Special Board Resolution

February 16, 2023

This article has been written by Pallavi Jindal, a student of NEF Law College, Guwahati

INTRODUCTION:

The major decisions of the company are taken by the board of directors of the company so to take the decisions; an agreement is made by the company in a company which is known as resolution. It deals with important and significant decisions of the company. According to the Companies Act, 2013 there are two types of resolution passed by the company i.e; ordinary resolution and special resolution.

An ordinary resolution means when the votes caste in favour of the resolution exceeds the vote caste against the resolution and the special resolution means when the votes caste in favour is not less than three times votes caste against the resolution.

PROVISION:

Section 114 of the Companies Act, 2013 deals with ordinary board resolution and special board resolution.

According to Section 114(1) of the Companies Act, 2013 ordinary board resolution means A resolution shall be an ordinary resolution if the notice required under this Act has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case may be, in favour of the resolution, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.

According to Section 114(2) of the Companies Act, 2013 special board resolution means; a resolution shall be a special resolution when-

(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;

(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

IMPORTANT MATTERS FOR WHICH THE SPECIAL BOARD RESOLUTION IS PASSED:

The matters for which the special board resolution is passed are as follows:

Alteration of the MOA and AOA of the company under Section 13 and 14 of the Companies Act, 2013.
In case of issue of sweat equity shares under Section 54 of the Companies Act, 2013.
Change in the registered office of the company.
In case of issue of shares to the employees of the company.
Buy- back of shares of the company.
Matters which relates to the loans and investments of the company under Section 186 of the Companies Act, 2013.
Payment related to remuneration to the director’s of the company.
Matter related to the issuing of global depository receipt in any foreign country.
In case of voluntary winding up of the company.

CASES REFERRED:

Libra Leasing vs. Jagat Singh & Ors on 30 October 2012: It was held in this case that no board resolution which was signed by the managing director on behalf of the complainant was submitted on records by the complainant so the complain will not be maintainable as sufficient proof of authorization was not provided.
Sanjeev Kumar & 6 Ors vs. State of UP & 5 Ors on 19 April, 2019: In this case it was held that the board resolution which was passed by the company cannot be challenged as the respondent company have the power to define the conditions of service of its employees according to the Articles Of Association.
Jasdev Singh & Ors vs. Unit Trust of India On 2 May, 2011: It was stated in this case that passing of the resolution is a necessary requirement under Section 292(1)(d) and through that resolution the powers are delegated to directors, managing directors or any other principal officer of the company.

CONCLUSION:

A resolution is an agreement taken by the board of directors to take vital decisions of the company. The passing of the board resolution is the requirement for the company in case of any authorization. The matters of resolution must be within the scope and power of the Memorandum of Association and Articles of Association. The company needs to comply and follow the rules mentioned in the resolution. If the company does not comply with the resolution, then they will be liable and penalized for that matter. A board resolution is divided into two parts i.e; ordinary resolution and special resolution. A special resolution is passed when the votes caste in favour is not less than three times votes caste against the resolution and in case of the matters as mentioned in the Companies Act, 2013.

REFERRENCES:

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February 16, 2023