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.
Definition of a Company Resolution
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:
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
A resolution of the members or of a class members of a public company shall be passed at a meeting of the members
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 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.
Section 291 – Ordinary Resolutions
An ordinary resolution of the members or a 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
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
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
Subject to provision of the constitution, any matter that may be passed by ordinary resolution may also be passed by special resolution
Section 292 – Special Resolutions
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 centum of such members;
Who are entitled to vote and do vote in person, or where proxies are allowed, by proxy at a meeting of members.
Who are entitled to vote on a written resolution
If a resolution of a private company is passed as a written resolution, the resolution is not special resolution unless it is stated that it is a special resolution and passed as a special resolution.
Subject to paragraph (1)(a), a special resolution passed at a meeting on a show of hands is passed as a special resolution if it is passed by not less than seventy-five per centum of the members who are present at the meeting.
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 centum of the total voting rights of the members who are entitled to vote and do vote in person or by proxy on the resolution.
Where a resolution is passed at a meeting;
The resolution is not a special resolution 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.
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.
How can a Company resolution be passed?
There are two methods to pass a Company resolution:
The common way for a 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 current 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.
Requirements for the Passing of a Resolution
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.
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.
Why Company Resolutions 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. 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.
In many businesses in Malaysia, the same people often serve asthe shareholders, directors, and employees of the company at the same time. These frequent instances of overlap often lead to confusion regarding the decisions to be made by shareholders and directors make. For this reason, almost all business entities in Malaysia will require company resolutions to be passed at some point.
Why do Shareholders request the holding of general meetings?Tiwi2020-04-28T17:26:50+08:00
According to the Companies Act, shareholders are provided with the privilege to request the holding of a general meeting. During this general meeting, they submit their proposals for resolutions. Usually, general meetings are requested by shareholders to consider matters which are within the directors’ exclusive powers or functions. Proposed resolutions are not constitutional amendments and cannot be legally changed by the company during any general meeting
Can Company Resolutions be changed?Tiwi2020-04-28T17:26:13+08:00
The extent to which a company resolution can be amended depends on the type of resolution which is involved. Special and ordinary resolutions are to be changed in different ways. A special resolution is not allowed to be amended except with regard to minor details such as the correction of grammatical or spelling errors.
Ordinary resolutions can be amended regardless of whether either the text of the resolution or merely the general nature of the business is involved. Any amendments made to company resolutions of a Malaysian company are to be related to the content of the resolution itself, not result in additional burdens to become imposed on the company, and not undo the effects of any related resolutions.