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. This will help to maintain the integrity of the company.

Resolutions are written document or statement that records a decision or action discussed and approved during an annual general meeting (AGM) or extraordinary general meeting (EGM). Such document is commonly used in companies worldwide, Malaysia included.

Since the major commercial decisions are normally made by the board of directors, it is common for the resolution to be called as “Company Board Resolution”.

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

In Malaysia, company resolutions are made in relation to any formal decision made by the board of director on behalf of the Company which are approved by the members (shareholders). It can be either an ordinary resolution or a special resolution.

In layman’s term, a special resolution takes place mostly during extraordinary general meeting (EGM) where an urgent decision must take place and is voted by the majority of the members during the meeting.

There are two methods to pass a Company resolution in Malaysia:

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 annual general meeting (AGM).

The resolution will be typed out by the Company Secretary and once decision is made; all parties will need to sign off the document for it to come into effect.

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 from. The document will be prepared by the Company Secretary, detailing out all the crucial information.

There are several general requirements which must be fulfilled before the passing of a company resolution may be made. Company resolutions are only allowed to be passed during a meeting which has been properly convened and fulfils all other requirements.

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

• The company resolution must be saved in the records kept by the company Secretary after the meeting has been held
• The minutes of the meeting are also required to be signed by the chairperson of the meeting
• A company which fails to follow these requirements might find that the outcome of the company resolution may become void

Company resolutions are important to every company in Malaysia because they document the decisions made and actions taken by the board of directors. Every significant action of the board of directors must be stated in the form of a company resolution.

These company resolutions serve as documents that hold the board accountable and prove to licensing boards and government regulators that the board is acting in a proper manner. Corporations are generally intended to be separate entities from their owners; thus, they are to have separate liability from the owners. Company resolutions assist in upholding this separation.

Members of a board of directors do not need to make resolutions for the daily activities of the business. These activities include  hiring of employees, paying off debts, and engaging with customers, among others. Such activities are directed by the company’s corporate officers who are allowed to do so by the board of directors.

On the other hand, most decisions which do not have to do with the normal day-to-day running of a business will require a resolution to be passed. Company resolutions are also to be passed with regard to any decision which 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.