Written resolutions are not new. The procedure has been commonplace for years, but have now been put on a statutory basis, with much more complex rules than applied hitherto. The Companies Act 2006 gives greater prominence to the written resolution and creates some more detailed procedural rules. A provision in the articles of a private company that a resolution cannot be passed as a written resolution is void (sec300), but this applies only to resolutions 'required or provided for in an enactment'. As under the old law, there are two types of resolutions that cannot be passed as written resolutions: to remove a director under sec268 or an auditor during term of office under sec510.
Eligible members (sec289) (timing where membership changes)
In relation to a written resolution, the eligible members are those members who would have been entitled to vote on the resolution on the circulation date (see sec290) of the resolution. If those who are eligible change during the course of that day, it is those who are entitled to vote at the time that the first copy is sent or submitted to a member for his agreement.
Circulation of written resolutions proposed by the directors (sec292)
The statutory provisions on the means of circulating written resolutions are more detailed than might have been expected, given the practice is already commonplace. Notice the difference between 'sending' the resolution (each member gets a separate copy) and 'submitting' it, where the members get the same copy in turn.
The provisions are:
The company must send or submit a copy of the resolution to every eligible member. (see sec289, above.) The company must do so by either
(a) sending copies at the same time (so far as reasonably practicable) to all eligible members in hard copy form, in electronic form or by means of a website, or
(b) if it is possible to do so without undue delay, by submitting the same copy to each eligible member in turn (or different copies to each of a number of eligible members in turn),
or by sending copies to some members in accordance with (a) and submitting a copy or copies to other members in accordance with (b).
The resolution must be accompanies by a statement saying how the member should signify agreement to the resolution (see sec296) and the date by which the resolution must be passed if it is not to lapse (see sec297).
Failure to comply with these provisions is an offence, but does not affect the validity of the resolution.
Note: these provisions really can complicate things. The written resolution must be accompanied by this notice, and the lapse date (which will be 28 days for virtually all companies at the moment as none will have specified something else in their articles) may lead members to delay until the end of that period. If it is not assented to by that date, then the resolution lapses.
Procedure for signifying agreement (sec296 - sec297)
Agreement is signified by the company receiving an authenticated document (hard copy or electronic) identifying the resolution to which it relates and indicating his agreement to it. Once signified, agreement cannot be revoked.
The big change is that the resolution is passed when the required majority (simple majority, or 75% if a special resolution) as appropriate of eligible members have signified their agreement to it: CA 2006, sec282 and sec283. Under the old procedure, every member was required to consent.
While perhaps more efficient, majority voting on written resolutions may lead to poorer decision making in some circumstances, and weakens the position of minority shareholders. They lose the right to argue against a controversial proposal at a general meeting, where they might, perhaps, have persuaded other members to vote against it. It is easier to push measures through, or treat people unreasonably, by signing a paper than at meeting where you have to look them in the eye and argue a case to less committed members.
Circulation of members' written resolutions (sec292)
Members representing not less than 5% (or such lower percentage as is specified in the company's articles) can require a written resolution to be circulated unless it would be ineffective (because inconsistent with an enactment or the company's constitution, etc.) or defamatory, frivolous or vexatious. They may also require a statement of up to 1,000 words to be circulated with it.
The company must within 21 days send or submit the resolution and its accompanying statement to the members (as it would one circulated by the directors, above). Note, however, that the members requesting the statement to be circulated must pay the company's expenses in doing so unless the company resolves otherwise, and the company need not circulate the resolution and statement unless the members deposit or tender a sum reasonably sufficient to meet these expenses (sec294).
The company, or a person aggrieved, may apply to the to the court for an order not to circulate the statement requested by the members if the court is satisfied that sec292 and sec293 are being abused (sec295).
Rights of auditors
By CA 2006, sec502: In relation to a written resolution proposed to be agreed to by a private company, the company’s auditor is entitled to receive all such communications relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13 of this Act, are required to be supplied to a member of the company.
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