CHAPTER 1: INTRODUCTION

It has already been stated that the purpose of a meeting is to arrive at decisions and the sense of a meeting is ascertained by voting upon proposals put to the meeting.

A formal proposal put to the meeting is termed a "motion", a proposal to alter that motion is an "amendment", and the motion, as amended, becomes a resolution if adopted by the meeting. In practice the words "motion" and "resolution" are used indiscriminately, but strictly, speaking, a motion is the term of business, question or proposal under consideration by the meeting before it is voted upon and a resolution is a motion that has been voted upon, agreed to and subsequently entered in the minutes.

A company expresses its will by means of resolutions. The Companies Act refers to resolutions throughout and not to motions, meaning, persuadably, "proposed resolutions". In s. 283(l) which relates to voting on appointment of directors, it is, however, provided that a motion shall not be made for the appointment of two or more persons as directors of, the company by a single resolution, unless a resolution that it shall be so made, has first been agreed to by the meeting without any vote being given against.

In the case of company meetings the nature of the business and the form of the various motions that are to be submitted at those meeting are normally formulated beforehand. The essentials of a well-framed motion are that it should be couched in definite terms, free from ambiguity and be, within the powers of the meeting and the scope of the notice.

Contrary to popular belief, a proposal or motion need not be seconded unless the articles so require. "There is no law of the land which says that a motion cannot be put without a seconder, and the objection that the motion was not seconded cannot prevail"[1]. It is, however, the general practice to require that motions be seconded before they can be put to the meeting, Thereby preventing time from being taken in considering a matter that only, one person favors.

Kinds of resolutions:

There are only two kinds of resolutions under the Act, ordinary and special, and they are defined in s. 189. Some writers classify resolutions into three -types, namely, ordinary, special and resolutions requiring special notice. Reference has already been made to the new type of notice (not resolution), introduced by the 1956 Act and designated as "special notice" required for passing:

Resolutions under s. 225(l) for appointing as auditor- at an annual general meeting a person other than the retiring auditor, or providing that a retiring auditor shall not be appointed;
Resolutions under s. 284(2) to remove a director before the expiry of his period of office of to appoint somebody, instead of a director so removed at the meeting at which he is removed.

Such resolutions are, however, ordinary resolutions. The articles of association of a company may require special notice to be given to the company for passing resolutions relating to any other matters (s. 190) and may also provide that such resolutions shall be special resolutions.

CHAPTER 2: ORDINARY RESOLUTION

This is a resolution passed by a simple majority of those present in person or by proxy where proxies are allowed and voting upon the resolution. Members not participating in voting are not taken into account. As distinguished from a simple majority, an absolute majority is’ a majority of all those entitled to vote whether they attend or not.

Section 189(l) defines an ordinary resolution as follows:

"A resolution shall be an ordinary resolution when at a general meeting of which the notice required under this Act has been duly given, the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the resolution (including the casting vote, if any, of the chairman) by members who, being entitled to so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the resolution by members so entitled and voting."

“It cannot be disputed that whenever a certain number (of persons) are incorporated, a major part of them may do any corporate act, so if all are summoned and part appear, a major part of those that appear may do a corporate act, though nothing be mentioned in the charter of the major part” [2]But this principle of the majority ruling as applied to companies under the Companies Act, is subject to the Act and to the memorandum and articles in each case applicable[3]. Hence, it is necessary to see that, meeting is duly convened; that the resolution is one which can properly be put to the meeting; that the requisite quorum is present; that the regulations as to voting are duly observed; and that in any case the sense of the meeting is taken, unless a poll is demanded, in the first instance by a show of hands; and afterwards, if a poll be demanded, by poll in the ordinary way.

Subject to the articles, an ordinary resolution is sufficient for; inter alia, any of the following matters:

1. To authorize an issue of shares at a discount (s. 79);

2. To increase the share capital if authorized by the articles, or otherwise alter the share capital apart from its reduction (ss. 94, 100);

3. To appoint auditors [s. 224(1) 1; but in the case of a company in which not less than 25 per cent of the subscribed share capital is held, whether singly or in any combination, by a public financial institution or a Government Company or Central or any State Government, or a nationalized bank or an insurance company carrying a general insurance business, the appointment of auditors requires a special resolution (s. 224A);

4. To appoint directors;

5. To adopt annual accounts;

6. To declare dividends;

7. To wind up voluntarily when the period, if any, fixed for the, duration of the company by the articles has expired, or the event, if any, has occurred, on the occurrence of which the articles provide that the company is to be dissolved [s. 484(1)];

8. To appoint liquidators in a members' voluntary winding-up and to fix their remuneration (s. 490);

9. To register an unlimited company as a limited company (s. 32); and generally to do all things for which a special resolution is not specifically required either by the Act or the company's articles.

