Introduction
An Ordinary Resolution is a formal decision taken by a simple majority (i.e., more than 50%) of company members or shareholders during a meeting. This type of resolution is applicable where no other specific form of resolution, such as a special resolution, is required by legislation or the company’s articles of association.
Historical Context
The concept of an ordinary resolution arises from corporate governance principles and has been formalized in statutes such as the Companies Act 2006 in the United Kingdom. This act provides a legal framework for the operation of companies and sets out the procedures for various types of resolutions, including ordinary resolutions.
Types/Categories
- General Meetings: Used in Annual General Meetings (AGMs) or Extraordinary General Meetings (EGMs).
- Directors’ Resolutions: Passed by the board of directors for routine decisions.
Key Events in Corporate Meetings
- Notice of Meeting: Generally, a notice is sent to all eligible voters. Although for ordinary resolutions, specific notice of the proposed resolution may not be required.
- Quorum: The minimum number of members required for the meeting.
- Voting: Conducted either by a show of hands or a poll.
- Passing the Resolution: Requires a simple majority.
Detailed Explanations
Ordinary resolutions cover various routine matters such as:
- Approval of annual accounts.
- Appointment or re-appointment of directors.
- Declaration of dividends.
Importance and Applicability
Ordinary resolutions are crucial for the day-to-day operations of a company. They ensure that routine business decisions can be made efficiently without the need for more stringent voting requirements.
Examples
- Example 1: Approving the annual budget of a company.
- Example 2: Electing a new member to the board of directors.
Considerations
- Quorum Requirements: Ensure the meeting has a quorum.
- Voting Methods: Determine whether votes will be conducted by show of hands or by poll.
- Proxy Voting: Understand the rules for proxy voting in the company’s articles of association.
Related Terms with Definitions
- Extraordinary Resolution: Requires a higher majority (often 75%) and is used for more significant decisions.
- Special Resolution: Typically needs a 75% majority and is often required for fundamental changes such as amending articles of association.
Comparisons
- Ordinary vs. Special Resolution: Ordinary resolutions require a simple majority, whereas special resolutions need at least 75% support.
Interesting Facts
- Ordinary resolutions are the most common type of resolution passed in corporate governance.
Inspirational Stories
- Case Study: A small tech startup successfully passed an ordinary resolution to appoint a new CEO, leading to significant growth and innovation.
Famous Quotes
- “The will of the majority must always prevail.” – Thomas Jefferson
Proverbs and Clichés
- “Majority rules.”
Jargon and Slang
- Quorum: The minimum number of members needed to validate a meeting.
- Proxy: A person authorized to vote on behalf of a member.
FAQs
Q1: What is an ordinary resolution? A: An ordinary resolution is a decision made by a simple majority of shareholders in a company meeting.
Q2: When is an ordinary resolution used? A: It is used for routine matters that do not require a higher level of consent.
References
- Companies Act 2006 (UK)
- Corporate Governance Guidelines
Summary
An ordinary resolution is a crucial mechanism in corporate governance, allowing companies to make routine decisions efficiently with a simple majority vote. Understanding its application, process, and implications helps ensure the smooth operation of corporate entities.
