Meetings and resolutions are an essential part of running a successful limited company. You may have to hold board meetings of the directors and general meetings of the members (shareholders/guarantors) when important decisions need to be made. Whenever any such formal meetings take place, certain rules and procedures must be followed to comply with company law.
Any resolutions (decisions) that are taken during the course of a board meeting or general meeting must be in accordance with the Companies Act 2006, as well as the company’s articles of association and shareholders’ agreement. Additionally, limited companies are legally required to keep a record of meetings in the form of ‘minutes’.
If you are the sole director and shareholder of a company, you are still required to hold ‘meetings’ in certain situations, such as passing resolutions. This is simply a formality to satisfy corporate compliance regulations. However, most resolutions can now be passed as written resolutions (i.e. without holding a general meeting).
Furthermore, private limited companies are no longer required by law to hold general meetings (including Annual General Meetings) or board meetings, unless the articles of association state otherwise. However, best practice dictates that an Annual General Meeting of the members and regular board meetings of the directors should be held.
What is a general meeting in a limited company?
Any formal meeting of limited company shareholders is called a general meeting. The conduct of these meetings is governed by the Companies Act 2006, the articles of association, and any shareholders’ agreement that has been drawn up. General meetings are usually called by directors when there is a need for shareholders to discuss and make formal decisions on the following types of matters:
- the appointment and removal of directors
- changing directors’ powers
- altering the articles of association
- altering the shareholders’ agreement
- reviewing annual accounts
- company finances
- changing the name of the company
- changing the structure of the company
- altering the objectives of the business
- issuing company shares
- approving share transfers
- creating new share classes
- dissolving the company
- legal claims and proceedings
- the appointment and removal of auditors
Members also have the power to require the directors to call a general meeting. To do so, a request from members representing at least 5% of the company’s paid-up share capital (or voting rights, if the company is limited by guarantee) must be made to the directors.
If a general meeting is called, statutory rules require that a notice period of at least 14 days is given to every member. However, the company’s articles may stipulate a longer notice period. In some instances, a general meeting can be held on short notice with the consent of a majority of members holding at least 90% of the company’s voting rights.
Notice of a general meeting must be provided to every shareholder and it should contain the following information:
- date, time, and location of the meeting
- type of general meeting
- general nature of the business to be conducted
- intention to propose a special resolution (if applicable) and the specific wording of the resolution
- a statement declaring that every shareholder has the right to appoint a proxy
- date the notice is issued
- name of the individual calling the meeting
Notice must also be sent to the directors and anyone who is entitled to shares upon the death or bankruptcy of a shareholder.
Any decisions taken by shareholders at a general meeting are formalised by ‘passing a resolution’. Once passed, these decisions are legally binding. Copies of resolutions must be filed with Companies House within 15 days.
Minutes must be taken to officially record the proceedings, the names of all persons present, and any formal decisions that are taken. The company should keep copies of all minutes and resolutions at its registered office or SAIL address.
What is a limited company board meeting?
A board meeting is an official meeting of limited company directors. Board meetings are required when directors need to make important decisions, present proposals, raise concerns, review the financial position of the business, and discuss strategies.
First board meeting of directors
The purpose of the first board meeting of directors is to provide an opportunity for directors to collectively discuss the formalities of the new business, such as:
- familiarising themselves with the articles of association
- determining the duties and responsibilities of directors
- confirming the objectives, vision, and values of the company
- issuing share certificates
- appointing a chairperson of the board
- appointing a company secretary
- delegating duties and responsibilities to the company secretary
- confirming the company’s accounting reference date (ARD)
- confirming statutory filing deadlines for the annual accounts, Confirmation Statement, and tax returns
- setting up a business bank account
- record-keeping and accounting requirements
- appointing an accountant
- director remuneration
- hiring staff
- contracts and agreements with suppliers and service providers
- marketing strategies and other important business strategies
Statutory rules governing limited company board meetings require that minutes are taken to officially record the proceedings, even if the company has just one director.