As already stated earlier, for certain matters the Act requires that special notice of, an ordinary resolution shall be given. Where this is so the resolution' shall not be effective unless notice of the intention to move it’ has been given to the company not less than 14 clear days before the meeting at which it is to be moved, and the company shall give its members notice of, any such resolution in the same manner as it gives notice of the meeting, or if that is not practicable, shall give them notice thereof, either by advertisement in a newspaper having an appropriate circulation or in any other mode allowed by the articles, not less than seven days before the meeting (s. 190)[4].

CHAPTER 3: SPECIAL RESOLUTION

Apart from ordinary resolutions, various sections of the Act provide that certain things can be done by a company with the authority of a special resolution passed at a duly constituted general meeting. The articles may also require special resolutions when ordinary resolutions would otherwise be sufficient under the Act. In such cases the resolutions cannot have effect unless they are passed as special resolutions. A special resolution is an artificial conception of the Act, requiring a large majority than an ordinary resolution[5].

It has been defined by s. 189(2) as follows:

A resolution shall be a special resolution when:

a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;

b) the notice required under the Act has been duly given of the general meeting; and

c) the votes cast in favour of the resolution (whether on a show of hands, or on a poll as the case may be) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting

Points as to special resolutions:

The requirements of the Act in respect of special resolutions must be strictly complied with[6], and in particular the following points, should be observed:

a) The notice of the general meeting convening the meeting must be given in accordance with the provisions of the Act.

b) The notice must specify the intention to propose the resolution as a special resolution[7], D.A. DESAT, J. of the Gujarat High Court has expressed -the views that the requirement that the notice must specify the intention to propose the resolution as a special resolution is only directory and not mandatory, while the other requirements, of s. 189(2) are undoubtedly mandatory. The: object of this requirement is obviously to inform all shareholders of the nature of the resolution proposed so that they may decide for themselves whether to attend the meeting or not. It is, therefore, submitted that the requirement should be considered as mandatory.

c) The majority required is a three-fourths majority of those present and voting. Thus voting for and against must both, be counted, all those remaining neutral not being counted either way. Thus, if on a show of hands twelve members out of sixteen present vote and nine are in favor and three against, the resolution is carried. When a poll is demanded, reference shall be had to the number of votes cast for and against the resolution. Thus, if ten members are voting and one member casts seventy-five votes in favour of the resolution and the other nine members cast twenty-five votes against the resolution, the resolution is carried. The significance of the reference to voting by proxy "where proxies are allowed" will be appreciated if it is understood that on a poll being taken, proxies must be included, but on a show of hands (when each member present has only one vote), only the votes of members actually present may be counted and -proxies must be excluded from the reckoning.

If the articles, of the company require a different majority they will be void in respect of powers required by the Act to, be exercised by special resolution[8]. There is, however, nothing to prevent the articles from requiring a special quorum at a meeting to consider a special resolution[9].

d) It is doubtful whether a resolution can take effect as a special resolution when the formalities required by s. 189(2) have not been complied with even if it is agreed to by all the members of the company. There are no cases directly in point, and s. 189(2) should therefore be complied with.

e) The notice convening the meeting at which a special resolution is to be considered must set out the actual wording of the resolution, and also annex an explanatory statement as required under s. 173, in which the shareholders are informed of the material facts concerning the resolution and the nature of interest therein of the directors.

f) A printed or typewritten copy of the special resolution (together with a copy of the explanatory statement annexed under s. 173) duly certified under the signature of an officer of the company must be filed with the Registrar of Companies within thirty days of its being passed (s. 192).

