A company resolution is a formal decision or agreement regarding critical matters in the company’s daily business activities and operations during meetings with the board of directors or shareholders. This resolution needs to be made in compliance with the requirements specified in Singapore’s Companies Act and can only be passed when it acquires a majority vote.
Why Are Company Resolutions Important?
Here are a few reasons why company resolutions are important:
- Provides Structure to Decision-Making Process: Company resolutions allow relevant individuals to easily come to an agreement on matters and issues that would have otherwise taken much more time.
- Keeps Directors and Shareholders Informed and Involved: As company resolutions need to be passed during meetings, they include directors and shareholders in the decision-making process and keep them up-to-date with the inner workings of the company. Company resolutions also allow them to hold the company accountable and provide insights and direction when needed.
- Keeps Record of Past Decisions: Company resolutions are physical documents that will need to be filed appropriately once passed. This will also come in handy during company audits when the auditor requests a physical record for review.
Who Can Make Company Resolutions?
In Singapore, only the company’s shareholders or board of directors can pass a company resolution, with these being known as shareholders resolutions and board resolutions, respectively.
How to Pass a Company Resolution?
There are two ways that a company resolution can be passed:
- Physical Meetings: Company resolutions are traditionally passed during physical meetings with the company’s shareholders or board of directors.
- Written Resolutions: Should the company not be able to meet in person, directors or shareholders can pass their votes through postal ballots, or any other channel that the company may have specified in the company’s Articles of Association. However, according to the Companies Act, any individual or group with at least 5% voting rights may request a physical meeting instead.
Different Types of Resolutions
Board Resolutions
Board resolutions are resolutions that are passed by the company’s board of directors regarding the daily operations of the company. A company’s directors have the authority to be involved in all company decisions as specified in Section 157A of the Companies Act.
The circumstances that will require a board resolution include, but are not limited to, the following:
- When a proposal is made that can significantly impact the company
- When there’s an upcoming sale of shares
- When the company plans to acquire assets or intellectual property
- When an audit committee needs to be appointed
- When the company is looking to change its registered address
- When the company wants to open a new corporate bank account
- Any issue that involves the appointment or resignation of directors or company secretaries
Shareholders Resolutions
Ordinary Resolutions
Ordinary resolutions are passed by the shareholders of the company. Before passing an ordinary resolution, all shareholders must be given 14 days’ written notice.
During the meeting, shareholders must pass their votes with a simple raising of hands or through a poll, with the resolution considered to be passed when it acquires at least 50% of the total votes.
The following are some examples of circumstances that may require an ordinary resolution:
- When a director is to be removed before the end of his or her period in office
- When deciding if a general meeting is to be recognized as an annual general meeting
- When appointing or reappointing a director older than 70 years
- When declaring dividends
- When employing and declaring the remuneration of auditors
- When electing new directors
Special Resolutions
Special resolutions are formal decisions requiring at least 75% of the total shareholder votes to be passed—a considerably larger portion than the shareholder resolution. Another difference from ordinary resolutions is that a special resolution is required to give shareholders of a public company 21 days of written notice and 14 days of written notice to shareholders of a private company.
Unlike both board and ordinary resolutions, special resolutions are reserved for much more urgent and important decisions.
For a special resolution to be passed, it must acquire at least 75% of the total shareholder votes through a show of hands, a poll or ballot, or a written resolution.
The following are some circumstances that will require the passing of a special resolution:
- When changing the company’s name
- When making any amendments or revisions to the company’s constitution
- When reducing the company’s share capital
- When changing the status of the company through registration
Once passed, a copy of the special resolution should be submitted to ACRA.
The Takeaway
Company resolutions streamline company directors’ or shareholders’ decision-making processes on urgent matters by executing them in an organized manner, either through physical meetings or written resolutions.
These resolutions may also be reviewed during the audit process, so if you’re looking for a reliable accounting and bookkeeping partner, our team of professionals here at WealthBridge offers accurate accounting and bookkeeping services in Singapore to help you run your business more smoothly.