Ordinary resolution

3 key takeaways

• An ordinary resolution is passed with a simple majority vote, meaning more than 50% of the votes cast by shareholders or members are in favor.
• It is commonly used for routine decisions in a company, such as approving annual accounts, appointing directors, or declaring dividends.
• Ordinary resolutions are typically easier to pass compared to special resolutions, which require a higher threshold of approval.

What is an ordinary resolution?

An ordinary resolution is a type of resolution adopted by the shareholders or members of a company during a general meeting. It is the most common form of resolution and is used to address routine business matters that do not significantly alter the company’s structure or operations. To pass an ordinary resolution, more than 50% of the votes cast by those present (either in person or by proxy) at the meeting must be in favor.

Process of passing an ordinary resolution

The process for passing an ordinary resolution typically involves the following steps:

1. Notice of meeting: A notice of the general meeting is sent to all eligible shareholders or members, specifying the date, time, venue, and agenda items, including the proposed ordinary resolutions.
2. General meeting: The general meeting is convened, and shareholders or members gather to discuss and vote on the proposed resolutions.
3. Discussion: The proposed ordinary resolution is presented, and shareholders or members may discuss and debate the merits of the resolution.
4. Voting: A vote is taken on the resolution. This can be done by a show of hands, by poll, or electronically, depending on the company’s articles of association and the nature of the meeting.
5. Counting votes: Votes are counted, and if more than 50% of the votes cast are in favor, the ordinary resolution is passed.
6. Recording the resolution: The outcome of the vote is recorded in the minutes of the meeting, and the resolution becomes binding on the company.

Examples of ordinary resolutions

Ordinary resolutions are used for various routine decisions in a company, including:

• Approval of financial statements: Adopting the company’s annual accounts and reports.
• Appointment of auditors: Approving the appointment or reappointment of the company’s external auditors.
• Election of directors: Electing or re-electing members of the board of directors.
• Declaration of dividends: Approving the payment of dividends to shareholders.
• Remuneration of directors: Setting the remuneration or compensation for directors.

Difference between ordinary and special resolutions

While ordinary resolutions require a simple majority to pass, special resolutions require a higher threshold of approval, typically at least 75% of the votes cast. Special resolutions are used for more significant decisions that can fundamentally alter the company’s structure or operations, such as:

• Amending the articles of association: Changing the company’s governing documents.
• Changing the company name: Approving a new name for the company.
• Issuing new shares: Authorizing the issuance of additional shares or changing the share capital structure.
• Mergers and acquisitions: Approving major transactions like mergers, acquisitions, or disposals of significant assets.

Related topics

If you found the concept of ordinary resolutions interesting, you might also want to explore these related topics:

• Special resolution: A resolution requiring a higher threshold of approval, typically 75% or more of the votes cast.
• General meeting: A formal gathering of shareholders or members of a company to discuss and vote on important matters.
• Proxy voting: A method allowing shareholders to vote on resolutions without being physically present at the meeting.
• Board of directors: A group of individuals elected by shareholders to oversee the management and direction of the company.
• Corporate governance: The system of rules, practices, and processes by which a company is directed and controlled.

Understanding ordinary resolutions is crucial for participating in corporate governance and decision-making processes, ensuring that routine business matters are conducted efficiently and in accordance with the company’s regulations.