Passing Written Resolutions in Private Companies

In private companies, shareholders often need to make key decisions on corporate matters - such as changing the company's articles of association, approving dividends, authorising share issues or altering the company's name. While such decisions can be taken at a general meeting, written resolutions allow private companies to make these decisions without convening a physical meeting. This approach can save time and reduce administrative burden, provided the proper legal procedures are followed. This article explains how written resolutions work under English and Welsh law, what the Companies Act 2006 requires, and how to pass them correctly.

What a Written Resolution Is and Why It Matters

A written resolution is a decision agreed by shareholders in writing or electronically, without holding a general meeting. For private limited companies, written resolutions carry the same legal effect as resolutions passed at a meeting of members. They are authorised by Part 13, Chapter 2 of the Companies Act 2006 (“the Act”) and are intended to make decision‑making more efficient in small companies where convening meetings may be impractical.

Written resolutions are not available to public companies; they must hold general meetings for member decisions. Likewise, two specific types of decisions cannot be passed by written resolution and must be dealt with at a general meeting:

• Resolution to remove a director before the end of their term of office.
• Resolution to remove an auditor before the end of their term.

All other member decisions that would otherwise require an ordinary or special resolution at a meeting can generally be passed in writing.

Legal Framework: Companies Act 2006

The statutory provisions covering written resolutions are found in sections 288 to 300 of the Companies Act 2006.

Under the Act, a written resolution must be:

• Proposed and circulated to all eligible shareholders.
• Circulated in hard copy form, electronic form or by means of a website, subject to the company's articles and any applicable electronic communication rules.
• Accompanied by a statement explaining how members can signify their agreement and the deadline by which the resolution must be passed.
• Passed by the required majority of votes held by shareholders eligible to vote.

Once a shareholder indicates agreement, that agreement cannot be revoked.

Ordinary Versus Special Written Resolutions

Written resolutions follow the same voting thresholds as resolutions passed in meetings, based on whether the matter is classified as ordinary or special:

• Ordinary written resolutions typically require a simple majority (more than 50%) of the total voting rights of eligible members.
• Special written resolutions require at least 75% of the total voting rights of eligible members in favour. This applies where the Act or the company's articles demand a special resolution.

It is important to distinguish between the two: special resolutions are used for fundamental matters, such as amending the company's articles or changing the company's name. Ordinary resolutions apply to more routine decisions, such as approving an annual dividend.

Who Can Propose a Written Resolution?

A written resolution may be proposed either by:

• Directors of the company.
• Shareholders holding at least the threshold of voting rights specified in the company's articles or by statute (commonly 5% of voting rights, but this can vary).

When proposed by shareholders, those proposing the resolution must hold a sufficient proportion of voting rights, and they may be required to cover the costs of circulating the resolution unless the company decides otherwise.

Steps to Pass a Written Resolution

1. Draft the Resolution

The resolution must clearly state what decision is being made, the action required, and whether it is an ordinary or special resolution. If it is a special resolution under the Act or articles, this must be explicitly stated in the document.

2. Circulate the Resolution

The company must send or make available the proposed written resolution and accompanying statement to every eligible shareholder on the circulation date. This may be done:

• By post.
• By email or other electronic communication.
• Via a company website, if permitted by the articles and electronic communication rules.

The statement must explain how a shareholder can signify agreement to the resolution and the deadline for signifying agreement.

3. Signify Agreement

A member signifies their agreement when the company receives an authenticated document from them (or someone acting on their behalf) that:

• Identifies the resolution.
• Indicates agreement to it.

This can be done by signed paper, email (if accepted under the articles), or other authorised electronic means. Once agreement is signified, it cannot be withdrawn.

4. Reach the Required Majority

The resolution is passed once the number of eligible voting rights indicating agreement meets the statutory threshold: more than 50% for ordinary resolutions or at least 75% for special resolutions.

5. File and Record the Outcome

After a written resolution is passed, the company must:

• Keep a copy of the resolution and any accompanying members' statements for at least 10 years.
• File with Companies House within 15 days any written special resolutions or any ordinary resolutions that require filing (for example, those that impact statutory registers or constitutional documents).
• Update internal records, including minute books and registers, to reflect the decision.

Time Limits and Lapse of Written Resolutions

Under the Act, a written resolution lapses if it is not passed before the end of:

• The period specified in the company's articles for passing written resolutions.
• If no period is specified, 28 days from the circulation date.

Any agreement given after the expiry of this period is ineffective. Companies should therefore set clear deadlines in circulation documents.

Practical Considerations and Common Pitfalls

Communication and Eligibility

Companies must ensure that written resolutions are circulated to all eligible members on the circulation date. Failure to do so can undermine the validity of the resolution and potentially expose directors to breach of duty.

Documentation and Compliance

Accurate record‑keeping is essential. Copies of written resolutions and proof of agreement should be maintained in the company's minute books. Certain filings at Companies House are mandatory and failure to file within statutory deadlines (such as the 15‑day period for special resolutions) can result in penalties.

Articles of Association

While the Act provides the statutory framework, a company's articles of association may set additional requirements or procedures for written resolutions. Directors and members should review the articles before circulating resolutions to ensure compliance.

Key Takeaways

Written resolutions provide a flexible and efficient mechanism for companies limited by shares or guarantee to make decisions without convening formal meetings. Governed by the Companies Act 2006, they allow private companies to pass ordinary and special resolutions in writing, provided they follow specified circulation procedures and achieve the appropriate majority of votes. Directors and members must ensure written resolutions are properly drafted, circulated to all eligible shareholders, passed within statutory time frames and recorded and filed where required. When used correctly, written resolutions can streamline governance while ensuring that shareholder rights are upheld.