Decision making in UK Company Incorporation via Voting, Circulating Resolutions, Demanding Poll and Recording Written Resolutions

29 Nov

There are two ways of taking formal decisions in a UK company incorporation. The first is via meetings and the second is via the circulation of written resolution. The first mode is preferred in UK PLC company formation whereas the second is more suitable to private companies. Hence to know how to setup a private limited company UK and run it effectively, this article provides rulings about the resolutions that may be passed in a private company for decision making. The article also discusses about the voting procedure that may take place in public companies.

Voting Majority at a Meeting 

According to Section 281(3), 282 and 284 of Companies Act 2006, the ordinary resolution will be passed when a simple majority votes, which may be equivalent to at least 50% in favour of the resolution and each member will have one vote per share as long as no different quota is specified by the articles of the company. A salient feature of a corporate body is that it takes actions according to the decisions that have been taken in the meetings. The decisions are taken by the passage of resolutions either ordinary or special. Moreover, if the rules do not suggest about how to pass a resolution, it will be assumed under common law that a company may take an action according to the votes that are given by the entitled members in a meeting. For further elaboration consider the case of Attorney General.

Attorney General

Twelve persons were grouped by King Edward VI through a charter. These twelve persons had to choose the church of Kirton’s chaplain in Lincolnshire. Another provision entitled three of the twelve persons to elect a chaplain for the church of Sanford. However, it had to be done after gaining the assent of majority of the residents of Sanford. Two of the three persons elected a chaplain with the consent of majority of the Sanford’s inhabitants. However, the third person disagreed with the choice of the rest of the two persons. It was argued that whether the choice was good enough.

It was held by Lord Hardwicke LC that:

  • There is no argument in the fact that whenever a group of people form an incorporation together, the incorporation then acts according to the majority of the people who are incorporated. Hence, if all the persons are called for decision and some of them appear, then the action may be taken according to those who have appeared. Even though when there is no such matter discussed in the provisions of the charter, this is applicable.
  • This is charters’ common construction. I think that the three persons were an incorporation aimed for choosing the chaplain. There was confirmation about the choice and hence, it was not mandatory for all the three persons to join in. It is not required by every act of the corporate to be authorised by the seal of the corporate and this act did not require any seal as well.

Demanding a Poll

Section 373 of Companies Act 1985 states about the scenarios where a poll can be demanded justly. It states that:

  • Any provision of the articles of a company is deemed annulled in so far as it would be effective for either:
  • Exclusion of the authority for demanding a poll in a meeting on any issues apart from the choosing of the Chairman or adjourning the meeting.
  • Making the request for poll void, if it is requested by either of the following:
  • At least 5 members that are entitled to vote at the meeting.
  • A member or group of members that represent at least one tenth of the total rights of vote given to all the entitled members.
  • A member or group of members who are shareholders of the company and have a right to vote in the meeting, provided there is a minimum of one tenth of the total amount of all those shares that have conferred the right to vote, paid up by the members.
  • If a proxy is appointed for voting, he is also entitled to demand a poll. And in relation to the first clause of this section, the demand of poll by a proxy will have the same effect as the demand of a member for polling.

Proposal of Written Resolutions

As discussed above, a common and popular method of taking decisions in UK PLC company formation is arranging meetings and conducting voting in it. An alternative method that is of interest for those who want to know how to setup a private limited company UK is of taking decisions via resolutions that are in written form. However, this facility can be enjoyed by private companies only and no public company can benefit from this facility. The directors as specified in subsections 288(3) and 291 of Companies Act 2006 or the members that hold at least 5% of the voting rights or any lower percentage of representation that is specified by the articles, as per subsections 288(3)(b) and 292(5) of Companies Act 2006 are entitled to propose a written resolution in the private companies. Subsections 290-297 of Companies Act 2006 specify about the circulation of such resolutions and assenting to them.