Acts for which special resolutions required:

Some matters may be so important and outside the ordinary course of the company's business, such as any important constitutional changes, that safeguards should be imposed to ensure that a larger majority than a simple majority of the members approve of them before they are given effect to. The Act requires that the following matters, inter alia, to be resolved by the company by special resolution:

(1) To alter any provisions contained in the memorandum, which could lawfully have been contained in the articles instead of the memorandum (s. 16);

(2) To alter the objects or the place of registered office of a company (s. 17);

(3) To change the name of a company (s. 21);

(4) To alter the articles of association (s. 3 1);

(5) To create a reserve liability, that is, to determine’ that a portion of the uncalled capital shall not be capable of being called up, except in the event of a winding up (s. 99);

(6) To reduce the share capital (s. 100);

(7) To remove the company's registered office within the same State but outside the local limits of the city, town or village where such office is situated [s. 146(2)];

(8) To commence any new business which is not germane to the business the company is carrying on currently, though covered by the objects clause of the memorandum (s. 149(2A));

(9) To pay interest on shares out of capital (s. 208);

(10) To appoint auditors, if not less, than 25 per cent of the company's subscribed capital is held whether singly or in any combination, by central government, Government companies, financial institutions, nationalized banks, etc.. (s. 224A);

(11) To support an application to the Central Government for that Government to appoint inspectors to investigate the affairs of the company (s. .237);

(12) To appoint sole selling agents, if the company's paid-up capital is Rs. 50 lakhs or more [s. 294AA(3)];

(13) To authorize the payment of remuneration to non-executive directors by way of commission on the basis of a percentage of the net profits, in the case of a public company or a private company which is a subsidiary of a public company [s. 309(4));

(14) To authorize directors, etc. to hold office or place of profit under the company. (s. 314);

(15) To alter the memorandum where the articles permit, to make unlimited the liability of directors (s. 323);

(16) To authorize the company to make any loan, give guarantee or provide security in connection therewith to any body corporate under the same management, irrespective of the amount involved, and to any body corporate not under the same management if the amount involved exceeds ten per cent of the aggregate of the subscribed capital of the lending company and its free reserves (s. 370);

(17) To have their company wound up by the court [s. 433(a)];

(18) To wind up voluntarily for any reason not otherwise provided for by the section. (s. 484);

(19) To authorize the liquidator to transfer or sell the assets of the company, which is proposed to be, or is in the course of being wound up voluntarily, to another company in exchange for shares (ss. 494 and 507);

(20) To authorize the liquidator in a members' voluntary winding up to exercise the powers given by clauses (a) to (d) of s. 457(l) to a liquidator in a winding up by the court [s. 512(l) (a)];

(21) To sanction the exercise by the liquidator in a voluntary winding up of the powers mentioned in s. 546;

(22) To direct the disposal of books and papers of the company in a members' voluntary Winding up (s. 550);

(23) To adopt Table A in Schedule I in the case of registration of a company under Part IX of the Act [s. 578 (3) (a)];

(24) To alter the form of constitution of a company registered under Part IX of the Act Is. 579(1)].

As already stated, in addition to the requirements of the Act, a company's own articles may prescribe for special resolutions where under the act only an ordinary resolution is necessary.

CHAPTER 4: WHEN SIMPLE MAJORITY EFFECTIVE IN PLACE OF SPECIAL RESOLUTION

Apart from ordinary and special resolutions the Act provides for certain resolutions, which affect the rights of members or a certain class of members, or creditors or any class of them being passed by a specific majority. Section 391, for example, provides in connection with company reconstructions or arrangements that if a majority in number representing three-fourths in value of the creditors or class of creditors or members or class of members, as the case may be, present and voting either in person or by proxy at a meeting held as directed by the court, exercise their votes in favour of a compromise or arrangement between the company- and its members or creditors or any class thereof, the compromise’ or arrangement mill be binding if subsequently sanctioned by the court.

Again, sec 517 provides that Any arrangement entered into between a company about to be, or in the, course of being, wound up and its creditors shall, subject to the right of appeal to the court within three weeks from the completion of the arrangement, be binding on the company and on the creditors if it is sanctioned by a special resolution of the company and acceded to by three-fourths in number and value of the creditors. It will be observed that under this section there is required the sanction of (i) a special resolution of the company; (ii) three-fourths in number and value of the creditors; and (iii) the confirmation of the court, if applied to.

In connection with the variation of the rights of any class of shareholders articles normally provide that these rights can only be altered by a specified majority of the whole class or by a specified majority of those present at a meeting of the class concerned. Thus, reg. 3 of Table A provides:

1. “If at any time the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, subject to the provisions of sections 106 and 107, and whether or not the company is being wound up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class or with the sanction of special resolution passed at the separate meeting of the shares of that class.

2. To every such separate meeting, the provisions of these regulations relating to general meetings shall mutatis mutandis apply, but so that the necessary quorum shall be two persons at least holding or representing by proxy one-third of the issued shares of the class in question.”

When debentures have been issued by the company provisions as to meetings and voting thereat will be contained in the terms of issue or in the trust deed securing the issue, as the case may be[10].

