Gulshan Aggarwal in Tax Accountants, Auditors, Finance / Banking Feb 16, 2020 · 3 min read · +300

What are Ordinary and Special Resolutions under Companies act?

What are Ordinary and Special Resolutions under Companies act?

A company usually passes ordinary resolution and special resolution under the Companies Act. When and where these resolutions must be passed, have been discussed thoroughly in the sections below in this article:

When are ordinary resolution and special resolution under Companies Act passed?

· Matters requiring sanction by Ordinary Resolutions (OR) under Companies Act:

1) In case a company had been incorporated by furnishing wrong or incorrect information for approval of its name, the Registrar may direct the Company to change its name within 3 months by passing an OR, after giving an opportunity of being heard.

2) If the name is too identical or resembles an already existing company’s name or a registered trade mark, the CG shall direct the company to change its name by passing an OR

3) A limited company having a share capital may, if so authorized by its articles, alter its memorandum in its General Meeting to—

(a) increase its authorized share capital by such amount as it thinks expedient;

(b) Consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares.

(c) Convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;

(d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(e) Cancellation of uncalled share capital.

4) Capitalization of company’s profit or reserve to issue fully paid bonus shares.

5) Unlimited company to provide for reserve share capital on conversion into a limited company by an Ordinary Resolution under Companies Act.

6) A company may by passing an OR in General Meeting accept deposits from its members.

7) 4 main business transacted at the Annual General Meeting-

(i) The consideration of financial statements and the reports of the Board of Directors and auditors;

(ii) The declaration of any dividend;

(iii) The appointment of directors in place of those retiring;

(iv) The appointment of; and the fixing of the remuneration of, the auditors.

8) Remuneration of cost accountant shall also be fixed by ordinary resolution under Companies Act.

9) Pursuant to the AOA or by an OR passed in General Meeting; the Board may appoint an alternate director.

10) A company may, by ordinary resolution under Companies Act, remove a director.

11) Contribution to bona fide charitable and other funds an amount >5% of its average net profits for three immediately preceding financial years.

12) Restriction on non-cash transactions involving directors of the company or its holding, subsidiary or associate company or a person connected with him without prior approval by means of an OR in General Meeting.

13) SR before entering into contracts by companies having such paid up share capital or for transactions not exceeding such sums as prescribed

Also Read: ROC Compliance incase of One Person Company

· Matters requiring sanction by Special Resolutions (SR) Under Companies Act:

1) Alteration of Article of Association for including the provisions of “Entrenchment” in case of public company. In case of private company, approval of all the members required.

2) To change the registered office of the company outside the local limits of the city, town or village in which it is situated or from jurisdiction of one ROC to another ROC or from one state to another state.

3) For alteration of Memorandum of Association of the Company.

4) To issue Global Depository Receipt in any foreign country.

5) Where a company has share capital of different classes, the rights attached to any class of shares may be varied by consent of members holding three-fourth of the shares issued of that class or by a SR passed in their meeting

6) Issue of Sweat Equity Shares.

7) For issuing further shares to employees of the company

8) for determining the terms of issuing debentures convertible into shares or loans raised by the company into shares

9) For reduction of Share Capital.

10) SR passed in General Meeting authorizing buy-back of shares.

11) For issuing Debenture convertible into shares, wholly or partly.

12) The company may keep registers; returns etc. in that place of office, where the 1/10th Members is residing and whose names have been entered in the Register of Members, if approved by Special Resolution under Companies Act in General Meeting.

13) Removal of auditor appointed u/s 139, before the expiry of his term and after obtaining approval of CG

14) Company may appoint more than 15 directors after passing a SR.

15) Re-appointment of an independent director for a further period of 5 years

16) Restriction on power of the Board specified u/s 180

17) Loans and investment by a Company specified u/s 186

18) Subject to the provisions of section 197 (relating to managerial remuneration in case of absence or inadequacy of profits) and Schedule V, appointment of a managing director, whole-time director or manager

19) Special Resolution under Companies Act is required to be passed for intimation to the CG that the affairs of the Company ought to be investigated

20) Special Resolution is required to be passed for intimation that the affairs of the Company ought to be investigated by the Serious Fraud Investigation Office.

21) Special Resolution under Companies Act is required or consent of 75% of shares holders required for making an application to the ROC for striking off the name of the Company. This is an important checkpoint in the ROC Compliance checklist for companies in India.

22) Approval of shareholders, of both the companies, in General Meeting for scheme of merger and amalgamation of sick company with other company.

23) Special Resolution under Companies Act is passed resolving winding up of the Company by the Tribunal.

Jimmy Lustig Feb 19, 2020 · #1

Lots of great resources in this article. Thanks!