• Pratham Dave

SECTION 114: ORDINARY AND SPECIAL RESOLUTION

Updated: Oct 7



INTRODUCTION:


An ordinary resolution is passed by a simple majority of the company's members. A special resolution, on the other hand, is approved by a three-fourths majority of the company's members.


The items of business to be conducted during a GM (General Meeting) at a firm are submitted as motions. The term "move" refers to a suggestion made for discussion and approval at the meeting. A resolution is created when a motion is agreed unanimously by all members present at the meeting. Ordinary Resolution and Special Resolution are the two sorts of resolutions that must be passed under various conditions.


WHAT IS AN ORDINARY RESOLUTION?


According to Section 114 (1) of the Companies Act of 2013,


A resolution is an ordinary resolution if the notice needed by this Act has been given and it is obligated to be approved by the votes cast, whether on a unanimous vote, electronically, or by-poll, as the case may be, in favour of people of the resolution, along with the casting vote, if any, of the Chairman, by members who, being entitled to do so, vote in person, or where intermediaries are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution.


The members must be given proper notice of the meeting's convening. Furthermore, members who do not engage in voting are not taken into account. In general, the ordinary resolution must be approved to conduct ordinary business at the AGM (Annual General Meeting). Ordinary Business consists of the following activities:

  • Adoption of final financial statements.

  • The dividend is declared.

  • Retiring and appointing Directors

  • Retirement and appointment of Auditors, as well as determining their salary.


WHAT IS A SPECIAL RESOLUTION?


According to Section 114 (2) of the Companies Act of 2013,


A Special Resolution (SR) is a resolution wherein the number of votes cast in favour of it must be three times greater than the number of votes cast against it. Certain acts can only be done by the corporation if a special resolution is approved at a legally convened general meeting. The members shall be given proper notice of the general meeting, and the notification should expressly state the intention to propose the resolution as SR.

The resolution must be carried by any method, including voting by unanimous vote, polling, or electronically by members present in person, proxy, or postal ballot.


PASSING A RESOLUTION:


The proposed resolution is referred to as a motion Until it secures approval to be passed. It becomes a resolution after the appropriate permission is acquired by the provisions of the Companies Act, 2013. When it comes to matters requiring a special resolution, they must be included on the agenda of the meeting, which is provided when the meeting notice is sent out. Motions arising from negotiation may also be authorized for situations that do not require a specific resolution under the Act.


Form MGT – 14 must be filed with the Registrar of Companies within thirty days of the resolution being enacted, especially if the resolution is a special resolution. Attachments include the following:

  • A copy of the resolution that was passed is attached.

  • Section 102 of the Companies Act of 2013 requires an explanatory statement.

  • A copy of the articles of incorporation (where any change is made).

  • A copy of the Articles of Association (where any change is made).


DIFFERENCE BETWEEN ORDINARY RESOLUTION AND SPECIAL RESOLUTION:

  • Ordinary Resolutions are those that require only a simple majority to be passed at a general meeting. A Special Resolution is one that requires a senate majority to be passed at the general meeting.

  • Ordinary resolutions require the approval of at least 51 percent of members in order to be passed. The special resolution, on the other hand, requires the approval of at least 75% of the members voting in favour of the resolution.

  • Only in particular circumstances should a copy of an ordinary resolution signed by the company's officer be lodged with the registrar. In contrast, a printed or handwritten copy of a special resolution with the signature of the company's officer must be filed with the Registrar of Companies (ROC) within thirty days.

  • Ordinary Resolution was passed in order to conduct Ordinary business. A special business, on the other hand, can be transacted through a special resolution or an ordinary resolution, as required under the Companies Act.


CONCLUSION:


Meetings are held in businesses to make decisions by voting on formal proposals presented to the gathering. Resolutions are simply the company's expression of intent. Aside from the regular business, Ordinary Resolution is adequate to transact the business. Change of business name, at the instruction of ROC, when the previously registered name is erroneous or incorrect, or Rectification of company name, as instructed by Central Government, payment of cost accountant.


The issuance of sweat equity shares, changes to the provisions of the memorandum of association, changes to the articles of association, the purchase of shares or securities, changes to the objects of the prospectus, the relocation of the company's registered office, and other matters require Special Resolution.


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