Corporate actions often require a resolution in order to proceed.
There are ordinary and special resolutions which can be taken by the company’s shareholders or the company’s board of directors.
An ordinary resolution requires a simple majority (that is more than 50% of voting rights exercised on a resolution) in order for a resolution to be passed on any matter, and a special resolution requires 75% percent of the voting rights exercised on a resolution in order for the resolution to be passed on any matter.
In terms of the new Companies Act (the Act), a company’s Memorandum of Incorporation can increase the percentages required to pass ordinary resolutions and increase or decrease the percentages for the passing of a special resolution so long as the difference between the highest percentage for the passing of an ordinary resolution and the lowest percentage for the passing of a special resolutions is at least 10% on any matter. The new Act sets out that the following actions that require a special resolution in order to be implemented:
- Amending the company’s MOI as required by section 16(1)(c) and section 36(2)(a) which deals with amending the MOI in order to amend the authorisation and classification of shares;
- Ratifying a consolidated revision of the MOI;
- Ratifying director’s actions in excess of their authority;
- Approving the issue of shares or grant of rights to directors, prescribed officers or inter-related persons or their nominees;
- Approving the issue of shares and securities where the voting power of the shares or securities issued will equal or exceed 30% of the voting power of shares and securities held immediately prior to the transaction;
- Authorising the board to grant financial assistance to persons for the purpose of subscribing to an option or securities or the purchase of any securities of the company or related or inter related company, or financial assistance to directors;
- Approving a decision of the board for re-acquisition of shares;
- Authorising the basis for compensation to the directors of a profit company;
- Approving the voluntary winding up of the solvent company;
- Approving the winding up of the solvent company by court order;
- Approving an application to transfer the registration of the company to a foreign jurisdiction;
- Approving any proposed fundamental transaction to the extent required by Part A of Chapter 5 which deals with the disposal of the whole or greater part of the assets of the company, mergers and acquisitions and schemes of arrangement; and
- Revoking a resolution which gave rise to shareholders’ appraisal rights.