Free Shareholders’ Resolution

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Shareholders’ Resolution

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RESOLUTION OF THE SHAREHOLDER

RESOLUTION IN WRITING of the sole voting shareholder (the "Shareholder") of __________ (the "Company") effective this 28th day of September, 2022.

BACKGROUND:

  1. The Company is a company organised under the Corporations Act and operating in accordance with the laws of the Australian Capital Territory and the Commonwealth of Australia.
  2. The Shareholder is in favour of the resolution set out in this document.

THE SHAREHOLDER RESOLVED THAT:

  1. _________________________

DATED this 28th day of September, 2022.

__________________________
_________________________

Last updated: April 4, 2022

What is a Shareholders' Resolution?

A Shareholders' Resolution is a document that allows a corporation's shareholders to pass a decision in writing instead of having to hold a remote or in-person meeting. The term "shareholder resolution” can also refer to the decision itself.

Shareholders' Resolutions that are passed outside of meetings are known as circulating resolutions. The term “circulating” is used because a proposed resolution is written down and circulated to the shareholders for their signatures instead of presented and voted upon at a meeting. To pass a circulating resolution, all shareholders with voting rights must sign and unanimously agree to it.

A Shareholders' Resolution is also known as a:

  • Circular resolution of shareholders
  • Shareholder consent to action without meeting
  • Resolution of shareholders
  • Sole shareholder resolution

What companies can use circulating Shareholders' Resolutions?

Generally, shareholders of private and proprietary companies can use circulating Shareholders' Resolutions so long as all shareholders unanimously sign to pass the resolution. However, according to the Australian Securities & Investments Commission (ASIC), if shareholders of a private or proprietary company want to pass certain resolutions, such as removing an auditor, they must have a meeting, whether it be remote or in-person.

Shareholders of most public companies cannot use circulating Shareholders' Resolutions because they must have a meeting to pass a resolution.

A company with a sole shareholder can pass a Shareholder Resolution without having to circulate the document because they can sign and execute it themselves.

What decisions can be made with Shareholders' Resolutions?

The types of decisions that shareholders can make with circulating resolutions depend on a company's constitution and Shareholder Agreement.

These governing documents should dictate which decisions can be made by circulating Shareholders' Resolutions. Whether they are circulating or not, Shareholders' Resolutions can be used for minor or major decisions about the company, such as:

  • Changing the company name
  • Amending the company constitution
  • Appointing or removing directors
  • Changing directors' powers
  • Appointing an auditor
  • Changing the company share structure
  • Issuing or transferring shares
  • Changing the company type, such as taking it public
  • Approving the sale of assets
  • Deregistering a company
  • Winding up the company

If a company does not have any governing documents, its shareholders may be able to make most decisions by circulating resolutions. By default, shareholders can pass circular resolutions. However, a company's constitution and Shareholders' Agreement can limit the types of decisions that can be made and define the process for passing circular resolutions.

Keep in mind that certain decisions or actions may require a corporation to lodge additional documents with the ASIC and pay additional fees. For example, when changing a corporation's name, the shareholders may have to lodge Form 205 and pay $422.

Shareholders' Resolutions: Ordinary versus special

Depending on the type of decision being made, resolutions are considered ordinary or special. Both types can be passed in a meeting or by circulating written resolutions, assuming a company's governing documents do not prohibit using circulating resolutions for some or all decisions.

Ordinary resolutions refer to decisions regarding daily operations. Generally, to pass an ordinary resolution at a meeting, over 50% of a company's shareholders need to vote in favour. However, to pass an ordinary resolution by circulating a written document instead of holding a meeting, all shareholders must unanimously sign it.

Special resolutions are used for more important decisions. Special resolutions require more than a simple majority. Often, shareholders with at least 75% of the company's shares may need to vote in favour to pass a special resolution at a meeting. The required majority can be higher than 75% depending on the terms of the company constitution. However, to pass a special resolution by circulating a written document instead of holding a meeting, all shareholders must unanimously sign it.

Do circulating Shareholders' Resolutions require a unanimous vote?

Yes, all shareholders must unanimously sign to pass circulating resolutions. This requirement of unanimity is contrasted by resolutions that are passed at meetings, which may only require a majority of shareholders to pass them.

When should a corporation use a circulating Shareholders' Resolution?

A corporation's shareholders should circulate a written Shareholders' Resolution when they cannot or do not want to meet but need to pass a certain resolution. Circulating resolutions can be a useful way to eliminate unnecessary shareholder meetings, especially for minor matters in which calling a formal meeting would waste time and resources.

Circulating resolutions can be most useful when shareholders need to pass a resolution but they are facing an obstacle, such as:

  • The next general meeting is not scheduled for a while
  • The shareholders are in different places
  • The corporation's governing documents do not permit remote meetings

Circulating Shareholders' Resolutions may not be appropriate for all resolutions. For example, if shareholders do not have the required knowledge to make an informed decision, circulating a written document instead of holding a meeting may not be suitable.

As previously stated, a circulating resolution can only be passed when all shareholders unanimously agree to sign it.

What is included in a Shareholders' Resolution?

To create a Shareholders' Resolution that can be circulated to all voting shareholders, we ask that you include:

  • The state or territory that the corporation is registered within
  • The name of the corporation
  • The shareholders' names
  • The resolutions
  • The date that the resolution(s) come into effect

Directors' Resolutions versus Shareholders' Resolutions

Directors' Resolutions are very similar to Shareholders' Resolutions because both are considered company resolutions. However, there are distinct differences between the two.

Directors' Resolutions document resolutions passed by directors instead of shareholders. These resolutions may include decisions about capital expenditure, taking out or providing a loan, entering into contracts, and more. Directors' Resolutions are also known as board resolutions.

Generally, Shareholders' Resolutions are used for more fundamental company decisions, such as changes to a company's constitution.

Shareholders' Resolutions versus meeting minutes

The key difference between a circulating Shareholders' Resolution and meeting minutes is whether or not a formal meeting has taken place. When a shareholder meeting takes place, whether it be remote or in-person, meeting minutes record the actions taken and resolutions passed at the meeting.

A Shareholders' Resolution that is circulated to shareholders can allow the same actions to be taken without having to meet. Generally, once a Shareholders' Resolution is signed by all shareholders, it is filed in the corporate minute book.

Are Shareholders' Resolutions binding?

Yes, Shareholders' Resolutions are binding. To change or reverse a resolution, a board needs to pass another resolution that undoes or supersedes the first.

Related Documents:

  • Share Purchase Agreement: Outline the sale of stock or shares between an existing shareholder of a corporation and another individual or corporation.
  • Share Repurchase Agreement: Use this agreement when a company wishes to repurchase shares from one of its shareholders.
  • Shareholder Agreement: Outline how a corporation will be managed, how disputes will be resolved, what will happen on the death of a shareholder, and more.
  • Shareholder Loan Agreement: Outline the terms of a loan when a corporation is borrowing money from one of its shareholders or a shareholder is lending money to its corporation.
  • Directors' Resolution: Record decisions or actions in lieu of a corporate meeting.
  • Corporate Constitution: Govern the management of your company by outlining shareholder meeting rules, voting requirements, and responsibilities of officers.
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