A limited company
(either public or private)’s grundnorm are its Memorandum of Association and
Articles of Association. The Memorandum of Association contains basic
information about the company such as name, authorised share capital,
objectives of the company etc. The Articles of Association on the other hand
provide for the internal workings/mechanism of the company e.g. how directors
are to be appointed, removed, their term of duration, how the Articles can be
alternated etc.
In other words, the
Memorandum and Articles of Association are key on how the company operates and
is administered. As a juristic being, the Company can only make or take its
decisions through the actions of the management of the company. Its management
is constituted by the directors (known as the mind of the company) or/and the
shareholders (owners of the company). Such decisions taken on behalf of the
company as a juristic entity is validated when channelled as a Resolution.
WHAT IS A RESOLUTION?
According to the
Black’s law dictionary, a Resolution is defined as “a formal action by a
corporate Board of directors or other corporate body authorising a particular
act, transaction, or appointment.”
A Resolution is a
written statement created by either the Board of directors or shareholders of a
company detailing a binding decision or action at a meeting. For example, a
Shareholders’ Resolution is a Resolution by shareholders usually passed to
ratify the actions of the Board of directors (Board). When passed, Resolutions
form part of the minutes of the meeting at which they were passed.
The Board being the
decision making arm of the company is charged with the responsibility of
ensuring that Resolutions passed by either the shareholders or the Board are executed.
Decisions that require Resolution are those decisions which are beyond the
normal day-to-day running of the company, as such decisions will affect the
Constitution and Rules of the company i.e. the Memorandum and Articles of
Association.
FORM OF RESOLUTION
Resolutions could
either be proposed for passage in written form or communicated verbally at a
physical meeting.
Where it is
proposed and passed at a meeting, it is required that such be accurately
recorded in the minutes of the meeting. This serves as evidence of the
proceedings and the actions and decisions taken at such a meeting. Thereafter,
a written notification informing the owners of the company (shareholders) of
any Resolution so passed must be dispatched.
As a requirement of
the law, public companies are to pass their Resolutions at physical meetings
convened for such a purpose. The private companies on the other hand can elect
to pass their Resolutions either through written exchanges or physical
meetings.
REQUIREMENTS FOR
PASSING A RESOLUTION
These are:
·
Passing
the Resolution at a meeting that has been properly convened and fulfils the
quorum requirement.
·
Entering
the Resolution in the books kept by the company within one month of the meeting
being held.
·
The
chairman must sign the record of the minutes of the meeting.
·
The
company’s minute book must be kept at the company’s registered office or
principal place of business.
·
If any
of the above requirement is not carried out, the Resolution may be invalidated.
PROCEDURE FOR THE
PASSAGE OF A RESOLUTION
Resolutions are
normally proposed and seconded before they are put to vote. Where a Resolution
has been proposed and seconded but not put to vote at the meeting but is rather
merely declared to have been so passed by the Chairman, such an act invalidates
such Resolution.
A proposed
Resolution can be amended. Such amendment can take the form of an omission, an
insertion, a substitution or the alteration of the position of words or phrases
in the original motion. The amendment must be voted on first. In the absence of
this, any Resolution passed subsequently will not be binding.
TYPES OF RESOLUTIONS
There are two (2)
types of Resolution; Ordinary Resolution and Special Resolution.
Ordinary Resolution refers to decisions which simply requires a
majority of the shareholders or directors to agree or disagree upon S. 233(1)
Companies and Allied Matters Act (CAMA) 1990. They are passed with a show of
hands at the meeting or in writing (private companies). Example of such
decisions are appointment or removal of directors, appointment of the members
of the audit committee, etc. See S. 214 CAMA.
Special Resolution on the other-hand is also called an
“Extraordinary Resolution”. It is employed for matters considered to be very
important to the life of the Company. For it to be passed, it requires the
consent of at least 75% of the shareholders or directors present at the
meeting. It equally must have been backed by a pre-notice duration of twenty-one
(21) days prior to the meeting to be convened for its proposition and passage
S. 233(2) CAMA.
CAMA provides
instances where the Board is to carry out its functions by an Ordinary
Resolution or by Special Resolution. A business of the Board would be invalid
if it passes by Ordinary Resolution any corporate decision(s) which requires a
Special Resolution and vice versa.
CAMA at Section
233(6) equally allows a company to take decisions or handle matters by Ordinary
Resolution where the Act does not specifically provide that such is to be done
by Special Resolution. To take advantage of this provision, such a variation
must be clearly provided for in the Articles of Association of the company.
Company decisions
or business that must be specifically passed by Special Resolution are:
·
Alteration
of the Memorandum of Association S. 46(1) CAMA
·
Alteration
of the Articles of Association S. 48(1)
·
Changing
the name of the company S. 31(1)
·
Reduction
in authorized share capital S. 106(1)
·
Making
liability of directors unlimited S. 289
·
Resolution
that the company be wound up by the court S. 408(a)
·
Resolution
that the company be wound up voluntarily S. 457(b)
·
Authorizing
the liquidator on the sale of undertaking of company to receive shares, policies,
or similar interests as consideration for distribution among members S. 538
·
Re-registration
of unlimited company as company limited by shares S. 52(1)
·
Re-registration
of a company limited by shares as unlimited company Ss. 51(5) & 46(1)
·
Re-registration
of private company as public company S. 50(1)
·
Re-registration
of public company as a private company S. 53(1)
·
A
Resolution for a scheme proposed for a compromise, arrangement or
reconstruction of merger between it and another company S. 539
·
A
Resolution by the company to pay interest on equity capital raised to defray
the expenses of certain infrastructure projects which cannot be made profitable
for a long period S. 113
·
A
Resolution to determine that any portion of the company’s share capital which
has not been already called up shall not be capable of being called up except
in the event and for the purposes of the company being wound up S. 134
·
A
Resolution of the holders of a class of shares to vary the rights attached to
that class of shares S. 141
·
A
Resolution to alter remuneration of directors fixed by articles of association
S. 267
·
In a
member’s voluntary winding up, a Resolution, on or after the appointment of a
liquidator, that the accounts of the company shall not be and it’s prior to
it’s being laid before the general meeting S. 470(6)
·
In a
member’s voluntary winding up a Resolution to authorize the liquidator to pay
any classes of creditors in full; to make any compromise or arrangement with
creditors; to compromise all calls, and liabilities to calls, debts and
liabilities S. 481.
CONCLUSION
It can be seen that
a company makes and takes decisions through the passage of Resolutions. It is
can either be exercised by the shareholders at a general or extraordinary
meeting or by the directors at a Board meeting. The Articles of Association of
a company provides for matters which can be passed by either Ordinary or
Special Resolution.
Note
This article was
put together by Ramatu Ibrahim, Esq
