Written Resolutions - When Should They Be Used In A Company? Are They Important To Have?
When private companies need to make decisions, they usually hold meetings to pass a resolution. Resolutions are typically proposed and passed during formal meetings such as the Annual General Meeting (AGM). However, companies also have the option to pass resolutions in writing.
Written resolutions are typically used when directors and shareholders are unable to meet in person for any reason.
Written resolutions can be passed in all but two instances:
- The resolution to remove a director
- The resolution to remove an auditor before their term of service has expired.
Another point to remember is that public limited companies cannot use written resolutions.
How do they work?
Written resolutions will need to be provided to all relevant members of the company; this could be shareholders or directors. Just remember that when giving out the copies, they will need to be provided at the same time to everyone. You can do this either electronically, or by handing out hard copies.
The written resolution will need to describe the decision that is being proposed and how members need to respond to it. Typically, if members agree with the resolution, they will need to sign and return it.
You must inform the members how they need to indicate their agreement and the date by which a response must be received before the resolution is passed (written resolutions will lapse if they are not passed within 28 days).
When should they be used?
Written resolutions can be used in instances when the shareholders or directors can't meet in person, just like we’ve seen with recent events with the global pandemic.
Both directors and shareholders can propose written resolutions. If the directors are proposing the resolution, it’s best practice to include the minutes of the meeting where it was discussed.
Should my company be using them?
It’s possible for the majority of companies to be using written resolutions compared to holding in-person meetings.
With some restrictions still in place as part of the Coronavirus global pandemic, it could be seen that using written resolutions is the only way to keep the company running as it should be.
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