When a company in Singapore needs to make a formal decision, it does so through a “resolution.” But not all decisions are created equal. You’ll often hear two terms: Ordinary Resolution and Special Resolution.
While they sound similar, they represent two different levels of approval from shareholders.
1) What Is An Ordinary Resolution?
An ordinary resolution is the standard mechanism for handling the routine business of a company. It requires a simple majority to pass, meaning it is approved if it receives more than 50% (>50%) of the votes cast by shareholders entitled to vote at a meeting.
Common Scenarios for Ordinary Resolutions (The “AGM Checklist”)
These resolutions typically concern the routine governance and operational oversight of the company and are often addressed at the Annual General Meeting (AGM).
- Director and Auditor Matters: Appointing new directors, re-appointing retiring directors, removing a director before their term expires, and approving directors’ fees. Appointing the company’s auditors and fixing their remuneration is also a standard item of ordinary business.
- Financial Matters: Approving the annual financial statements for presentation to shareholders, and the declaration of final dividends.
- Share and Asset Management: Authorizing directors to issue new shares, often through a general mandate approved at the AGM, and approving the disposal of the whole or a substantial part of the company’s property or undertaking.
2) What Is A Special Resolution?
A special resolution is reserved for matters of high importance that can fundamentally alter the company’s structure, constitution, or future direction. Reflecting this gravity, it requires a supermajority of at least 75% (≥75%) of the votes cast by shareholders to be approved.
Critical Matters Requiring a Special Resolution
These resolutions are reserved for decisions that fundamentally alter the company’s legal structure, financial framework, or governing rules.
- Constitutional Changes: Amending any provision in the company’s constitution is a classic example that requires a special resolution.
- Identity Changes. Changing the official name of the company requires this higher level of approval.
- Capital Structure Alterations: A decision to reduce the company’s share capital must be approved by a special resolution, as it affects the company’s financial foundation and the rights of creditors and shareholders.
- Existential Decisions: Approving the voluntary winding-up (liquidation) of the company, or a merger with another corporate entity, are final or transformative acts that require the strong consensus demonstrated by a special resolution.
2) Formal Notice
The formal notice of a general meeting is the legal foundation upon which any resolution is built. An improperly issued notice can invalidate all decisions made at the meeting.
The Notice
The notice must, at a minimum, specify the date, time, and venue of the meeting, along with the specific business to be discussed. It must also inform shareholders of their right to appoint a proxy to attend and vote on their behalf.
Critical Content for Special Resolutions. When a special resolution is on the agenda, the notice carries an additional burden. It must explicitly state the intention to propose the resolution as a special resolution and must include the full, exact text of that resolution.
This requirement is absolute and ensures that shareholders receive unambiguous information about the significant decision they are being asked to make.
Notice Period
- The standard notice period for a meeting to pass an ordinary resolution is 14 days.
- For special resolutions, the period is differentiated: 14 days for private companies and 21 days for public companies, reflecting the often larger and more dispersed shareholder base of the latter
In situations requiring urgent decisions, these notice periods can be shortened. However, this is only permissible if members holding at least 95% of the total voting rights agree to the shorter notice.
3) Written Resolutions
Recognizing the need for greater efficiency, the Companies Act allows private companies and unlisted public companies to pass resolutions by written means, bypassing the need for a physical meeting.
This mechanism is highly practical for companies with few shareholders or where there is broad agreement on a matter. The same voting thresholds apply: a simple majority of total voting rights for an ordinary resolution and a 75% majority for a special resolution.
The 5% Minority Protection Rule
The convenience of written resolutions carries a potential risk: it could allow a majority to make decisions without providing a forum for debate or discussion, effectively silencing minority viewpoints.
To counter this, the Companies Act provides a crucial safeguard. Members holding 5% or more of the company’s total voting rights can, upon receiving a proposed written resolution, give notice to the company requiring that a physical meeting be convened instead.
4) Record-Keeping & ACRA Filings
Passing a resolution is not the final step. Proper documentation and, where required, notification to the regulatory authorities are important to finalizing the decision and ensuring ongoing compliance.
Minutes
Under Singapore law, every company is required to maintain proper documentation of all board and shareholder decisions. All passed resolutions must be formally recorded in the company’s minute book, along with the minutes of the meeting at which they were passed.
This minute book serves as the official, legal record of the company’s decisions. It is an essential document for internal governance, external audits and due diligence by potential investors or lenders.
ACRA Filing Requirements
The Accounting and Corporate Regulatory Authority (ACRA) requires companies to lodge certain resolutions, making them part of the public record. The filing requirements differ significantly between special and ordinary resolutions.
- Special Resolutions: A copy of every special resolution must be filed with ACRA through its BizFile portal within 14 days of being passed.
For certain special resolutions passed at an EGM, such as for a voluntary winding-up, a copy of the resolution must be filed with ACRA within 7 days. - Ordinary Resolutions: In contrast, most ordinary resolutions do not need to be filed with ACRA. However, the Companies Act requires that any resolution which “effectively binds all shareholders” must be lodged within the same 14-day timeframe.
The most common and practical example of this is an ordinary resolution passed by all members of a private company to dispense with the holding of AGMs.
Conclusion
The core distinction between ordinary and special resolutions can be summarized simply: ordinary resolutions are for running the business, requiring a simple majority (>50%) for operational efficiency.
Special resolutions are for redefining the business, demanding a supermajority (≥75%) to ensure broad consensus for fundamental change.
