A resolution is the formal means by which decisions are made by a meeting of company members. There are two types of resolutions: ordinary and special. The Corporations Act 2001 (the Corporations Act) requires many decisions that affect a company to be made by resolution, some of which must be by special resolution. In addition, the constitution of a company may also require that other decisions be made by either an ordinary resolution or a special resolution.
General requirements for passing resolutions
The general requirements under the Corporations Act for the passing of any resolution are:
- The resolution—
- is passed at a meeting, which is properly convened and satisfies the quorum requirements, and
- is entered in the books kept by the company for that purpose within one month after the meeting is held.
- The minutes must be signed by the chair of the meeting at which the resolution was passed or by the chair of the next meeting.
Non-compliance with these requirements could invalidate the outcome of the resolution.
Voting on resolutions
Where a company has share capital, a member has one vote for each share held subject to any rights or restrictions attached to any class of shares.
For a company without share capital, every member is entitled to one vote. The chair has a casting vote, and if a member, also a member’s vote.
Proxy documents for members of listed companies
A notice of meeting for a meeting of members of a listed public company:
- must specify a place and a fax number; and
- may specify an electronic address for the purposes of receipt of proxy appointments.
Listed companies are required to record the total number of proxy votes exercised validly and how those votes were exercised in the minutes of meeting of members, in respect of each resolution in the notice of meeting.
These requirements apply despite anything in the company’s constitution.
Ordinary resolutions are not specifically defined in the Corporations Act and require only a simple majority to pass (i.e. more than 50% of the members present at the meeting, either in person, or by proxies, if allowed by the constitution).
Some of the matters on which an ordinary resolution is sufficient are:
- election/re-election of directors
- appointment of an auditor
- acceptance of reports at the annual general meeting
- strategic, commercial decisions
- increase or reduction in the number of directors
- passing a board limit resolution (for public companies)
Calling a meeting of members of a company or registered scheme
The notice of meeting sent to members advising them of the meeting must set out an intention to propose the special resolution and state the special resolution. This is in addition to the other information required to be provided in a notice of a meeting including the place, date and time of the meeting, the general nature of the meeting’s business and information about proxy votes where applicable.
Generally, notice of a meeting to members of a company must be given 21 days before the meeting is to be held. A listed company must give a least 28 days notice. Shorter notice can be given where members with at least 95% of the votes that may be cast at the meeting agree beforehand. However, the provision for shorter notice does not apply to a resolution to remove or appoint a director or to remove an auditor.
Notice of a meeting to members of a registered scheme must be given at least 21 days before the meeting is to be held. Registered schemes can’t give shorter notice.
Passing a special resolution when holding a meeting
At least 75% of the votes cast by members entitled to vote on a special resolution must be in favour of the resolution for it to be passed. However, it will not always be necessary for the members to physically meet in order to consider the resolution.
Passing a special resolution without holding a meeting
A proprietary company with more than 1 member can pass a resolution by circulating a document and having all the members entitled to vote sign a statement on the document that they are in favour of the resolution. Where two or more people hold shares together, each member of a joint membership must sign. The resolution is passed when the last member signs (i.e 100% of members entitled to vote agree). A ‘circulating resolution’ cannot be applied to a resolution to remove an auditor. The 75% requirement for votes in favour of the special resolution only applies when a company holds a physical meeting.
A proprietary company with only one director who is also the only member of the company can pass a resolution just by signing a document setting out the resolution.
Advising us about special resolutions
|Type of action requiring special resolution||Form used|
Modification or repeal of the company constitution or a provision of the constitution (s136(2) of the Corporations Act).
|Form 205 (public companies only)|
|Change the name of the company (s157(1)).||Form 205|
|Change of company type (e.g. from a public company limited by shares to a proprietary company limited by shares) (s162(1)).||Forms 205 and 206|
|Setting out the procedure for varying or cancelling the rights attached to the shares in a class of shares (for companies with share capital) or the rights of members in a class of members (for a company limited by guarantee). This applies only if the company does not have a constitution or the constitution does not set out the procedure (s246B(2)(c)).||Form 2205 (if required) and for public companies only, Form 210|
|Issue of preference shares with appropriate rights attached (unless the company's constitution already provides for it) (s254A(2)).||Form 484|
|Conversion of ordinary shares into preference shares (s254G(2)).||Form 211|
|Limited company may provide that the whole or a part of its unpaid share capital may be called up only if the company becomes externally administered (s254N(1)).||Form 2205|
|Give different dividend rights or shares in the same class (s254W(1)(b)).||Not required|
|Selective reduction of share capital (s256C(2)).||Forms 2205 and 2560|
|Shareholder approval for selective buy-back of shares (s257D(1)(a)).||Form 280|
|Financial assistance for the company to acquire shares in the company itself (s260B(1)).||Forms 2205, 2601 and 2602|
|Approval by an Australian company listed on the stock exchange for a company that will be a subsidiary of the listed company allowing financial assistance to be given to the subsidiary to acquire shares (s260B(2)).||Forms 2205, 2601 and 2602|
|Company resolves to be wound up by the Court (s461(1)(a)).||Form 205|
|Company resolves to be wound up voluntarily (s491(1)).||Form 205|
|Liquidator seeks sanction from the company for any action or any purpose he or she thinks fit (s506(1)(f)).||Not required|
|Powers and duties of liquidator (s506(1A)(b)).||Form 205|
|Giving the liquidator of the company power to accept shares or other items as consideration for sale of the property of the company (s507(2)).||Form 205|
|Confirming that an arrangement entered into between the creditors and the company is binding on the company if the company is about to be wound up or is in the course of being wound up (s510(1)(a)).||Form 205|
|Company wants to transfer its registration to registration under a law of a State or Territory instead (s601A1).||Form 6014|
|Members of a registered scheme modifying, repealing or replacing their constitution (s601GC(1)).||Form 5101|
For more information on company resolutions, see Your company and the law.
Please note that this is a summary giving you the basic information you need. It does not cover the whole of the relevant law and is not a substitute for professional advice.
Moreover, because it avoids legal language wherever possible there may be some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances need to be taken into account when determining how the law applies to you.
This is Information Sheet 22 (INFO 22), reissued in July 2011. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.