Written resolution on shareholder requisition

Most written resolutions are proposed by the board. The Companies Act 2006 also enables shareholders to require the board to circulate a written resolution. Our models show you how this can be done and how the company needs to respond.

Shareholder requisition

As many private companies choose not to hold regular shareholder meetings, the shareholder requisition procedure gives the shareholders a way of raising a matter of their choice. It is one of the checks and balances of company management, giving the shareholders the opportunity propose a resolution when the board is unwilling or unable to do it. For example, it could be used to instruct the board to do, or not do, something, to declare that a transaction entered into without the correct authority is void, or simply as a way of ensuring that the company takes the shareholders’ views on a particular matter into account.

A requisition is a formal form of request and, subject to the limitations described below, the company has to comply with it. The requisitionists have the option of requiring the company to circulate a statement of up to 1,000 words to accompany the resolution. The statement must be on the subject matter of the resolution.

Limitations

There are some basic limitations on the resolutions that can be proposed:

• the resolution should be effective, if passed. This includes being effective under statute and the company’s own articles
• it cannot be defamatory of any person; and
• it cannot be frivolous or vexatious.

Procedure

If a valid requisition has been made, the company has to circulate it to all shareholders eligible to vote on it within 21 days of receiving it. The notice in the model informs the shareholders of why the resolution is being circulated. The text of the resolution should be incorporated into our Written Resolution model, which explains how it can be passed and the deadline for doing so.

It is a criminal offence to fail to circulate the resolution by the deadline, or to fail to include an explanation of how to pass the resolution and the deadline for doing so.