What is a Written Resolution for Shareholders in the UK?

Depending on your company’s rules, there are certain decisions that only shareholders can make, rather than the company’s board of directors. For any decisions that require shareholder approval, the board of directors must present a resolution to the shareholders. A sufficient number of shareholders must, in turn, pass the resolution for it to take effect. Company law allows private companies to pass resolutions either via a general meeting or a written resolution. This article will explain the difference between the two and the advantages and disadvantages of written resolutions.

What is a Written Resolution for Shareholders?

To fully understand what a written resolution is, you may find it helpful to see how it differs from resolutions passed at a general meeting. 

General Meetings

The general rule is that companies must pass shareholder resolutions at shareholder meetings. These meetings, commonly called general meetings, require shareholders to be physically present to vote. Alternatively, a shareholder can appoint a proxy to vote on their behalf.

Importantly, there must be a minimum number of shareholders (or their proxies) at a meeting for it to be lawful. This minimum number called a quorum, cannot be less than two for all companies with two or more shareholders. In practice, many companies amend their articles of association to require more shareholders.

Written Resolutions

Convening a general meeting can be a substantial administrative task for directors and shareholders. Therefore, the law allows private companies (but not public companies) to pass resolutions via written resolutions. This method does not require the directors to convene a general meeting, saving the company time and money.

Who Can Propose Written Resolutions?

Subject to your company’s articles, both shareholders and directors can propose resolutions via the written resolution procedure. The procedure for each differs depending on whether the board is proposing the resolution or the shareholders. The following are generic procedure plans for both. However, you should consult a solicitor before implementing this because your articles may have specific rules. 

Procedure for Written Resolutions Proposed by the Board 

1. The directors must send a copy of the resolution to every eligible shareholder. The copy can be in hard copy or electronic. 
2. Directors should ensure copies are sent simultaneously to all eligible shareholders.
3. The directors should include a statement with a copy that explains to the shareholders how to signal their approval. Likewise, the statement should clearly explain the timeline for response and when the deadline for passing the resolution lapses.

Procedure for Written Resolutions Proposed by Shareholders

1. Any shareholder with 5% or more of the total voting rights can propose a resolution. A company can amend its articles so that the threshold is lower. The shareholder may be liable to the company for the expense of circulating the resolution. 
2. The directors must circulate the proposal within 21 days from the date they are the company is subject to the requirement to circulate the proposal. This depends on the exact procedure the shareholder that proposed the resolution used. 

Which Shareholders are Eligible to Vote

As a general rule of thumb, all shareholders eligible to vote at a general meeting are eligible to vote in the written resolution. Practically, this means that only shareholders entered into the company’s member register are entitled to vote on the written resolution. Therefore, if you have recently issued shares or otherwise transferred existing shares to a new shareholder, consider speaking with a solicitor.

Company Registers

When you incorporate a company in England and Wales, you must maintain a number of company registers at its registered office or at the Companies House. This template includes these company registers.

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Further Legal Considerations

Limitations on Written Resolutions

Any resolution proposing to remove a director before the director’s term of service expires requires a general meeting. Therefore, you cannot put the matter to shareholders in the form of a resolution. Moreover, the company cannot escape this law by amending its articles. 

Ordinary Resolutions vs Special Resolutions

Some resolutions may require special resolutions rather than ordinary resolutions. Special resolutions require at least 75% of the eligible votes to pass. A common example of this is any resolution to amend the company’s articles of association. Accordingly, any resolution requiring a special resolution needs 75% of the eligible votes, regardless of whether it is presented to shareholders at a general meeting or via a written resolution.

Attempts to Restrict Written Resolutions

A private company cannot restrict the right of its shareholders to pass resolutions via written resolutions. Therefore, you should not attempt to incorporate any terms into the company’s articles of association that restrict this right. 

Key Takeaways

A written resolution is an alternative way for shareholders to vote on a resolution that requires their approval to become effective. Importantly, the company does not need to convene a general meeting. This saves considerable time and expense. Instead, the shareholders have a specified timeframe to signal their support. If the requisite number does so, the resolution passes. If not, the resolution does not pass.

If you need help with your company’s board, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us on 0808 196 8584 or visit our membership page.

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