A public company may not offer any further shares to be issued by it to its existing equity shareholders as required under s. 81(l), if a special resolution to that effect is passed by The company in general meeting. Even when no such special resolution is passed, the company need not offer such further shares to its existing equity shareholders, if the resolution is passed by a simple majority and the Central Government is satisfied on the application made by the Board of Directors in this behalf that the proposal -is most beneficial to the company [s. 81, (1A)][11].

Again, a public company is required under s. 149(2A) to pass a special resolution before it can commence any new business which is not germane to the business the company is carrying on currently, though covered by the objects clause of the company's memorandum of association. Where, however, no such special resolution is passed but the’ proposal to commence the new business is approved by simple majority, central Government may on an application made to it by the board of directors in his behalf allow the company to commence its business as it proposal had been passed by a special resolution by the company in general meeting.

CHAPTER 5: SPECIAL BUSINESS, SPECIAL NOTICE AND SPECIAL RESOLUTION

Confusion is sometimes caused in regard to the application of the terms; special business, special notice and special resolution.

Special business is any business to be transacted at a general meeting other than ordinary business. Section 173(1) provides that all business shall be deemed special that is transacted at any general meeting other than at an annual general meeting, and also all that is transacted at an annual general meeting, with the exception of (i) the consideration of accounts, balance sheets and reports of the Board of Directors and auditors; (ii) the declaration of a dividend; (iii) the appointment of directors in the place of those retiring; and (iv) the appointment of, and the fixing of the remuneration of, the auditors[12].

Thus a proposal to increase the company's authorised capital would be special business whether the matter was included on the agenda of an, annual general meeting or of an extraordinary general meeting. Although classified as special business, an increase of capital may, unless articles otherwise provide, be transacted by means of an ordinary resolution. Similarly, a special resolution can, provided proper notice is given, be passed at an annual general meeting or at an extraordinary general meeting and an ordinary or a special resolution can also be passed at either of such meetings[13].

Reference has already been made to the new type of notice introduced by the 1956 Act and designated as "special notice". Certain ordinary resolutions require "special notice" to be given to, not by, the company. The resolutions requiring special notice are for (i) the removal of a director or the appointment of somebody instead of a director so removed at the meeting at which he is removed (s. 284(2)); (ii) the appointment of an auditor other than the retiring auditor or providing expressly that a retiring auditor shall. not be reappointed [s. 225(l)]. It is usual to set out the resolution and to state expressly that special notice has been received of the intention to propose it. Thus a special notice is not required for a special resolution, or for a special business other than the business mentioned above.

Circulation of members' resolutions and statements

Section 188 enables members of a company:

a) to introduce resolutions for consideration at a company's annual general meeting;

b) to circulate statements with respect to any resolution to be proposed at any general meeting.

This section provides that on the requisition in writing of:

1. any number of members representing not less than one-twentieth of the total voting power of all the members having a right, at the date of the requisition, to vote on resolution or business to which the requisition relates; or

2. not less than 100 members having the right aforesaid and holding shares in the company on which there has been paid up an aggregate sum of not less than one lakh of rupees in all;

The company must:

1. give to members entitled to receive notice of the next annual general meeting, notice of any resolution which may properly be moved and is intended to be moved at that meeting;

2. circulate to members entitled to have notice of any general meeting sent to them, any statement (not exceeding 1,000 words) regarding the subject matter of any proposed resolution or business to be dealt with at that meeting

Unless the company otherwise resolves, the expense must be borne by the requisitionists.

It should be noted that the statement is required to be circulated only to members entitled to have notice “sent” to them, whereas notice of the resolution is required to be given to members entitled to "receive" notice. The latter term is wider than the former, since articles may provide for certain members, e.g. those with no registered address in

India

, to "receive" notice by advertisement.

A copy of the requisition signed by the requisitionists (or two or more documents which among them contain the signatures of all the requisitionists) must be deposited at the registered office of the company:

not less than six weeks before the meeting, in the case of a requisition requiring notice of a resolution; and
not less than two weeks before the meeting in the case of any other requisition, i.e. one requiring circulation of a statement.

The requisitionists must deposit or tender with the requisition a sum reasonably sufficient to meet the expenses.

If an annual general meeting is called for a date six weeks or less after deposit of a requisition requiring notice of a resolution, this will not invalidate the requisition. Notwithstanding anything in the articles, the business at an annual general meeting must include any resolution of which due notice has been given, and for this purpose the accidental omission to give, notice to any member does not invalidate the proceedings.

