Determining when to use Ordinary vs. Special resolutions for company changes
When actioning change within a company relating to important matters such as share capital or key stakeholders, it is common practice to draft and circulate resolutions for shareholders' approval. Depending on the nature of the change, an Ordinary or Special resolution may be required. An Ordinary resolution typically requires more than 50% approval from shareholders, while a Special resolution usually necessitates a 75% approval rate. It is important to note that Special resolutions with a 75% approval rate must be filed with Companies House.
For more details on pass rates and how resolutions work, please refer to our 'What are Resolutions?' guide.
However, there are exceptions to these rules. Additional restrictions on pass rates for Ordinary and Special resolutions are outlined in the Companies Act 2006 (CA 2006), which we have detailed below.
This guide covers the following topics:
Special Resolutions:
- Matters that always require a Special Resolution
Ordinary resolutions:
- Matters where the pass rate cannot be raised
- Matters that require filing with Companies House irrespective of the pass rate
- Matters requiring an Ordinary Resolution
Company matters that ALWAYS require a special resolution
Section 283 of the CA 2006 defines a special resolution as "a resolution passed by a majority of not less than 75%". The below list sets out matters which the CA 2006 requires to be addressed through a Special Resolution.
The special resolution pass rate for the actions list below can only be increased, not decreased. Increasing the pass rate would require a process referred to as entrenchment of provisions of the articles; the provisions can only be made in the company’s articles on formation, or by an amendment of the company’s articles agreed to by all members of the company.
Matters requiring a special resolution:
Amendment of articles of association.
Change of company name.
Disapplication of pre-emption rights: private company with only one class of shares.
Disapplication of pre-emption rights: directors acting under general authorisation.
Renewal of general authority to disapply pre-emption rights.
Disapplication of pre-emption rights by special resolution.
Renewal of special resolution to disapply pre-emption rights.
Disapplication of pre-emption rights: sale of treasury shares.
Disapplication of pre-emption rights in relation to specified allotment.
Reduction of share capital in connection with redenomination of share capital.
Reduction of share capital by special resolution accompanied by solvency statement.
Reduction of share capital by special resolution confirmed by the court.
Purchase of own shares from capital.
Purchase of own shares from capital for the purposes of or pursuant to an employees' share scheme.
Application of Welsh company to be registered in Wales.
Application of Welsh company to be registered in England and Wales.
Re-registration of private company as public.
Re-registration of public company as private.
Re-registration of unlimited company as limited.
Reduction of the notice required for a general meeting of a traded company from 21 days to 14 days.
Opting-in resolution in relation to takeovers.
Opting-out resolution in relation to takeovers.
Company Matters requiring an Ordinary Resolution
An Ordinary written resolution is defined as a simple majority (>50%) of the total voting rights of all eligible members (section 282 CA 2006). Anything that may be done by an Ordinary resolution may also be done by a Special resolution (section 282(5), CA 2006).
Many of the below provisions may be subject to your articles of association which may prescribe a higher majority or unanimity. The list of matters is split out into three categories:
- Matters where the articles of association may not prescribe a higher majority;
- Matters where the articles of association may not prescribe a higher majority and must be filed at Companies House; and
- Matters that must be filed at Companies House no matter the pass rate.
Matters where the articles of association may not prescribe a higher majority:
Removal of directors
Members' appointment of auditors of private company.
Members' appointment of auditors of public company.
Fixing of auditor's remuneration who is appointed by the members.
Removing auditor from office.
Authorisation of a liability limitation agreement.
Withdrawal of authorisation of liability limitation agreement.
Approval of agreement for transfer of non-cash asset.
Authorising reconversion of stock into shares.
Authorising the directors to determine the terms, conditions and manner of redemption of shares (unless already authorised by articles of association).
Approval by transferor company of articles of new transferee company in the case of merger by formation of new company.
Approval by transferor company of articles of new transferee company in the case of division.
The following Ordinary resolutions must be filed at Companies House AND matters where the articles of association may not prescribe a higher majority:
Power of directors to allot shares (unless already authorised by articles of association)
Renewal, revocation, variation of authority to allot shares.
Matters that must be filed at Companies House no matter the pass rate:
Redenomination of share capital.
Authority for off-market purchase for the purposes of or pursuant to an employees' share scheme.
Authorising company to make a market purchase of its own shares.
Agreement to sending or supplying documents or information to members by making them available on a website.
Matters requiring an Ordinary Resolution
Approval of director's long term service contracts.
Approval of substantial property transactions.
Affirmation of substantial property transaction made in contravention of section 190.
Approval of loans to directors.
Approval of quasi-loans to directors.
Approval of loans and quasi-loans to persons connected with directors.
Approval of credit transactions.
Approval of related arrangements.
Affirmation of breach of sections 197, 198, 200, 201 or 203.
Approval of payment by company for loss of office.
Approval of payment in connection with transfer of undertaking.
Approval of payment in connection with share transfer.
Quoted companies: Approval of remuneration payment to a person who is, or has been a director of the company.
Quoted companies: Approval of payment of loss of office to a person who is, or has been a director of the company.
Ratification of acts by directors.
Power to make provision for employees on cessation or transfer of business if not authorised to be sanctioned by a board resolution.
Election of chairperson of a general meeting (if the articles do not state who may or may not be chairperson).
Election of a proxy as chairperson of a general meeting (if the articles do not state who may or may not be chairperson).
Authorising political donations or expenditure.
Quoted companies: Approval of directors' remuneration report.
Quoted companies: Approval of directors’ remuneration policy.
Authorising sub-division or consolidation of shares.
Authority for off-market share buyback contract.
Verifying, revoking or renewing authority for off-market share buyback contract.
Variation of contract for off-market purchase.
Release of company's rights under contract for off-market purchase.
Cancelling redeemed debentures.
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