Written Resolutions making Corporate Transactions Easier
Written by 07th September 2014on
The Companies Act 2014 (the Act) will make a significant positive impact on the way corporate transactions are concluded and on corporate governance in general. Members (shareholders) of a company will be permitted by default to pass written resolutions signed only by the requisite majority.
Under the Companies Acts 1963-2013, members must hold a meeting to pass members' resolutions unless the company's articles of association provide for resolutions to be passed in writing without holding a meeting. Where written resolutions are provided for, they must be signed by all members entitled to vote at a meeting.
The Act provides the default position that, without a meeting, members may pass resolutions in writing which can be signed in counterparts. This significant change recognises the modern connected business landscape, where physical meetings are often not practical nor desired.
A written resolution will only require the requisite majority to sign for it to be valid, i.e. a simple majority to be passed as an ordinary resolution or a three quarters majority for special resolutions.
Written resolutions may not however be used for the removal of directors or the removal of the auditor.
This process is not without risk of abuse and the Act provides safeguards and procedures, with criminal penalties in some cases, to ensure that this process is not abused. For example, a member must forward at least a scan of their signed counterpart to the Company within 14 days of a written resolution that has been passed unanimously, or potentially face criminal penalties.
Where a resolution is passed only by majority, be it ordinary or special, a company must wait 7 days or 21 days respectively from the date the last requisite signature is received before the resolution takes effect. This allows a moratorium period for dissenting members to take action. Moreover, officers may face criminal penalties if they do not notify members of the date the resolution will be deemed to be passed within 3 days of the requisite signatures being received.
The introduction of these majority written resolutions will significantly improve many Irish companies' ability to transact quickly in corporate matters, particularly given the high level of foreign direct investment and venture capital in Irish Companies leaving numerous shareholders based across the globe. LK Shields can advise on the procedures and safeguards to ensure full advantage of these changes can be applied.
The Companies Act 2014 is expected to come into force on 1 June 2015.