The Companies Act 2014 allow a new mechanism for decision-making by shareholders. It introduces significant changes to the way written resolutions can be passed by the shareholders of a company by enabling the passing of written resolutions by a requisite majority.

Under the Companies Act 2014 (the “Act”), majority written resolutions of shareholders in private companies limited by shares or in designated activity companies can now be passed by a requisite majority of shareholders, depending on the type of resolution (more than 50% of the total voting rights for an ordinary resolution or 75% or more of the total voting rights for a special resolution). Written resolutions passed in this manner are subject to a delayed effect, meaning that certain time periods have to pass before the resolution is effective. This is explained in more detail below.

Pre-Companies Act 2014

Prior to the passing of the Act, shareholders could only pass resolutions either:

  • at a general meeting of the shareholders of the company; or
  • where the constitution permitted, by written resolution signed by all of the shareholders entitled to vote at a general meeting of the company

Therefore, it was only possible for decisions by shareholders to be passed in writing unanimously. This possibility remains and resolutions passed in this manner take effect immediately.

New Companies Act 2014 provisions

Majority written resolutions have been introduced by the Act and are a welcome reform to Irish company law. A resolution in writing is valid and effective as an ordinary or special resolution, as the case may be, on condition that:

  • it is described as an ordinary resolution and is signed by a member or members who represent more than 50% of the total voting rights of the members entitled to attend and vote at a general meeting at that time; or
  • it is described as a special resolution and is signed by a member or members who represent 75% or more of the total voting rights of the members entitled to attend and vote at a general meeting at that time; and in either case
  • the proposed text has been circulated by the directors to all the members of the company who would be entitled to attend and vote on the resolution

However, the above process cannot be used to remove a director or auditor as this must be done at a general meeting.

Mandatory delayed effect

Although the introduction of majority written resolutions is welcome, there are certain procedural requirements that must be followed which delay the process. A majority ordinary resolution will only be deemed to have been passed 7 days after the last member signs it, while a majority special resolution will only be deemed to have been passed 21 days after the last member signs it. This “delayed effect” safeguard can be waived by all members entitled to vote on the resolution by signing a written waiver. However, it is not possible for a shareholder to waive this requirement generally, so any such waiver must be obtained in respect of each specific resolution.

All written resolutions, properly signed by a requisite majority of members, must be delivered by the signatories to the company and a resolution will have no effect until this is done.

Offences

Upon receipt of a resolution duly signed by the requisite number of members, the company must notify all members of its passing and its effective date. The Act states that the officers of the company may face criminal penalties if they do not notify every member of the fact that the resolution was signed by the requested majority and of the date the resolution will be deemed to be passed, within three days of the required signatures being received.

Conclusion

If you are a shareholder of a private company limited by shares or a designated activity company, you may wish to avail of the majority written resolution provisions where shareholders are based in diverse locations or where physical meetings are neither practical nor desirable.

If you are an officer of the company and the company passes decisions by majority written resolution, you must be careful to follow the requirements of the Act to avoid criminal penalties.