Members Shareholders Resolution Of A Private Company

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Members Shareholders Resolution Of A Private Company

AUGUST 2024

The rights and obligations of a private company’s members/ shareholders are governed by:-

  1. the statutory provisions under the Companies Act (CA),
  2. the company’s Constitution (if adopted) under CA 2016 or the company’s memorandum of association and articles of association (M&A) for companies incorporated under the CA 1965,
  3. the Shareholders’ Agreement (if any) supplementing the Constitution.

Note that section 32(2) CA 2016 provides that the Constitution of a company has no effect to the extent that it contravenes or is inconsistent with the provisions of the Companies Act. In other words, in the event of conflict between the provisions under the Companies Act and the Constitution/ M&A, the provisions under the Companies Act prevail.

Both the company’s Constitution and the Shareholders’ Agreement constitute a contract between the members/ shareholders.

Passing of Members/ Shareholders’ Resolution

Type of Resolution

Ordinary Resolution

Passed by simple majority of more than half of the members1

Special Resolution

Passed by majority of not less than 75% of the members2

Note: A resolution is not a special resolution unless stated as a special resolution and passed as a special resolution3

Notice

14 days (or longer as specified in Constitution)4

21 days5

Note: 28 days if special notice is required under the provisions of CA.

Examples of Type of Resolution under Companies Act 2016

If the Companies Act does not specify the type of resolution required, the resolution shall be passed as an Ordinary Resolution, unless otherwise provided in the constitution6.

The following table are examples of type of resolution required under the Companies Act:

***Note: Some provisions for type of resolution required under the Companies Act provides reference to the Constitution such as “subject to the constitution” / “unless otherwise provided in the constitution”.

In such cases, the Constitution prevails over the Companies Act.

Ordinary Resolution under CA 2016

  • Section 202(2): Appointment of director
  • Section 206(1)(a): Removal of director
  • Section 267(4): Appointment of auditor
  • Section 274(1)(a): Remuneration of auditor
  • Section 276(1)(a): Removal of auditor

Special Resolution under CA 2016

  • Section 28(1): Change of company’s name
  • Section 32(1): Adoption of constitution
  • Section 36(1) Alteration/ amendment of constitution
  • Section 40(1): Conversion from unlimited to limited company
  • Section 41(2): Conversion from private to public company
  • Section 84(1): Alteration of share capital
  • Section 91(2): Variation of class rights
  • Section 115: Reduction of share capital
  • Section 126(2): Financial assistance in a sum not exceeding 10% of the shareholders’ funds for acquisition of the company’s shares
  • Section 130(2): Payment of interest out of capital in certain cases
  • Section 195(3): Recommendation to board on management matters
  • Section 439(1)(b): Voluntary Winding Up
  • Section 465(1)(a): Winding Up by Court

Passing of Resolutions

A resolution can be passed by way of written resolution (based on total voting rights of members), or at a members’/ shareholders’ meeting (by show of hands / by poll).

Note: Not all matters can be resolved by way of a written resolution. The following matters shall NOT be passed by written resolution and require a meeting to be convened7:-

  1. Removal of Director under Section 206 CA 2016
  2. Removal of Auditor under Section 276 CA 2016

Written Resolution

Each member = 1 vote per share

Members’ / Shareholders’ Meeting

  1. Vote on show of hands: Each member = 1 vote per member
  1. Vote on poll: Each member = 1 vote per share

Note: A resolution put to vote at a meeting, shall be decided on a show of hands, unless before/ on the declaration of the result of the show of hands, a poll is demanded in accordance with section 330(1) CA.

Quorum

No business shall be transacted at any members’ / shareholders’ meeting unless a quorum is present at the time when the meeting proceeds to business8.

To constitute a quorum under the provisions of the Companies Act, except in the case of a company having only one member, there shall be at least two (2) members (or by proxy) present at a meeting, unless a higher number is specified in the constitution9.
1 Section 291(1) Companies Act 2016 2 Section 292(1) Companies Act 2016 3 Section 292(2) Companies Act 2016 4 Section 316(1) Companies Act 2016 5 Section 292(1) Companies Act 2016 6 Section 290(3) Companies Act 2016 7 Section 297(2) Companies Act 2016 8 Section 328(4) Companies Act 2016 9 Section 328(1) & (2) Companies Act 2016