Written Resolution – What is it?

Written by

Published in on

0 comments | Tags: , , ,

Written resolutions have long been an instrument in a company’s toolkit for agreeing directors’ and shareholders’ resolutions without the need to physically hold a meeting. Here we’ll discuss:

  • What they are
  • Why and when companies choose to use them
  • How they are formed and circulated
  • How they are agreed

Shareholders’ written resolutions have the most rules for their proposal, contents and circulation, which we’ll explore in detail. Directors’ written resolutions, covered at the end of this article, have fewer enforced rules to their use, and are covered more by the company’s articles than the Companies Act.

Need written resolution templates?

Inform Direct has over 300 templates available, including written directors' and shareholders' resolutions.

Access the templates

Note: Throughout this article, reference is made to company’s members as ‘shareholders’ as this is the most familiar type of member, but this information applies equally to members in a company limited by guarantee.

What is a written resolution?

Written resolutions allow board and shareholder decisions to be made without having to hold a board or shareholder meeting. Instead, a written resolution describing the decision can be circulated to the required audience, with them able to sign and return it – confirming their agreement.

An example of a shareholders’ written resolution, and what it must contain, is included later in this article.

Written resolutions can be used for shareholder ordinary and special resolutions instead of a holding a general meeting, and for directors’ resolutions instead of holding a board meeting.

Why & when might a company choose to use a written resolution?

There are many reasons that a company may decide to make most, or just some decisions, via written resolutions:

  • It’s simpler and faster:
    • If the directors/shareholders are not close geographically.
    • It saves on the hassle and administration of calling and running a shareholder/board meeting for what may be a single decision.
  • it just makes more sense:
    • If a company has just one director and shareholder – it would be strange for them to hold a meeting on their own!
    • If there is a majority shareholder, calling everyone in for a meeting that can effectively be made by that one person would be wasting everyone’s time.
  • It’s a better option for a specific decision:
    • There is no regular or scheduled board/shareholder meeting soon and you need a decision to be made quickly.

Shareholder written resolutions

For a written (whether ordinary or special) shareholders’ resolution to be passed, the requirements are the same as those at a general meeting:

These are the same percentage requirements that would be required in a meeting. However, there is an often overlooked but key difference. A person that doesn’t attend a meeting (or vote via proxy) counts as not voting. A person that doesn’t respond to a written resolution counts as a vote ‘against’ the resolution.

This can become significant, as demonstrated in the following example.

Example

A company has five shareholders:

  • Two holding 25 shares each – will vote ‘For’ the resolution
  • Two holding 20 shares each – will vote ‘Against’ the resolution
  • One holding 10 shares – usually doesn’t attend meetings or vote

Here are the voting outcomes of a meeting vs written resolution:

As shown here, a resolution passing can entirely hinge on the method used to propose it.

When can a written shareholders’ resolution be used?

Written shareholders’ resolutions can be used for almost any ordinary or special resolution, although the following two resolutions can’t be agreed by a written resolution:

  • Removal of an auditor before their term of office expires.
  • Removal of a director before their period of office expires.

Public limited companies cannot use written shareholders’ resolutions to make decisions unless it is specifically permitted in their articles of association.

How are they proposed?

Both officers and shareholders can propose a resolution to be circulated as a written resolution.

A proposal request from shareholders must be sent to the company by hard copy (paper) or electronically. It must identify the resolution being requested for proposal, include any accompanying statement and be signed by those making the request.

For a shareholder proposal to be accepted for circulation it must pass certain criteria:

  • At least 5% of the shareholders eligible to vote on the resolution have requested that it be circulated (or a lower percentage if specified in the company’s articles).
  • It must not be defamatory of any person.
  • It must not be frivolous or vexatious – so it must have value/purpose, and not just be to cause nuisance.
  • If passed, it must be able to be effective (so it doesn’t cause an inconsistency with the company’s constitution).

Where shareholders propose the resolution be circulated, they are able to write up to 1,000 words on the proposed resolution which then must be circulated with it.

What must be included in the written resolution?

The written resolution document that will be circulated must include:

  1. Whether it is a special or ordinary resolution.
  2. The wording of the resolution.
  3. A description of how shareholders can signify agreement.
  4. The date by which the resolution must be passed, else it will lapse (28 days from circulation date unless stated otherwise in the company’s articles).
WrittenResolutionExampleCallOutBoxes

Multiple resolutions can be specified within one written resolution circulation and document, including a mixture of ordinary and special resolutions.

How is the written resolution circulated?

Any written resolution must be sent to all shareholders entitled to vote on it, and a copy sent to the auditors (where appointed). A shareholder is eligible to vote on such a resolution if they were eligible to vote on the date of circulation (and time of circulation to the first shareholder if it comes down to it).

Usually the resolution is sent at the same time to all recipients (so far as reasonably practicable) by:

  • Hard copy, or
  • Electronically, or
  • By means of a website

Or, so long as it doesn’t cause delay it can be done by sending the same copy to each recipient in turn, or a combination of these two methods.

If the resolution was proposed by shareholders and there was an accompanying statement, it must be circulated with the written resolution (it is possible to get the accompanying statement suppressed by application to the court).

How is agreement signified by a shareholder?

It is usual for the written resolution document sent to each shareholder to be signed and returned to the company to signify agreement. This can be on paper or electronically.

However, the Companies Act deems a shareholder’s agreement as signified when the company receives an authentic document that both identifies the resolution to which it relates and indicates their agreement to the resolution. This allows for agreement to be signified by email response or performing an action on a website, so long as it is allowed by the company’s articles.

By whatever means chosen, once this agreement is received by the company, it cannot be revoked.

Once the requisite percentage is reached the resolution is deemed as passed. The same Companies House filing and record keeping requirements for ordinary and special resolutions passed at a meeting are required.

If by the expiry date the requisite percentage is not reached, then the resolution lapses and is not passed.

Directors’ written resolutions

The requirements for directors’ decisions to be made via written resolutions are documented in a company’s articles. The model articles (and most other articles) allow for them, but usually require that they can only be passed by unanimous agreement of all eligible directors. Usually they can be utilised for any board decisions.

‘Eligible directors’ is used here as it is possible that a director is not allowed to vote on a resolution because it would cause a conflict of interest. For example, a director may have a personal interest in the result of the decision, such as the awarding of a service contract to the said director.

Just like a shareholders’ written resolution this needs to be documented and signed by the directors to signify agreement. Just like the minutes of a board meeting this must be kept for 10 years.


Use Inform Direct to create registers, written resolutions and other documents with ease

Start now

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

2019 Review
of UK Company Formations

Read our comprehensive review of UK company formations in 2018, year-on-year growth rates and breakdown by county. This detailed insight is provided in the form of easy to understand infographics available for sharing through social media and on your own website