Matters Requiring Special Resolution under Companies Act, 2013 (2023)

A resolution may beeither an Ordinary Resolution or a Special Resolution, according to Section 114of the Companies Act of 2013. If a resolution wins a majority of the votes, itis considered an ordinary resolution under Section 114. (1). A resolution isconsidered a special resolution under Section 114(2). The intention to presentthem as a “special resolution” was duly indicated in the noticecalling the general meeting or in another notification sent to the members ofthe company:

According to Section 114(2) of the Companies Act of 2013 a special resolution is when-

1. The intention to put forth the special idresolution was duly communicated to all members in the notice calling for thegeneral meeting or in any other information that was sent to them.
2. The notice required by Act has been dulydelivered; and
3. Whether by a show of hands, electronically, orin a poll, the number of votes voted against the resolution, if any, must be atleast three times more than the number of votes cast in favor of it.

Crucial Considerations MustBe Taken Into Account

• The Companies Act of 2013 requires that notice of the meeting be sent to all members in advance.
• According to the information that was sent to members in advance of the meeting, a special resolution would be passed.
• A super majority is necessary for a special resolution to be adopted at a General Meeting.
• At least 75 percent of the members must vote in favor of the resolution in order for there to be a super majority.
• When it comes time to tally up the votes, only those cast by members who meet the criteria will be counted.
• Some of the problems that call for a special resolution include: – Articles of Association amendment, Issue of Sweat Equity Shares, the registered office of the company has been moved, share capital has decreased, getting rid of an auditor before his term is over, purchase back shares, more than 15 directors are presently in the office, loans and investments made by the company.

Situations underWhich Special Resolutions Are Issued

Below mentioned is alist of circumstances which require passing of special resolution under thecompanies act, 2013.

1. To insert entrenchment provisions in a Public Company’s Articles of Association (AOA), a Special Resolution is necessary under Section 5(4).
2. Change of Registered Office: The registered office of the company cannot be changed without the resolution holders’ approval of a special resolution. This shows that SR in GM mandates that a company relocate its registered office outside of the city, municipality, or hamlet in which it is now situated.
3. Any modifications to the Memorandum of Association (MOA) must be approved by the company’s shareholders at the annual meeting (GM).
4. A company that has submitted a prospectus to the public in order to acquire capital is required to wait until a special resolution is enacted before changing the reasons for why the capital was obtained. In other words, an SR in GM is necessary to change the projects of a company that has obtained funds from the public via a prospectus but has not yet used the complete amount.
5. Articles of Association (AOA) Change: SR in GM was necessary to change the AOA, including revisions that would turn a private company into a public one or vice versa.
6. A company must pass SR in GM in order to change a contract specified in the prospectus or the items for which the prospectus was issued.
7. Issue Depository Receipts: After gaining SR in GM, a company is granted permission to issue Depository Receipts in any nation outside of its home country.
8. Changes to the rights attached to shares of any class must be approved by the shareholder rights committee of General Motors.
9. Issue Sweat Equity Shares: A Special Resolution may issue Company Sweat Equity Shares of a previously issued Class of Shares, provided that the issuance is authorized by a Special Resolution passed by the Company.
10. Give Employees Additional Shares Using a Stock Option Scheme to Raise Subscribed Capital. The Notification No. does not apply to private companies, nevertheless.
11. Raise the amount of capital that has been subscribed to by issuing more shares to anybody. The Company may issue the Additional Shares to the Additional Investors if the price of the Additional Shares is established by a valuation report from a registered valuer.
12. To approve the terms of the Debentures or Loans raised by the Company in order to convert such Debentures or Loans into Company Shares.
13. Reduce Share Capital: To reduce the share capital in any manner, subject to Tribunal approval.
14. Approve Scheme for Employees: To approve any plan for the purchase or subscription of fully paid-up shares in the company or its holding company, provided that the purchase or subscription is for shares held by trustees for the benefit of employees or that such shares are owned by employees.
15. Buy-back: Allowing the company to repurchase its own shares or other specified securities.
16. To authorize the issue of debentures with the option to convert all or a part of them into shares at the time of redemption. This is known as the conversion of debentures into shares.
17. To keep and maintain the registers of members, debenture-holders, and any other security holders, as well as copies of the Annual Report, at any place in India (other than the registered office) where more than one-tenth of the total number of members listed in the register of members live.
18. Appoint/Re-appoint Auditor: To appoint another auditor in lieu of the departing auditor or to clearly say that the retiring auditor will not be appointed again.
19. Removal of Auditor prior to the expiration of his term with prior consent from the Central Government: to get rid of the Auditor before his term is over. In other words, unless the company approves a special resolution, the auditor appointed in accordance with Section 139 cannot be removed before the expiry of his term.
20. A company may nominate as many as 15 directors by passing a special resolution. Board of Directors in Public, Private, and One-Person Companies.
21. Reappointment of Independent Director: The process of reappointing an independent director at the conclusion of their first term of five years. If the company reaches SR in GM, an independent director may be eligible for reappointment.
22. Fewer Directorships: To choose fewer companies in which a director of the company may serve as a director. Find out more information on the maximum number of directors that may serve in a public or private company.
23. The Board of Directors of a company has the ability to sell, invest, borrow, and engage in other business-related actions. Limits on a Board of Directors’ Power.
24. Must provide their stamp of approval of any strategy that would make it possible for a loan to be given to a management or full-time director of a company. Loan money to MD or WD. Discusses a Loan to a Company’s Directors.
25. Any loan or guarantee that exceeds the required limitations, i.e., 60% of Paid-Up Share Capital, Free Reserves, and Securities Premium Account, or 0% of Free Reserves and Securities Premium Account, whichever is larger, requires prior authorization.
26. Director or Managerial Appointment over 70: To appoint someone over 70 as Managing Director, Full-Time Director, or Manager. Appointment of a Company’s MD, WD, or Manager.
27. The process of determining the pay that is provided to directors of a company, including any managing or full-time directors or managers, in line with the articles of incorporation, is referred to as “determining the director’s remuneration.” In the case that profits are inadequate, management will get compensation.
28. Investigation by the Central Government: Informing the Central Government that an inquiry into the company’s dealings is necessary.
29. Serious Fraud Investigation Office Investigation: Notify Central Government that the SFO will be looking into the company’s dealings.
30. Removal of Company Names: A Company may petition to the Registrar to have its name removed from the register of Companies for any of the reasons stated in Section 248 of the Companies Act, 2013^[1].
31. To approve the merger of the failing company with any other company proposed by the shareholders of both companies.
32. To ascertain that the company would be liquidated by the Tribunal.
33. To ascertain whether or not the company was voluntarily dissolved.
34. Specifically granting the Company Liquidator of the transferor company the following powers: To provide the Company Liquidator of the transferring company the authority to accept money in consideration for the transfer or sale of the firm’s business or property.
35. If the Company Liquidator wants to buy the member’s share, he needs to first acquire the required cash in a way that is sanctioned by the Special Resolution. Only then may he make the purchase of the member’s share.
36. If the Company Liquidator chooses to purchase the member’s investment, the SR in GM will need to figure out how to earn the money to buy the interest.
37. To approve any agreement that binds the liquidated company and its creditors (other than Section 319).
38. During a voluntary liquidation, granting the Company Liquidator the right to execute certain functions.
39. Disposal of Books and Papers: To describe how a firm’s books and papers are to be disposed of in the event that the company is voluntarily wound up and its affairs have been completely wound up.
40. A special resolution authorizing the modification must be passed by the shareholders of the company whenever they want to modify the way in which Table F of Schedule I applies to it.

