Introduction
The term members and shareholders mean the same in the context of companies. The members’ finance the company by purchasing shares in it and so become shareholders. Members may or may not be directors.
Functions of the Member
The amount of involvement the member has in the company will depend on the amount of shares he or she holds, the size of the company and the member’s own wishes. However, control of the company ultimately rests with the general meeting, where shareholders vote on important issues.
Functions of Directors
Because many shareholders do not wish to get involved in the day-to-day affairs of the company (particularly in larger public companies), directors will manage the company.
They take business decisions and make contracts on the company’s behalf. However, some major decisions, which may have an effect on the members’ rights, have to be approved by the members in general meeting. For example, this will include issuing new shares or removing a director from office.
General Meetings
Normally it is the directors who have power to call meetings. All members are entitled to attend general meetings and to speak and vote on resolutions. Directors are also allowed to attend and speak but cannot vote unless they are also members.
However, the members may force a meeting on a particular issue if the directors refuse.
Quorum
Resolutions are validly passed at a general meeting if that meeting is quorate – that is, a certain number of people are present at the meeting.
Section 370 Companies Act 1985 and art. 40 Table A fixes the quorum for general meetings at two, unless the company only has one member or the company agrees otherwise.
Types of Resolution
Members participate in the company by passing resolutions at general meetings. There are four types of resolution, which reflect the varying importance of various actions which may be taken by the members. The most common types are the ordinary resolution and the special resolution.
1. Ordinary resolution
This requires a simple majority of members voting in order to pass the resolution (i.e. 50% + 1 vote).
Examples of ordinary resolutions include the removal of a director (s.303 Companies Act 1985), the approval of directors’ service contracts (s.319 Companies Act 1985) and the increase of share capital (s.121 Companies Act 1985).
Only some ordinary resolutions need to be registered at Companies House, which are the aforementioned increase of share capital or directors’ authority to allot shares (s.80 Companies Act 1985).
2. Special resolution.
Generally this applies to more significant resolutions, and so a majority of 75% is required. All special resolutions must be registered at Companies House.
Examples of special resolutions include the disapplication of pre-emption rights (s.95 Companies Act 1985) and the alteration of the articles of association (s.9 Companies Act 1985).
3. Extraordinary resolution.
Again, a 75% majority is required to pass the resolution. All extraordinary resolutions are registered at Companies House.
An example of such a resolution is where the members vote on the voluntary liquidation of the company.
4. Elective resolution.
This type of resolution requires the unanimous consent of all the members.
All elective resolutions are registered at Companies House.
The term members and shareholders mean the same in the context of companies. The members’ finance the company by purchasing shares in it and so become shareholders. Members may or may not be directors.
Functions of the Member
The amount of involvement the member has in the company will depend on the amount of shares he or she holds, the size of the company and the member’s own wishes. However, control of the company ultimately rests with the general meeting, where shareholders vote on important issues.
Functions of Directors
Because many shareholders do not wish to get involved in the day-to-day affairs of the company (particularly in larger public companies), directors will manage the company.
They take business decisions and make contracts on the company’s behalf. However, some major decisions, which may have an effect on the members’ rights, have to be approved by the members in general meeting. For example, this will include issuing new shares or removing a director from office.
General Meetings
Normally it is the directors who have power to call meetings. All members are entitled to attend general meetings and to speak and vote on resolutions. Directors are also allowed to attend and speak but cannot vote unless they are also members.
However, the members may force a meeting on a particular issue if the directors refuse.
Quorum
Resolutions are validly passed at a general meeting if that meeting is quorate – that is, a certain number of people are present at the meeting.
Section 370 Companies Act 1985 and art. 40 Table A fixes the quorum for general meetings at two, unless the company only has one member or the company agrees otherwise.
Types of Resolution
Members participate in the company by passing resolutions at general meetings. There are four types of resolution, which reflect the varying importance of various actions which may be taken by the members. The most common types are the ordinary resolution and the special resolution.
1. Ordinary resolution
This requires a simple majority of members voting in order to pass the resolution (i.e. 50% + 1 vote).
Examples of ordinary resolutions include the removal of a director (s.303 Companies Act 1985), the approval of directors’ service contracts (s.319 Companies Act 1985) and the increase of share capital (s.121 Companies Act 1985).
Only some ordinary resolutions need to be registered at Companies House, which are the aforementioned increase of share capital or directors’ authority to allot shares (s.80 Companies Act 1985).
2. Special resolution.
Generally this applies to more significant resolutions, and so a majority of 75% is required. All special resolutions must be registered at Companies House.
Examples of special resolutions include the disapplication of pre-emption rights (s.95 Companies Act 1985) and the alteration of the articles of association (s.9 Companies Act 1985).
3. Extraordinary resolution.
Again, a 75% majority is required to pass the resolution. All extraordinary resolutions are registered at Companies House.
An example of such a resolution is where the members vote on the voluntary liquidation of the company.
4. Elective resolution.
This type of resolution requires the unanimous consent of all the members.
All elective resolutions are registered at Companies House.
