Company Resolutions in Malaysia: Types & How to Pass one?

When running a business after incorporation, it is important to take note of every decision and action taken by the company for recording purposes. In essence, this will help to maintain the integrity of the company. A company resolution is a document used in various countries to accomplish this, being no different in Malaysia.

Definition of a Company Resolution

Resolutions are written documents or statements that record decisions or actions discussed and approved during an annual general meeting (AGM) or extraordinary general meeting (EGM). As a matter of fact, companies in countries all over the world, including Malaysia, commonly use such documents.

Since the board of directors typically makes major commercial decisions, it is also common to refer to the resolution as a “Company Board Resolution”.

It is stated in the Company Act 2016, Section 290 that:

1. A resolution of the members or a class of members of a private company shall be passed either:
   • By a written resolution
   • At a meeting of the members
2. A resolution of the members or class members of a public company shall be passed at a meeting of the members
3. Unless otherwise stated in a constitution, where the Company Act does not specify, the resolution of a Company shall be passed as an ordinary resolution

Types of Company Resolutions in Malaysia

In Malaysia, company resolutions are formal decisions made by the board of directors and approved by shareholders. It can be either an ordinary resolution or a special resolution.

Section 291 – Ordinary Resolutions

1. Definition of Ordinary Resolution

An ordinary resolution of the members or class members of a Company means a resolution passed by a majority of such members who are:

• Entitled to vote in person, or where proxies are allowed
• Entitled to vote via a written resolution

2. Passing Ordinary Resolutions by Show of Hands

Subject to item 1, an ordinary resolution passed at a meeting on a show of hands is passed by a simple majority if it is passed by members representing a simple majority of members who are present at the meeting

3. Passing Ordinary Resolutions by Poll

An ordinary resolution is passed on a poll taken at a meeting if it is passed by members representing more than half the total of voting rights of the members who are entitled to vote and do vote in person or by proxy on the resolution

4. Ordinary Resolutions vs. Special Resolutions

Subject to the provision of the constitution, any matter that may be passed by ordinary resolution may also be passed by special resolution

Section 292 – Special Resolutions

1. Definition, Voting Rights, and Methods of Special Resolution

A special resolution of the members or class of members of a company means a resolution of which a notice of not less than twenty-one days has been given and passed by a majority of not less than seventy-five per cent of such members;

• Who is entitled to vote and do vote in person, or where proxies are allowed, by proxy at a meeting of members?
• Who is entitled to vote on a written resolution?

2. Requirements for Written Resolutions to Qualify as Special

If a resolution of a private company is passed as a written resolution, the resolution is not a special resolution unless it is stated that it is a special resolution and passed as a special resolution.

3. Voting for Special Resolution at Meetings, Passing by Show of Hands

A special resolution passed at a meeting by a show of hands is considered valid if at least seventy-five per cent of the present members vote in favour, subject to paragraph (1)(a).

4. Voting for Special Resolution at Meetings, Passing by Poll

A special resolution is passed on a poll taken at a meeting if it is passed by members representing not less than seventy-five per cent of the total voting rights of the members who are entitled to vote and do vote in person or by proxy on the resolution.

5. Notice Requirements for Special Resolutions at Meetings

Where a resolution is passed at a meeting;

• The resolution is not special unless the notice of the meeting includes the text of the resolution and states that the resolution is proposed as a special resolution.
• If it is so stated in the notice of the meeting, the resolution shall only be passed as a special resolution.

How can a Company resolution be passed in Malaysia?

In fact there are two methods to pass a Company resolution in Malaysia:

Physical meetings

The common way for a Malaysian company to pass a resolution is during physical meetings where the board of directors and shareholders meet; commonly during the annual general meeting (AGM).

After a decision is made, the Company Secretary will then type out the resolution. Thereafter, all parties will need to sign off the document for it to come into effect.

Through writing

It may not always be possible to hold physical meetings, especially during the pandemic situation or when some relevant parties are unable to be physically present. Hence, in such a case, a Company may choose to pass the resolution in written form. To ensure clarity, the Company Secretary will prepare a document detailing all crucial information.

Requirements for the Passing of a Company Resolution in Malaysia

Before passing a company resolution, the company must fulfil several general requirements. Company resolutions can only pass during a properly convened meeting that meets all other requirements.

Here are some of the requirements when it comes to passing a company resolution:

• The company secretary keeps the company resolutions in the records after the meeting.
• The chairperson must sign the minutes of the meeting.
• A company that fails to follow these requirements might find that the outcome of the company resolution may become void

Why Company Resolutions in Malaysia Are Important

Company resolutions are important to every company in Malaysia because they document the decisions made and actions taken by the board of directors. Furthermore, the board of directors records every significant action as a company resolution.

With this in mind, company resolutions hold the board accountable and demonstrate proper actions to license boards and regulators.

Upholding Corporate Separation

However,o limit liability, corporations are established as separate entities from their owners. Consequently, company resolutions assist in upholding this separation by providing a formal record of decisions and actions taken by the board of directors.

Authorization of Daily Activities

Members of a board of directors do not need to make resolutions for the daily activities of the business. These activities include hiring employees, paying off debts, and engaging with customers, among others. The board of directors authorizes the company’s corporate officers to direct such activities.

Decisions Requiring Resolutions

On the other hand, most decisions that do not involve the normal day-to-day running of a business will require the passing of a resolution. Company resolutions also apply to any decision that affects the constitution or rules of a company.

Such decisions include the appointing of company directors, the changing of directors’ powers, the changing of the company’s name, and the changing of the company’s share structure.