WRITTEN RESOLUTIONS UNDER THE COMPANIES ACT 2006

The Companies Act 2006 means that private companies are no longer required to hold AGMs and at the same time makes written resolutions a lot easier to use.

Christopher Sykes of Sykes Anderson LLP discusses the new regime with Simon Keane of www.companysecretariat.com.

What 'AGM business' can now be conducted using written resolutions and what can't?

The Act was drafted so that most decisions can be made by written resolution although a company will still need to hold meetings to dismiss a director or remove an auditor before the end of the term of office.

How has the Act made written resolutions a more viable decision-making process for private companies?

Previously, written resolutions required unanimity.  Now, the Act refers to two types of written resolution: an ordinary resolution, which to be passed requires a simple majority of those eligible to vote, and a special resolution, which requires 75% of those eligible to vote to be in favour.

How should the written resolutions be circulated?

The directors must circulate a written resolution by sending it to all members at the same time, or by submitting the same copy to each member in turn, if this can be done without undue delay.

After the written resolution has been circulated, does the company have to wait for all members to respond until it is passed?

Once the relevant majority of all members has been achieved, the written resolution is passed even if not all members have replied.  Failure to approve and return a resolution by the lapse date counts as a vote against it.

What is the lapse date?

A proposed written resolution lapses if it is not passed before the end of the period specified for this purpose in the company's articles, or if none is specified, the period of 28 days beginning with the circulation date.

That written resolutions can be circulated in electronic form seems like a powerful reason for private companies to adopt some of the electronic communication laws already in place. Do you agree?

Circulating written resolutions in electronic form can certainly save time and money.  However, the company needs to seek individual agreement of each shareholder to receive information by email, either generally or in relation to a particular document or information.  Where a shareholder does not agree or fails to provide an email address, the company will need to send information in hard copy.

Are there any points to watch in relation to communication from the shareholders to the company?

It should be noted that various provisions of the Act deem a company to have agreed to receiving documents or information electronically.  For example, if a company gives an electronic address in any document containing or accompanying a written resolution, then it is regarded as having agreed that documents or information relating to it can be sent to the company electronically at that address unless it says otherwise.

Disposing of the AGM potentially reduces the contact between a company's directors and its members. Do you agree this may cause friction between the two?

Directors should ensure that shareholders do not feel left out of the decision-making process. Shareholders' ideas and input should be sought and indeed a general meeting might be the best forum for this.

Is it correct that members of a private company holding 5% of the voting rights now have a new power to call a general meeting?

This is only correct where more than 12 months have past since the last meeting, otherwise the previous threshold of 10% of paid up share capital or total voting rights still applies.