The company is not, however, bound to circulate a statement if, on the application by the company or any aggrieved person, the court is satisfied that the rights conferred by s. 188 are being abused to secure needless publicity for defamatory purposes.

It may be, noted that there is no right of appeal to the court against giving notice of a resolution submitted by the requisitionists.

Shareholder resolution by postal ballot

The section 192A (1) of the Companies Act, 1956 was inserted by the Companies (Amendment) Act, 2000 which came into force with effect from 13th December, 2000. The provisions of the section give all listed companies an option of passing shareholder’s resolution through postal ballot.

The Companies (passing of the resolution by postal ballot) Rules, 2001 which were notified on 10th May, 2001 mention transactions to be transacted through postal ballot. Pursuant to section 2 of the Companies (Amendment) Act, 2000 a notification number S.O.523(E) dated 15th June, 2001 was published indicating the date from which the provisions of section 192A shall come into force i.e. 15th June, 2001.

The CLB has received a number of queries from the professionals, Chamber of Commerce & Industry, corporate sectors etc. on the above subject. The points raised have been carefully examined and CLB’s views thereon are indicated below: -

1. The Companies (passing of the resolution by postal ballot) Rules, 2001 read with section 192A shall apply to notices calling meetings of the shareholders approved by the Board of Directors after 15th June 2001.

2. According to the provisions of section 192A it is not mandatory for the company to release an advertisement giving the date of completion of despatch of postal ballots. However, as a measure of Good Corporate Governance companies in their own interest may release an advertisement for publishing the date of completion of despatch of postal ballots.

3. A specimen postal ballot form and items to be included in the calendar of events for conducting voting through postal ballot are enclosed for the use and convenience of the companies. The concerned companies must ensure that the postal ballots are serially numbered and have distinguishing water marks in order to avoid printing of any duplicate ballot papers.

4. The companies are required to specify the last date by which the postal ballot must be received by the company keeping in view the provisions contained in Rule 5(f) of the Companies (passing of the resolution by postal ballot) Rules, 2001 and the instructions at serial number 5 of the specimen postal ballot form.

5. It is clarified that voting right on postal ballot shall be in proportion to the shareholders share of the paid up equity share capital of the company.

6. The company secretary along with one of the functional directors should be made responsible for the entire postal ballot process by means of an appropriate board resolution. The resolution should be passed in the Board Meeting in which notice required to be sent to the shareholder under section 192A (2) is approved by the Board. A copy of the board resolution should be despatched alongwith item to be included in the calendar of events within one week of passing of the Board resolution to the concerned Registrar of Companies for information.

7. A query has been raised whether Companies (passing of resolution by postal ballot) Rules, 2001 is applicable only in respect of list of businesses as notified under rule 4 of the said rule. It is hereby clarified that the Central Government may at any time include or delete the items to be transacted through postal ballot, therefore, the procedure as specified in the rules has to be followed for any business to be transacted through postal ballot.

8. A query has also been raised whether passing of all resolution in respect of ordinary and special business other than those covered under rule 4 of the said Rules can be treated as sufficient compliance of provisions of section 166 of the Companies Act, 1956 and also whether the company is required to convene a general meeting in case the resolutions are to be passed through postal ballot. While the companies are required to hold annual general meetings which is a mandatory requirement under section 166 of the Companies Act, 1956 it is hereby clarified that any listed company which intends to transact such businesses as notified under rule 4 of the said Rules has to do so only in the general meeting along with other ordinary businesses and special business, if any. The companies are required to send notice only in respect of item to be transacted through postal ballot well in advance so that the reply is received from the shareholders before the date of the general meeting. This will enable the scrutinizer to be in a position to make an entry in the appropriate register maintained for the purpose and make it available to the Chairman of the general meeting who shall declare the results in the general meeting. The date of passing of the resolution will be the date of the General Meeting.

9. The CLB is separately taking following actions for amending the Companies (passing of the resolution by postal ballot) Rules, 2001: -

i. Insert new Rule 2A as under :

“The notices may be issued by the Companies under certificate of posting and an advertisement shall be published in a leading English Newspaper and in one vernacular Newspaper circulating in the State in which the registered office of the company is situated about having despatched the ballot papers;

ii. In rule 4 the word ‘may’ is proposed to be substituted by the word ‘shall’;

iii. In rule 4 (b) the words ‘deletion or’ is proposed to be omitted;

iv. In rule 4 (h) the word ‘proviso to’ to be inserted after the word ‘under’;

v. Rule 4 (i) is proposed to be deleted;

vi. Rule 5 (c) is proposed to be substituted by :- ‘scrutinizer will submit his report as soon as possible after the last date of receipt of postal ballot’;

vii. Rule 5 (f) is proposed to be substituted by :- ‘the consent or otherwise received after 30 days from the date of issue of notice will be strictly treated as if reply from the member has not been received’ ”.

