Matters requiring Special Resolution in General Meeting

Various matters requiring sanction of shareholders by special resolution in General meeting under various sections of the Companies Act 2013.

SR in GM: Amended and updated notes on section 114 of Companies Act 2013. Detail discussion on provisions and rules related to ordinary and special resolutions.

Chapter VII (Sections 88122) of the Companies Act, 2013 (CA 2013) deals with the provisions related to management and administration. Section 114 of CA 2013 provides for ordinary and special resolutions.

Recently, we have discussed in detail section 113 (Representation of corporations at meeting of companies and of creditors) of CA 2013. Today, we learn the provisions of section 114 of Companies Act 2013 read with the Companies (Management and Administration) Rules, 2014.

Section 114 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 2754(E) issued dated 12.09.2013. This notification shall come into force from 12th September, 2013 i.e. the commencement date of section 114 is 12-09-2013.

Many visitors of AUBSP have asked for the list of sections which provides for passing a special resolution. Therefore, I have plotted all the provisions under the Companies Act, 2013 (CA 2013) which compulsory requires for the sanction of shareholders by special resolution.

As per clause (63) of section 2 of the CA 2013, Ordinary or Special Resolution means an ordinary resolution, or as the case may be, special resolution referred to in section 114. According to the provisions of section 114(2) of CA 2013:

A resolution shall be a Special Resolution when—

(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;
(b) the notice required under this Act has been duly given; and
(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

List of Special Resolutions under Companies Act 2013

Following are the list of actions for which a Special Resolution is required under various sections of the Companies Act, 2013.

For Entrenchment

Special Resolution is required under section 5(4) to make the provisions for entrenchment in the Articles of Association (AOA) of a Public Company. [Refer Section 5(4)]

Change Registered Office

Except on the authority of a special resolution passed by a company, the registered office of the company shall not be changed. That means SR in GM required to shift the registered office of a company outside the local limits of any city, town or village where such office is situated. [Refer Section 12(5)]

Alter Memorandum of Association (MOA)

A company have to pass SR in GM to alter the provisions contained in the Memorandum of Association (MOA) of the company. [Refer Section 13(1)]

Change Objects of Company

A company, which has raised money from public through prospectus and still has any unutilised amount out of the money so raised, shall not change its objects for which it raised the money through prospectus unless a special resolution is passed by the company. In other words, a SR in GM is required to change the objects of a company for which it raised the money from public through prospectus and still has any unutilised amount out of the money so raised. [Refer Section 13(8)]

Alter Articles of Association (AOA)

SR in GM required to alter the articles including alterations having the effect of conversion of a private company into a public company and vice versa. [Refer Section 14(1)]

Terms of Contract in Prospectus

A company shall have to pass SR in GM to vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued. [Refer Section 27(1)]

Issue Depository Receipts

A company may, after passing SR in GM, issue Depository Receipts in any foreign country. [Refer Section 41]

Variation of Shareholders Right

SR in GM required to vary the rights attached to the shares of any class. [Refer Section 48(1)]

Issue Sweat Equity Shares

A company may issue sweat equity shares of a class of shares already issued if the issue is authorised by a special resolution passed by the company. [Refer Section 54]

Issue Further shares to Employees

To increase subscribed capital by the issue of further shares to employees under a scheme of employees’ stock option. However, private companies shall be exempted vide Notification No. G.S.R. 464(E) dated 5th June, 2015. [Refer Section 62(1)(b)]

Issue Further shares to any Person

To increase subscribed capital by the issue of further shares to any person if the price of such shares is determined by the valuation report of a registered valuer. [Refer Section 62(1)(c)]

Debentures or Loan into Shares

To approve the terms attached to the debentures issued or loan raised by the company to convert such debentures or loans into shares in the company. [Refer proviso of Section 62(3)]

Reduce Share Capital

To reduce the share capital in any manner and in particular subject to confirmation by the Tribunal. [Refer Section 66]

