What is a Special Resolution in England and Wales?

Summary

• A special resolution requires at least 75% of eligible shareholder votes to pass, compared to a simple majority for an ordinary resolution.
• Key company decisions – such as changing the company name, altering the articles of association, or approving a voluntary winding up – legally require a special resolution.
• Once passed, a special resolution must be filed with Companies House within 15 days, creating a public record of the decision.
• This article explains special resolutions in England and Wales for business owners, covering when they are required and how to pass them correctly.
• It has been prepared by LegalVision, a commercial law firm that specialises in advising clients on company law and corporate governance matters.

Tips for Businesses

Check your articles of association and shareholders agreement to identify which decisions require a special resolution beyond the statutory minimum. Give shareholders adequate notice before any vote, ensure the 75% threshold is met, and file the resolution with Companies House within 15 days of passing.

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On this page

• What is a Special Resolution?
• Why a Special Resolution?
• How Would a Company Pass a Special Resolution?
• Key Takeaways
• Frequently Asked Questions

A special resolution is a formal decision made by a limited company in England and Wales that requires the approval of at least 75% of shareholders. It is used for significant company decisions and is governed by specific procedural rules. This article will explain what a special resolution is, some of the rules surrounding special resolutions, and when you may have to use one.

What is a Special Resolution?

A special resolution is a shareholder resolution that requires at least 75% of votes to pass. In contrast, an ordinary resolution requires a simple majority of over 50% of votes in favour of the resolution. 

Certain important decisions require a company to make a special resolution. The Companies Act 2006 outlines certain decisions that companies can only make via special resolution. Some examples include:

• reducing the company’s share capital;
• changing the companies status by registration, for example, changing from a limited company to a partnership;
• purchasing the company’s own shares;
• changing the company’s articles of association;
• changing the company’s name; and
• approving long-term service contracts with directors 
• approving substantial property transactions with directors in some cases 
• disapplying pre-emptive rights on the issue of equity securities t. 

Under the Insolvency Act, a special resolution is also needed when approving a voluntary wind up of the company.

The shareholders and company may also agree in the articles of association or separate shareholders agreement that certain other matters (like undertaking an initial public offering, a business sale, or changing share class rights) require a special resolution.

Why a Special Resolution?

The purpose of a special resolution is to protect minority shareholders when a company makes important decisions. It allows for a 25% minority to overrule a decision and the majority cannot simply push through actions. 

How Would a Company Pass a Special Resolution?

There are certain rules as per the Companies Act 2006 as to how companies must pass special resolutions: 

• if 75% of individuals who are eligible members (in other words, have the right to vote) cast their vote at a general meeting, there must be a 75% majority through a show of hands. This means that, for a vote to be valid, at least 75% of all of the eligible votes must be counted;
• if 75% of individuals who are eligible members cast their vote at a general meeting during a poll, then the same rule applies regardless of whether they vote in person, by proxy, or in advance; and/or
• if the company decides to use a written resolution, then it must also consist of at least 75% of all eligible votes voting in favour of the decision.

It is worth noting that special resolutions must be filed with Companies House within 15 days of being passed. This filing requirement ensures transparency and creates a public record of significant company decisions. The resolution will then appear on the company’s public record, which can be accessed by anyone searching the company’s details.

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Key Takeaways

As a limited company, you may have to use special resolutions to pass certain actions. Often, this is used when it is required by the Companies Act, such as when your company wants to change its name. In some cases, however, your company’s constitution may require you to make some changes only via a special resolution. 

To pass a special resolution, you will need at least 75% of the eligible votes to be cast, and you will need at least 75% of those votes to vote in favour of the decision. 

LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced business lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.

Frequently Asked Questions