Taking minutes of meetings
Aside from being a legal requirement, taking minutes is extremely beneficial because it provides a written record of everything that occurs in a meeting. This greatly reduces the risk of mistakes, miscommunication, and disagreements further down the line. Typically, minutes of board meetings and general meetings should contain the following details:
- company name and registered office address
- time, date, and location of the meeting
- names of all persons in attendance
- apologies for absences
- any proxies present
- proposals put forth for consideration
- proposed resolutions
- decisions that were taken (i.e. resolutions that were passed)
- names of persons who supported or opposed any proposed resolutions
- queries and objections raised
- any other matters raised or discussed during the course of the meeting
- signature of director or company secretary
Limited companies must maintain copies of all minutes at their registered office or SAIL address for a minimum period of ten years.
What are company resolutions?
A company resolution is a legally binding decision made by directors or shareholders. If a majority vote is achieved in favour of any proposed resolution, the resolution is ‘passed’.
Shareholders can pass ordinary resolutions or special resolutions at general meetings. Alternatively, certain resolutions can be passed in writing, without the need to call and attend a general meeting.
All types of collective decisions of directors are simply referred to as ‘resolutions’ or ‘board resolutions’. These decisions can be made at board meetings or in writing.
Types of resolutions
There are 3 types of resolutions available to limited company shareholders:
- Ordinary resolutions – Passed by a simple majority (above 50%) of shareholders’ votes. Members cast their votes on a show of hands or poll. Used for all types of decisions, unless the Companies Act, the articles of association, and/or a shareholders’ agreement stipulates the need for a special resolution. The majority of ordinary resolutions must be filed with Companies House.
- Special resolutions – Passed by a 75% majority of shareholders’ votes at a general meeting. Members cast their votes on a show of hands or poll. Used for extraordinary business decisions that cannot be passed by an ordinary resolution.
- Written resolutions – Used when a general meeting is not required to pass an ordinary resolution or special resolution. Any written ordinary resolution must be passed by a simple majority of shareholders’ votes. Written special resolutions require a 75% majority vote. Shareholders cast their votes by signing the written resolution (if it is distributed on paper) or indicating their decision via email or online (if it is distributed by email on a website).
Board resolutions are formal decisions taken by the directors, either at board meetings or in writing. Typically, a simple majority vote of the directors is all that is required to pass a board resolution. However, it is possible to amend the articles to include provisions for a higher majority or unanimous agreement for some or all resolutions of the directors.
What decisions require an ordinary resolution?
An ordinary resolution is passed if a simple majority (above 50%) of the votes cast are in favour of the resolution. This type of resolution can be used by shareholders and directors for all day-to-day matters, such as:
- appointing and removing directors
- appointing and removing secretaries
- directors’ employment contracts
- amending the directors’ powers set out in the articles and shareholders’ agreement
- approving dividend payments and directors’ loans
- authorising the transfer of shares
The types of decisions that company directors can make depend entirely on the powers they are granted by the shareholders. Their rights and powers are outlined in the articles of association and shareholders’ agreement.
What is a special resolution?
In the context of limited companies, a special resolution is a motion or proposal that requires the approval of at least 75% of shareholder votes. This kind of resolution is reserved for more important and exceptional decisions, such as:
- changing a company name
- reducing issued share capital
- allotting more shares
- issuing different share classes
- altering the articles of association
- adding, removing, or altering pre-emption rights of shareholders
- re-registering a company
- changing a private company to a public company, or vice versa
- winding up a company by members’ voluntary liquidation
The Companies Act 2006 specifies the types of decisions that require a special resolution. Where no type of resolution is specified, shareholders may pass an ordinary resolution with a simple majority of over 50% of the votes.
How to pass a special resolution
To pass a special resolution, 14 days notice must be given to all members about the proposed resolution and its intention, unless the articles of association state otherwise.
If a general meeting is held, a vote will be taken by a show of hands or by poll. Alternatively, these decisions can be passed by written resolution. If 75% of the shareholders agree to pass the proposed resolution, the decision is legally binding in accordance with the Companies Act 2006.
Special resolutions must be delivered to Companies House by post within 15 days of being passed. A copy must also be given to all shareholders and the company auditor. Furthermore, a company must keep a copy of all resolutions at its registered office address or SAIL address for a minimum period of 10 years.