Company Resolutions And Types

A resolution is the final form of a decision taken at a meeting by voting on a motion, with or without amendment.

A Resolution must not be confused with a motion:

A motion is con­sidered at a meeting, a resolution is the outcome of the discussion. A resolution is binding on the organisation. It becomes effective when it is passed but minutes make the evidence of such resolution. Sometimes there is a legal formality, as we find in the Companies Act, to file a copy of a resolution with some appropriate authority (e.g., the Registrar of Companies) to make it effective.

Rules Regarding Resolution:

Every association has to function guided by the resolutions adopted at the meetings at different levels—resolutions passed at general meetings, at executive meetings and at committee meetings, if any. In an Assembly or in Parliament proposed Bills are passed in the forms of resolutions which become the Acts subsequently. Therefore, the importance of reso­lutions is immense. Certain rules have to be strictly observed for passing resolutions.

They are:

(1) The drafting of a resolution has to be carried out with great care so that the purport or meaning of the resolution is easily and clearly understandable and there is no ambi­guity (double meaning). The secretary, who is supposed to be an expert in the line, helps in the drafting process. The motion itself shall be drafted in such a manner that it can be adopted as a perfect resolution. This is particularly true for a formal resolution.

(2) There are different styles and forms of drafting a resolution. Any one style can be followed. It is desirable that a formal resolution is drafted in a specialized style.

(3) A resolution must be entered in the Minute Book in verbatim, i.e., word for word.

(4) Once a resolution is passed it cannot be revoked or cancelled either at the same meeting or at any subsequent meeting by passing another resolu­tion.

Types of Resolutions:

Broadly speaking, resolutions are of two types:

(1) Ordinary Resolution:

This type of resolution has the following characteristics:

(a) This can be passed by a simple majority of votes and even by a margin of one vote. It can be passed (or lost) by the casting vote of the chairman.

(b) This type of resolution is necessary to take decisions on ordinary matters of the association.

(c) This is the most common type of resolution.

(d) Formalities for passing such a resolution (unlike a special resolu­tion) are not so strict.

(2) Special Resolution:

This type of resolu­tion has the following characteristics:

(a) It needs a specific margin of votes to be passed. For example—Two-thirds majority or three- fourths majority. Every association in its bye-laws mentions what shall be the margin. There may be statutory rules too. For example, the Companies Act states that there shall be three-fourths majority out of the members present (in person or by proxy) and voting. According to our Constitution, any Article of the Constitution can be altered by two-thirds majority of all the members of Parliament.

(b) Such resolutions are necessary when any decision has to be taken affecting the very constitution of the organisation, e.g., altering the objects of the organisation

(c) This type of resolution is not commonly necessary.

(d) There may be strict formalities to be followed for the purpose (as found in the Companies Act).

Concept of types of resolutions comes mostly from the Companies Act. There are various types of resolutions mentioned in the Com­panies Act, mainly applicable to members’ meetings.

Resolutions as found in the Companies Act:

(1) Ordinary Resolution:

According to Sec. 189(1), an ordinary resolution is that which can be passed at a general meeting by simple majority (including a casting vote of the chairman, if any), votes being cast by the members present either in person or by proxy and either by show of hands or by poll.

(2) Special Resolution:

According to Sec. 189(2), a special resolution is that which can be passed at a general meeting, votes being cast by the members present either in person or by proxy and either by show of hands or by poll, provided that (a) in the agenda it is mentioned that the resolution shall be passed as a special resolution, (b) a notice has been duly issued and (c) three-fourth of the votes cast are in favour of the resolution.

It has to be noted that at a Board meeting there is no question of any special resolution. But, sometimes to pass a particular type of resolution the consent of all the directors present is necessary. (In the past, special resolution was known as extraordinary resolution).

(3) Resolution with Special Notice:

According to the Com­panies Act, certain resolutions require a special notice for their validity. The resolution itself may be passed as an ordinary resolution. The notice for a members’ meeting is prepared and issued by the Board of Directors (the secretary does it in practice) and the agenda is includ­ed in the notice.

If any member who wants to move any motion at the meeting must be given the opportunity to do it and generally for that this Section has been provided. According to Sec. 190, certain resolu­tions, as wanted by the Act or as mentioned in the articles, require special notice.

It means that a member, intending to move a resolution, shall give a notice to the company at least fourteen days before the meeting and the company shall circulate the notice of the resolu­tion to all the members at least seven days before the meeting.

Suppose, a director is to retire by rotation and his name has been mentioned in the notice as offering for re-election A member wants to propose the name of another person. He must send the name of that person at least fourteen days before the meeting and the company shall circulate the name at least seven days before the meeting (Sec. 257).

(4) Resolution by Circulation:

The Board of Directors of a Company (or the members of a committee appointed out of the directors of a company) may pass a resolution without holding a meeting. This can be done by circulating a draft of the resolution together with necessary papers, if any, to all the directors (or the members of the committee) at their usual address in India, and who are in India.

The resolution is deemed to be passed provided:

(a) The all or the majority have approved it and

(b) The total number of directors then in India is not less than the quorum (Sec. 289).

(5) Resolutions to be filed:

Copies of some resolutions, e.g., as resolution on change of any clause of any document, have to be filed with the Registrar (Sec. 192).

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