Circulating Resolutions

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I have recently been asked to advise what the alternatives are when dealing with a general meeting of shareholders/members of a private company.

If you are considering calling a general meeting of members of your company, consideration must firstly be given to the company’s constitution and other governing documents. Other governing documents may include, for example, a shareholder’s agreement. These documents will set out the circumstances where a company is required to hold a general meeting.

Where a general meeting cannot be held, the Corporations Act 2001 (Cth), via its replaceable rules, allows a private company to circulate a document relating to a resolution (the company’s constitution will specifically state where the replaceable rules do not apply to a company). This is conveniently called a ‘circulating resolution’.

In order to pass a resolution via a circulating resolution in a private company, the Corporations Act 2001 (Cth) requires the following:

  1. All members are to be given the proposed resolution along with any information or documentation that relate to the proposed resolution;
  2. Along with this, all members are to be given a document to be signed relating to the proposed resolution;
  3. That all members of the private company execute the required documentation. All members of the private company must agree to the proposed resolution in order for the circulating resolution to be passed by the company;
  4. If separate documentation is going to be provided to each individual member, the documentation must be identical; and
  5. Only when the last member of the private company signs the requisite document, will the proposed resolution be passed.

Please note that there are some limitations to a circulating resolution under the Corporations Act 2001 (Cth):

  1. A circulating resolution cannot be used to remove an auditor of the private company, appointed in accordance with the Corporations Act 2001 (Cth);
  2. If the proposed resolution being circulated would ordinarily require the private company to lodge certain documentation with the Australian Investment and Securities Commission, in accordance with the Corporations Act 2001 (Cth), this documentation must still be lodged, notwithstanding that a general meeting has not taken place.

If you have any questions in relation to circulating resolutions, please do not hesitate to contact me.

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