Circulation of Resolutions as per Companies Act 1985

Section 376 states the rulings about the circulation of resolutions in a company. It specifies that:

  • Subjected to the exceptions mentioned in Section 377, it is required by a company after the written requisition by a majority of members as specified in this section, that:
  • To share with members that are authorised to be notified about the coming general meeting, a notice mentioning the resolution that has to be moved in the coming meeting.
  • To share with the members who are authorised to be notified about the coming general meeting, a description of not more than 1000 words about the matter of the resolution or any business that has to be discussed in the meeting.
  • If this is not done, the company may get dissolved by the requisition.
  • The minimum number of members required for the requisition is as follows:
  • At least one twentieth part of the total members who are entitled to vote at the date requisition in a meeting upon the resolution related to the requisition.
  • At least 100 members who hold the company’s shares for which at average the members have paid at least 100 pounds each.
  • The members who are authorised to be informed about the meeting by sending them notice, should be notified about any such resolution or statement, by sending the resolution or statement’s copy to each entitled members in any way as permitted.
  • The resolution’s common effect should be informed to any other member via a notice in any way that is allowed.
  • In relation with the above two clauses, it is required that the notice of resolution and its general effect should be sent to the entitled members in the same manner and at the same time when the notice of the meeting is sent to the members. If it is not possible for some reason then, they should be sent as soon as possible.
  • Any resolution that has been notified about following the provisions of this section will be included in the business that has to be discussed in the yearly general meeting. For the purpose of the section being discussed, the notice is considered as been shared despite accidentally not sharing it with one or more than one members. This remains effective despite any articles of the company.
  • Every officer responsible for not complying with this section is liable to pay some fine.

Exceptional Cases of Circulating Resolutions

The 377th Section of Companies Act 1985 have stated exceptional cases when the provisions of Section 376 of the same act may not be implementable. These cases are as follows:

  • A company is only bound under this section to send a notification about the resolutions when:
  • One copy of the requisition that has been signed by the requisitionists is sent to the company’s registered office.
  • If there is a notice required for the requisition it should be sent 6 weeks prior the meeting.
  • If the notice for resolution is not required, then it should be sent at least 1 week before the meeting is intended to be conducted.
  • An amount of money that is enough to fulfil the expenses of the company in making the requisition effective, is either tendered or deposited with the requisition.
  • If any yearly meeting is called less than 6 weeks after the deposition of requisition’s copy, for which a notice for resolution is mandatory, is done at the company’s registered office, then the copy will be considered as properly sent to the registered office despite the fact that it has not been deposited within the time required by this section.
  • A company is also not required by the section 376 of this act for circulating the statement in a situation where the court has satisfaction about the application that is given by the company or any of its member claiming to be in grief, that the authorities given by section 376 are being misused for the purpose of gaining unrequired popularity regarding a notorious issue. In such a case a court is entitled to order that the expenses of the company that may arise in making the requisition effective should be paid completely or to some extent by the requisitionists, whether they have submitted the application or not.

Record Keeping of Written Resolutions

Private companies are allowed to pass written resolutions without arranging meetings. Under the 1985 version of Companies Act, it is a requirement for keeping a record of any written resolution that has been agreed upon. Section 382 A provides for the rulings related to the passage of this resolution:

  • In situations where there is an agreement upon any resolution given in the written form following the provisions of section 381 A of this act and the resolution becomes effective in the same manner as it would have if it was passed at a general meeting, the company has to keep that resolution and the signatures in record by entering these in a book just in a way the details of the proceedings of the company’s general meeting are recorded.
  • If it is claimed that any similar record has the signature of any director of the company or any secretary of the company signs it purportedly, it will show that resolution has been agreed upon in the proceedings. Moreover, if the minutes of the resolution are recorded following this section, then, as long as no contradictory situation is proved, it will be considered by this Act, that all the requirements for the proceedings have been complied with.
  • The penalties given by section 382(5) will be found applicable when the company is unsuccessful in following the first provision of this section in the same manner as it will be applicable if the first provision of section 382 is not followed by the company. Section 383 that states about inspection done regarding the minute books, will be found applicable on any record made following the provisions of this section in the same manner as it is applicable on the details of a meeting.

Once set up company London or UK, the rules should be followed that govern the conduct of the company. Else as mentioned in the sections above, the persons performing breach of the rules are liable to penalties.

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