Ordinary and special resolutions are the two types of shareholder resolutions that can be passed by a company’s shareholders, with each type dealing with different issues. While ordinary resolutions are more common and deal with a company’s daily operations, special resolutions are reserved for more serious matters that may impact the company’s direction.
What is an Ordinary Resolution?
An ordinary resolution is a resolution that deals with routine matters and can only be passed once it acquires at least 50% of the total number of votes. Shareholders can submit their votes with either a raise of hands or a poll.
The following circumstances are some examples that would require an ordinary resolution to be passed:
- Issuance of new shares
- Appointment or removal of directors from the board
- Approval of annual budgets
- Declaration of dividends
- Appointment of auditors
Should a meeting be held for the passing of an ordinary resolution, the shareholders must be given 14 days’ written notice. Alternatively, the company can choose to circulate a written resolution in lieu of a physical meeting to acquire the necessary votes and signatures, with the written resolution requiring the same minimum number of votes to be passed.
What is a Special Resolution?
A special resolution is only reserved for more urgent matters that will severely impact the company’s future, thus requiring a much larger majority vote of at least 75% of the total votes.
The following are examples of circumstances that will require a special resolution:
- Amendments and revisions to the company’s constitution
- Amendments to the company’s articles of association
- Changes to the name of the company
- Changes to the status of the company
- Reduction of the company’s share capital
Similarly to ordinary resolutions, a special resolution may be passed through a written resolution instead of having to schedule a physical meeting, though public and private companies would have to give shareholders 21 days’ and 14 days’ notice, respectively.
Ordinary Resolution vs. Special Resolution: What’s the Difference?
To summarize, here’s a table showing the differences between ordinary and special resolutions:
While these resolutions deal with matters of varying importance, both ordinary and special resolutions serve the purpose of streamlining the decision-making process and ensuring that the interests of the majority of shareholders are protected and acted upon.