CHAPTER 6: REGISTRATION OF RESOLUTIONS AND AGREEMENTS

Section 192 (1) requires a company to file a printed or typewritten copy, of certain resolutions together with explanatory statements under s. 173 and agreements with the Registrar of Companies within thirty days after the passing or making thereof, duly certified by an officer of the company. The section applies to (s. 192(4))—

Special resolutions;
Resolutions, which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions. This paragraph evidently assumes that where the Act requires a special resolution for any purpose, that purpose may also be effected by a "resolution agreed to by all the members of the company". This appears to be based upon the decisions in Re Oxted Motor Co[14].It is not clear whether individual assents given separately by all the members without assembling at a meeting could be treated as equivalent to a special resolution duly passed, notwithstanding the definition of such resolutions requiring them to be passed at a general meeting [s. 189. (2)]. According to HALSBURY, where it is shown that all members who have a right to attend and vote at a general meeting of the company assent to any matter which, a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be [15]This principle applies as well to special resolutions' as it applies to ordinary resolutions, and to resolutions of a class of members[16] [s. 192 (4) (e)), , GOWER is also of the same view[17] However, if a general meeting is held to pass a special resolution, but there is some defect in convening or holding it[18], the resolution will be undoubtedly treated as validly -passed if all the members entitled to attend the meeting subsequently agree to treat it as binding[19] Any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, reappointment or renewal of the appointment, or variation of the terms of appointment, of a managing director.
Resolutions or agreements which have been agreed to by all members of any class of shareholders, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by some particular majority or otherwise in a particular manner.
Resolutions or agreements which effectively bind all the members of any class of shareholders though not agreed to by all those members. It would appear from (d) and (e) above that, the intention is to require the registration not only of resolutions or agreements for variation of class rights or other cognate matters where effected by a specified majority under an article like reg. 3 of Table A, but also of re solutions or agreements dealing with such variation of matters passed or agreed to by all the members of the class, although not passed or agreed to under or in accordance with an enabling article.
Resolutions according consent to the exercise by the Board of Directors of any of the powers under clause (a), clause (d) and clause (e) of s. 293(1),
Resolutions approving the appointment of sole selling agents under s. 294 or sec. 294AA.
Copies of terms- and conditions of appointment of a sole selling agent appointed under s. 294 or of a sole selling agent or other person appointed under s. 294AA.
Resolutions requiring a company to be wound up voluntarily under s. 484(1) (a) on effiuxion of time or occurrence of a specified event as provided for in the articles (an ordinary resolution).

CHAPTER 7: RESCISSION AND AMENDMENTS OF RESOLUTIONS

Rescission to resolutions

A resolution is effective and can be acted upon as soon as it is validly passed. Accordingly, a resolution once passed cannot be further considered By the way of amendment or rescission at the same meeting at which it has been passed, since business already decided upon cannot be raised again at the same meeting. But its effect may be destroyed by reversal or rescission, at a subsequent meeting by an appropriate resolution. Thus a special resolution altering the articles may be rendered ineffectual by another special resolution passed at a later meeting whereby the articles are restored in their original form. Rescission of a resolution cannot, of course, affect its validity during the period after it was passed and before it was rescinded; in other words, the second resolution is not retrospective.

Rescission at a subsequent meeting must be in accordance with any regulations relating thereto in the articles.

There are, however, some cases in which the power to rescind is outsider the competence of a company. One such case is a special resolution to create reverse liability of limited company. Sec 99 states that if a company has resolved by special resolution to- set aside a part of its un-called capital to be used only in winding-up, then the money “…shall, not be capable of being called up except in the event and for the purposes" aforesaid. The reasons for making this resolution irreversible are that the existence of a reserve liability fund may induce persons to contract with the company where they might not otherwise have done so, for it amounts to an assurance that they are that much more protected if the company is wound up. To allow the company to alter the position would be to allow fraud on company creditors.

Another case is when a company has passed a resolution for voluntary winding, up. By virtue of s. 487, a voluntary winding up is deemed to commence at the time when the resolution for voluntary winding up is passed. The rights of creditors are involved once the winding up is commenced, and the resolution, therefore, cannot be rescinded.

