impose such requirements, provided they are included within the articles or a shareholders’ agreement.
How to pass a special resolution
To pass a special resolution, you must follow the procedure set out in the Companies Act 2006 and the articles of association. The steps required are as follows:
Step 1 – Issue notice of proposed special resolution
Where a special resolution is proposed, the directors must provide at least 14 days’ notice to members (and the company auditor, if you have one). The notice must state:
- details of the proposed resolution
- that it is a special resolution
- whether voting will take place on a show of hands or poll at a general meeting, or by written resolution
- the date, time, and location of the general meeting (if applicable)
- instructions on how to signify agreement to the written resolution (if applicable)
- the date by which the resolution must be passed
Some companies may specify longer notice periods, or prohibit the use of written resolutions for certain decisions. Therefore, you should always consult the articles and shareholders’ agreement in the first instance.
Step 2 – Vote on the resolution
Eligible members (i.e. those with voting rights) must cast their votes for or against the proposed special resolution. This may be done in one of two ways: by voting in person, on a show of hands or poll at a general meeting; or by written resolution, whereby votes are cast in hard copy form or by electronic means.
If members representing at least 75% of the company’s voting rights agree to the motion, the special resolution is passed and the decision is legally binding. However, if more than 25% of votes are cast in opposition to the motion, the proposed special resolution fails.
Again, check the articles and shareholders’ agreement to confirm whether a higher majority or unanimous agreement is required for a special resolution to be passed.
Step 3 – Notify Companies House
When you pass a special resolution, you must inform Companies House within 15 days, either by post or electronically via the ‘Upload a document’ service.
Depending on the changes you have made to the company, you may also have to include supporting documentation, e.g. a copy of the amended or new articles of association.
For convenience, Companies House provides a resolution template that you can use to give notice of any type of resolution, whether ordinary, special, or written.
Step 4 – Update company records
When a resolution is passed at a general meeting, it becomes part of the meeting minutes. These are normally circulated to members after the meeting.
The directors are also required to keep meeting minutes or copies of any written resolutions for a minimum of 10 years. These documents should be made available for inspection at the company’s registered office or Single Alternative Inspection Location (SAIL address).
If any changes have been made to share capital, the company’s statutory register of members and register of people with significant control (PSC register) must be updated immediately.
Where applicable, a copy of the amended articles should be provided to every member of the company following any alterations to this document.
Thanks for reading
We hope that this post has adequately explained the purpose of a special resolution, in addition to the procedure you must follow to propose and pass any such resolution in your limited company.
If you have any questions or feedback, please leave a comment below. You can also find more helpful advice and guidance on setting up and running a limited company in our Quality Company Formations Blog.