Some Conditions That Must BeSatisfied For a Special Resolution

The followingconditions must be satisfied in order for a special resolution to be passed:

• The notification states that the proposal isintended to be a special resolution.
• Notification is required under Section 2 of theAct.
• The number of votes voted in favor of theresolution, if any, is at least three times larger than the number of votescast against it, if any. In other words, the resolution was passed with 75percent of the valid votes in favor.
• It is permissible to vote via a show of hands,electronic voting, a referendum, or any other technique that is allowed, aswell as a postal ballot. Just the allocations of “entitled andvoting” members will be counted. Because of this, the votes of people whodo not vote or are unable to vote (whether as a result of this Act or anotherlegislation) should not be tallied. The member presenting the resolution, orthe company may also offer the appropriate notice.

Procedure ofPassing a Resolution

Resolutions withvaried degrees of compliance must be enacted in order to comply with theprovisions of the Act. Suspension is one such resolution, and it is included inSections 2 and 4 and 5 of the Act. The aforementioned resolution requiresapproval from 75% of shareholders, or 2 out of every 3 shares.

Adoption of a ResolutionProcedures

When it comes tomatters that need a special resolution, they must be placed on the agenda forthe meeting, which is disseminated together with the notice of the meeting. Amotion is a proposed resolution until it is adopted by 2/3 of the members. Withthe necessary approval in line with the Companies Act, 2013, it becomes aSpecial Resolution.

Each resolution isnormally offered 2 by one member and then seconded 3 by another member in linewith Paragraph 7 of the Secretarial Standard.

Form MGT-14 CompaniesResolution must be lodged with the Registrar of Companies within 30 businessdays following the resolution’s passing if the resolution is a specialresolution.

• A copy of the Resolution that was approved.
• In accordance with Section 102 of theCompanies Act, 2013
• Articles of Association, if there is amodification.
• Articles of Association, if there is amodification.

Differences between Ordinary Resolution and Special Resolution

Conclusion

A company organizes meetings where decisions are reached voting on formal ideas that are given to the group. Only resolutions serve as the formal declaration of purpose for the company. A Special Resolution must be approved in order to issue sweat equity shares, modify the memorandum of association, amend the articles of association, repurchase shares or securities, or alter the goals outlined in the prospectus.

Also Read:
Types Of Companies Under Companies Act, 2013

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