Amendments to resolutions

When a resolution is proposed, there is prima facie a right to propose any relevant amendment. An amendment may be defined as a proposal to alter a motion or proposed resolution submitted to a meeting, e.g.

by adding, inserting or deleting words of the original motion;
by substituting words, phrases or complete sentences for others in the original motion; or
by any combination of the above forms of alteration.

Before a motion under discussion has been voted upon it may be altered or amended except perhaps in case of special resolutions. It has been categorically stated in Palmer's Company Law[20], that special resolutions cannot be validly passed except on the terms or wording in which they were expressed in the notice convening the meeting; in other words, such resolutions cannot be amended. This limitation upon the power of a meeting to amend is a consequence of the statutory definition, of a special resolution, which requires the resolution to be duly specified in the notice calling the general meeting.

According to GOWER[21], this however may be too strict an interpretation. The test of validity of an amendment to a resolution, whether ordinary or special, appears to be similar, namely, would the amendment so alter the nature of the business stated as to cause any member who had stayed away reasonably to wish he had not? Thus, if, the notice specified consideration of a special resolution to increase the managing director's remuneration by Rs. 1,000 per month, an amendment to reduce this to Rs. 500 per month would clearly be valid, since a member who was prepared to swallow a camel could scarcely strain at a gnat. On the other hand, an amendment to increase it to Rs. 2,000 per month would undoubtedly be invalid, since many members might have stayed away because they regarded Rs. 1,000 as not unreasonable but might have dissented violently from a resolution granting larger sum.

The view of GOWER has, however, been recently rejected by SLADE, J. in an elaborate judgment in Re Moorgate Mercantile Holdings Ltd[22]and for the present it must be taken as established that no amendment (however trivial) to the substance of the resolution as notified is possible. In this case the court refused to confirm a special resolution for reduction of capital by way of reducing the share premium account., The resolution contained in the notice of meeting provided for the account to be cancelled entirely (i.e. $,356,900.48), but at the meeting the resolution was amended to reduce the amount to $321.17, being a small additional sum which had recently been credited; an amendment which would clearly have been permissible under the test suggested by GOWER. The learned judge, however, held that to be valid, a special resolution must be identical in substance to the notice given to Shareholders. He regarded his conclusion as supported not only by the language of the Act but also by considerations of public policy, since special resolutions are required only in some special circumstances where the resolutions are "likely either to affect the company's constitution or to have an important effect on its future". Hence shareholders should have "a clear and precise advance notice".

There is, however, no difference of opinion other than an amendment to a special resolution to correct an obvious mistake, e.g. a grammatical or spelling mistake, can always be made. It is, therefore, advisable to frame the notice so that it indicates the possibility of such amendments, e.g. "To consider and if thought fit pass with or without modifications...”

It may, however, be pointed out that by the concurrence of all the members entitled to attend and vote, a substantial amendment to a special resolution may be validly made. It is of course only in small companies that the concurrence of all the members is likely to be secured.

Clearly far greater scope is allowed if the amendment is to an ordinary resolution, particularly when the resolution is not detailed in the notice but merely the nature of the business is indicated. Even where the notice sets out the exact terms of the proposed resolution, it seems that an amendment may be proposed and adopted at a meeting provided that it comes with-in the scope of the notice and does not commit the meeting to anything more onerous than the resolution itself. Thus, when notice of a resolution to fix the director’s remuneration at a specified sum is given, the resolution would be effective notwithstanding that it is passed with an amendment reducing the remuneration to a smaller figure[23]

CHAPTER 8: CONCLUSION

Hence it can be said that the resolution is an effective weapon in the hands of the members to control the management of the company.

A company expresses its will by means of resolutions. The Companies Act refers to resolutions throughout and not to motions, meaning, persuadably, "proposed resolutions". In the case of company meetings the nature of the business and the form of the various motions that are to be submitted at those meeting are normally formulated beforehand. The essentials of a well-framed motion are that it should be couched in definite terms, free from ambiguity and be, within the powers of the meeting and the scope of the notice.

As it is clear that resolution is a decision or an expression of opinion or intention by a meeting. The term is also used to refer to a proposal to be submitted to a meeting. A resolution which has been recorded in the minute book is often referred to as a "minute".

There is probably no finite number of different kinds of resolutions that may be decided but those produce provide a useful all-round coverage which can assist those who have the responsibility of recording or advising on them.

It must be emphasized that although certain of the resolutions may be adopted in their entirety, others could only be used as guides to be varied where necessary to conform to the particular sets of facts and circumstances.

