The Importance of A Company Resolution (in Singapore)

The Importance of A Company Resolution (in Singapore)

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All businesses go through times when far-reaching decisions need to be made. During those times, the importance of company resolutions becomes clear. Their impact is felt throughout the business, and all aspects of the company are affected.

Here’s a detailed look at company resolutions.

What are Company Resolutions

Company resolutions are formal decisions that are made and handed down by shareholders or members of the board whenever they meet. Usually, they relate to important company matters. 

For a resolution to be legally enforceable in Singapore, it needs to be made in accordance with the Companies Act, which sets out specific requirements.

In addition, all resolutions need to be passed by majority vote, meaning the number of individuals who agree with it must be greater than that of those who oppose it.

There are different types of company resolutions.

The Different Types of Company Resolutions

1. Board Resolutions

Board resolutions are passed when members of the board sit to discuss matters that affect the day to day running of the business, in accordance with Section 157A of the Companies Act. 

Board resolutions may be passed when: 

  • Proposals that can critically impact the business have been tabled
  • A decision needs to be made on a new member of the board
  • A sale of shares is upcoming
  • The company plans to purchase or acquire assets and intellectual property

There are decisions for which, by law, a board resolution is required before the company can proceed. An example is when the company intends to open a corporate bank account. 

2. Ordinary Resolutions

Resolutions that are passed by the shareholders of the company are called ordinary resolutions. 

All shareholders are given 14 days notice before the date they are expected to meet and vote on a proposed resolution. 

However, voting can take place if some shareholders are absent, as long as those present hold at least 95% of the voting rights. 

Most business transactions fall under the ambit of ordinary resolutions. Those that do not are specified in the Articles of Association or the Companies Act, and they a special resolution or a special majority. 

Voting for ordinary resolutions is typically done through a show of hands by members. 

Ordinary resolutions are passed in situations such as:

  • Removal of a director from office before their term of office expires
  • Electing a new director to replace an outgoing one
  • Declaring dividends
  • Calling and deciding compensation for auditors,

3. Special Resolutions

Special resolutions are formal decisions that are passed when at least 75% of members vote in favor of the proposal. In the case of public companies, 21 days’ written notice needs to be given for the meeting. Private companies require 14. 

The meeting can still take place at shorter notice if members holding a minimum of 95% of the voting rights agree to hold it. 

Company resolutions are typically for exceptionally important matters which are laid out in the Companies Act. 

These include:

  • Changing a provision in the company’s constitution
  • Rebranding the company
  • Reducing share capital

Why Company Resolutions are Important

Resolutions are important because they provide an effective means for companies to easily navigate decisions that would otherwise take a lot of time.

Also, it allows the shareholders and board of directors to hold the employees of the company accountable and provide essential direction where they need to.

Resolutions also help to provide a record of past decisions, which shareholders can refer to in cases where that’s necessary. That can be during audits or circumstances when the company’s performance and objectives need to be reviewed.

Benefits that Can Be Offered by Corporate Secretarial Services

There are many procedures and documents that are handled when preparing for the passing of resolutions. For one, all shareholders or board members need to receive notice, depending on the type of resolution. 

And that involves the handling and preparation of administrative documents that need to be highly accurate. Corporate secretarial services help with ensuring that these documents are handled appropriately and correspondence is sent out in time.

Another advantage is the comprehensive service offerings. Companies can rely on them at various stages of the process, including the phases that come after the passing of resolutions, when effective documentation is especially needed.

To conclude…

Company resolutions, in their different forms, are crucial to the effective functioning of any business. And for them to have full enforceability, they need to be compliant with the Companies Act.

That can involve juggling a lot of processes if the company doesn’t have people dedicated to making sure the processes are well-handled. Corporate secretarial services can help with that, drop our friendly team a message here to find out how we can help!