WHAT IS ORDINARY, SPECIAL AND EXTRA ORDINARY RESOLUTION

The word “resolution” is not defined in our Companies Act 1994. Usually, in terms of company law, a resolution means the formal decision of a body (either the board of directors and/or shareholders) which has been taken in a meeting after proper deliberations. In a normal scenario, any proposed action (that require prior approval) is set out before the board of directors or shareholders as agenda for their approval. After the quorum is fulfilled, the board of directors or shareholders discuss, amend and vote such agenda. If the agenda is approved by a majority of the directors/shareholders, it becomes a resolution.

Kinds of resolutions:

Under the Companies Act 1994, (the “Act”) there are three kinds of resolutions for general meetings –

i) Ordinary;

ii) Special; and

iii) Extraordinary resolution.

There is also resolution of board meetings. But in this post, I will only discuss resolutions of general meetings.

Ordinary resolution:

In the Act it is not clarified what kind of resolution can be called ‘Ordinary Resolution’. An ordinary resolution is a resolution which is passed by a simple majority of the shareholders who are entitled to vote at a general meeting of the company. In the Act there are certain business which is required to be approved by resolution in a general meeting. Those resolutions mean an ordinary resolution unless the context otherwise provides.

Extraordinary resolution:

According to section 87 (1) of the Companies Act, a resolution is an extraordinary resolution if –

i) in the notice it was mentioned that this would be an extraordinary resolution;

ii) passed by a majority of three fourth of the members who are entitled to vote as are present in person or by proxy, where proxy is allowed.

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