Hence at the end I have been able to assimilate certain rules as to resolutions an motions

The rules as to motions or proposed resolutions may be summarized as below:

A motion or proposed resolution-

Should be as a rule positive in its terms and free from ambiguity. A motion should not ordinarily be in negative terms, for the same result could be achieved by mere inaction, A negative motion could, however, be appropriate only when a previous meeting is already committed to a course of conduct which it is desired to avoid, or where certain results must automatically ensue unless the contrary be resolved upon. For example, if at an annual general meeting at which a director retires by rotation and offers himself for reappointment, it is intended not to the appoint him it may be necessary to pass a resolution to the effect that the vacancy be not filled (s. 256). Again, a negative Resolution is required to be passed at an annual general meeting when it is intended not to reappoint the retiring auditor, who is qualified and willing to be reappointed [s. 224(2)].
Should be within the power of the meeting and scope of the notice, and relevant to the business of the meeting.
Should comply with the provisions of the 4ct and the articles as to form and notice. For example, the Act requires that special notice must be given for certain resolutions.
Should be duly proposed and, where it is the practice of the meeting or is required by the articles, seconded.
Should commence with the word "That", and, should be in the wording in which the resolution is required to appear in the records of the meeting.
Must not raise a matter already decided at the same meeting.
Once properly before the meeting, should not be withdrawn without the consent of the meeting. Where a motion has been seconded it cannot be withdrawn without the seconder's permission [24]
Gives the mover a right of reply.
Is of no effect unless carried.

[1] Re Horbury Bridge Coal, Iron, and Wagon Co. (1879) 11 Ch D 109

[2] (Per Lord HARDWICKE C.J. in Att.-Gen. v Davy (1741) 2 Atk 21 Z).

[3] Prakash Road Lines v. Vijay Kumar (1995) 83 Comp 569.

[4] Naresh Kumar Jain v. UOI (1997) 90 Comp Cases 445

[5] Gopla Vayas v. Sinclair Hotels AIR 1990 Cal 45.

[6] (MacConnell v Prill (E) & Co. Ltd. [1916] 2 Ch 57; [1916-171 All ER Rep 1344)

[7] (MacConnell v Prill (E) & Co. Ltd. [191612 Ch 57; [1916-17] All ER Rep 1344). In Re Maneckchowk and Ahmedabad Manufacturing Co. Ltd. [1970]40 Comp Cas 819

[8] (Ayre Skelsey's Adamant, Cement Co. (1904) 20 TLR 587)

[9] Palmer’s company, Precedents, Part I, 17th Ed., p. 861

[10] Gopla Vayas v. Sinclair Hotels AIR 1990 Cal 45.

[11] Hererman v. Simson (1990) 4 ACSR 81.

[12] Amar Nath Malothra v. MCS Ltd (1993) Comp Cases 469.

[13] Prakash Road Lines v. Vijay Kumar (1995) 83 Comp 569.

[14] . [192113 KB 32; Re Express Engineering Works [, 1920] 1 Ch 466; and Parker & Cooper Ltd. v Reading 11926] Ch 9 75; [19261 All ER Rep 323

[15] Re Du'omatic Ltd 1969 2 Ch365; [19691) All ER. 161.

[16] Halsbury Laws of

England

, 4th Ed., vol-7, 13. 348

[17] Gower's Principles of Modern Company Law, 4th Ed.9 pp. 550-551.

[18] Horsely v. White (1982) All ER 1045.

[19] Re Pearce Duff & Co. Ltd. [1960] 3 All ER 222; [1960 ' ]l WLR 1014; Re Bailey Hay & Co. Ltd. [1971]3 All ER 693; [197111 WLR 135.

[20] 22nd Ed., p. 585

[21] Principles of Modern Company Law, 4th Ed., p. 545

[22] 1980 11 WLR 227

[23] Torbock v Lord Westbury [1902]2 Ch 871; Henderson v Bank of Australasia (1890) 45 Ch D 330, CA; Rebello (F.A.C.) v Co-operative Navigation Co. Ltd. AIR 1925 Bom. 105; Vakil (T.H.) v Bombay Presidency Radio Club Ltd. [1946 )16 Comp, Cas 8; ILR 1945 Bom 687; AIR 1945 Bom. 475.

[24] R v Mayor of Dover [190311 KB 668).

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Sunday, August 29, 2010

Company Law - ORDINARY AND SPECIAL RESOLUTION IN BOARD MEETINGS