How Shelf Companies Lost Their Appeal and What to Do Now
Also known as a ready-made company or an off-the-shelf company, a shelf company is a pre-registered business you can buy and customise.
If you thought organising meetings is a common necessity for forming a company, wait until your company is in full swing; meetings and minutes await! For all those company-affecting critical decisions, you’ll be holding a number of general meetings and board meetings involving company members and directors; these meetings must be compliant with company law and follow the correct procedures.
Any decisions (resolutions) made in these meetings must be accurately recorded and, in some situations, directors must also report certain meeting-matters to Companies House. However, some resolutions can be passed in writing rather than at a general meeting.
Before we define a written resolution, let’s have a quick look at what constitutes a general meeting in a limited company:
The Definition of a General Meeting
A general meeting (sometimes casually referred to as a “G.M.”) is the name given to an organised, formal meeting of a limited company’s shareholders. The process, and conduct, of the general meeting should adhere to the Companies Act 2006, any shareholders’ agreement(s) that may be in place, and the articles of association. Notably, you should know how to get a copy of memorandum and articles of association to learn of its significance to such meetings.
Directors normally call general meetings in order for shareholders to discuss the following (non-exhaustive) topics:
- Appointment and removal of a director
- Changing directors’ powers
- Amending the articles of association
- Amending the shareholders’ agreement
- Finances of a company
- Changing the company name
- Changing the structure of the company
- Amending the targets and goals of the business
- Issuing additional company shares
- Approval of share transfers
- Creation of new share classes
- Dissolving the company
- Legal claims and subsequent proceedings
- Company filing and reporting requirements
General Meeting Notice Information
If you call a general meeting, then all shareholders and attendees will require a 14-day notice. The notice should contain the following:
- Date, time and location of the meeting
- Date the notice is issued
- Type of general meeting/nature of the meeting
- Statement declaring that every shareholder has the right to appoint a proxy
- Name of the individual who is calling the meeting
Minutes must be taken at all general meetings that will officially record the meetings’ “content” and proceedings, including the names of all those in attendance when important decisions are made.
All formal decisions that are made by shareholders at general meetings will require “passing a resolution”. The decisions made will be legally binding and copies of resolutions will need to be filed with Companies House within 15 days. All copies should also be kept at the company’s registered office address or SAIL address.
Note: A board meeting is an official meeting of limited company directors who are appointed to manage a limited company on behalf of the company’s shareholders or guarantors. Board meetings normally cater for collective decision making and discussions about the business strategy and financial position.
What Are the Different Types of Resolutions?
In order to pass company resolutions (they may be “ordinary” or “special”), shareholders have to vote for or against a proposed course of action. This process can take place either at a general meeting or by a written resolution.
Before we get to a written resolution, here’s an overview of both an ordinary and special resolution:
What Is an Ordinary Resolution?
Ordinary resolutions are passed if a simple majority (above 50%) of the votes are cast in favour of the resolution. Provided that the Companies Act or the articles of association does not state the need for a special resolution, an ordinary resolution will be used for any decisions made by directors and shareholders.
An ordinary resolution requires a vote to be taken at either a general meeting, a board meeting of shareholders, or by written resolution (more on the latter below).
An ordinary resolution can be used by shareholders for the following:
- Appointment and removal of directors
- Appointment and removal of secretaries
- Matters pertaining to directors’ employment contracts
- Amendment of directors’ powers
- Approval of dividend payments
- Authorisation of directors’ loans
- Authorisation of the transfer of shares
What Is a Special Resolution?
Special resolutions are used for unique or sensitive issues. The Companies Act 2006 and the articles of association will both explain which decisions require a special resolution. A special resolution may only be passed when at least 75% of shareholders vote in favour of the resolution.
A special resolution may be used for the following:
- Amend the articles of association
- Amend shareholders’ agreements
- Change the company name
- Change the structure of a company
- Remove pre-emption rights of shareholders
- Share capital reduction
- Wind-up a company
If shareholders request a special resolution for other decisions, then this must be clearly stated in the articles of association.
In order to pass a special resolution, 14 days’ notice has to be sent to each member about the proposed resolution and its intention, unless the articles of association state otherwise. Companies House must receive any special resolution by post within 15 days of being passed. A copy of the resolution must also be given to all shareholders as well as the company auditor.
Don’t do business alone. Join a Community.
Subscribe to our newsletter and join the ranks of 100,000+ entrepreneurs who receive weekly insights, legal updates, and compliance reminders directly in their inbox.
What Is a Written Resolution?
A written resolution can be either ordinary or special and is passed in writing rather than being passed at a general meeting whereby members cast votes in person or by proxy. A written company resolution may be proposed by a director or any shareholder who owns at least 5% of the voting rights in the company.
Invariably, written resolutions can be used for all decisions in a private limited company apart from the decisions to remove a director or an auditor.
Note: Public limited companies (PLCs) cannot use the written resolution procedure.
Remember…
Even if you are the only director or shareholder of your business, you must still hold “meetings” in specific situations — with yourself! This is a mere formality that abides by corporate compliance regulations.
Copies of company resolutions will have to be kept for at least 10 years from the date they are passed in addition to the recording of minutes of meetings. Such records have to be kept at a company’s registered office or SAIL address and subsequently have to be made available for inspection when requested.
To find out more about a written resolution and what it means for your business, contact our reputable company formations team, today!