Approve Scheme for Employees

To approve any scheme for the purchase of or subscription for fully paid-up shares in the company or its holding company, if the purchase of, or the subscription for, the shares held by trustees for the benefit of the employees or such shares held by the employee of the company. [Refer Section 67(3)(b)]

Buy-back

To authorise the company for buy-back i.e. to purchase its own shares or other specified securities. [Refer Section 68(2)(b)]

Debenture into Shares at the time of Redemption

To approve the issue of debentures with an option to convert such debentures into shares either wholly or partly at the time of redemption. [Refer proviso of Section 71(1)]

Registers to be kept at other place

To keep and maintain the registers of members, debenture-holders and any other security holders or copies of the Annual Return at any other place (other than the registered office) in India in which more than 1/10 of the total number of members entered in the register of members reside. [Refer proviso of Section 94(1)]

Appoint/ Re-appoint Auditor

To appoint some other auditor in place of retiring auditor or providing expressly that the retiring auditor shall not be re-appointed. [Refer Section 139(9)]

Removal of Auditor before the expiry of his term

To remove the auditor from his office before the expiry of his term after obtaining the previous approval of the Central Government. In other words, the auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company. [Refer Section 140(1)]

More than 15 directors

To appoint more than 15 directors by a company i.e. a company may appoint more than fifteen directors after passing a special resolution. Read – Board of Directors in Public, Private and One Person Company. [Refer proviso of Section 149(1)]

Reappointment of Independent Director

To re-appoint an independent director after expiry of a term of five consecutive years. You may say that an independent director shall be eligible for reappointment on passing SR in GM by the company. [Refer Section 149(10)]

Lesser number of Directorship

To specify any lesser number of companies in which a director of the company may act as directors. Read – Maximum number of directorship in Public or Private company. [Refer Section 165(2)]

Exercise of certain powers by BOD

To exercise certain powers i.e. to sell, invest and borrow etc. by the Board of Directors of a company. Read – Restrictions on power of BOD of a company. [Refer Section 180(1)]

Loan to MD or WD

To approve any scheme pursuant to which any loan may be given to a managing or whole-time director of a company. Read – Loan to Directors of a company. [Refer proviso of Section 185(1)]

Giving of any loan or guarantee beyond Limit

To get prior approval in case where the giving of any loan or guarantee or providing any security or the acquisition u/s 186(2) exceeds the specified limits i.e. 60% of paid-up share capital, free reserves and securities premium account or 100% of free reserves and securities premium account, whichever is more. Read – Loan and Investment by company. [Refer Section 186(3)]

Related Party Transaction [Section 188]: There is no need for passing special resolution vide the Companies (Amendment) Act, 2015 w.e.f. 29-05-2015. Read – Related party transaction.

Appointment of Director or Manager aged 70

To appoint any person as a managing director, whole-time director or manager who has attained the age of 70 years. Read – Appointment of MD, WD or manager of a company. [Refer Section 196(3)(a)]

Fixing of Remuneration of Director

To determine the remuneration payable to the directors of a company, including any managing or whole-time director or manager if the articles so require. Read – Managerial remuneration in case of inadequacy of profits. [Refer Section 197(4)]

Investigation by Central Government

To intimate the Central Government that the affairs of the company ought to be investigated. [Refer Section 210(1)(b)]

Investigation by Serious Fraud Investigation Office

To intimate CG that the affairs of the company are required to be investigated by the Serious Fraud Investigation Office. [Refer Section 212(1)(b)]

Removal of Names of Companies

By passing by a special resolution, a company may file an application to the Registrar for removing the name of the company from the register of companies on all or any of the grounds specified in sub-section (1) of Section 248 of the Companies Act, 2013. [Refer Section 248(2)]

Approval for Scheme of Amalgamation of a sick company

To approve the scheme of amalgamation of the sick company with any other company by the shareholders of both the companies. [Proviso of Section 262(2)]

Winding up by Tribunal

To resolve that the company be wound up by the Tribunal. [Refer Section 271]

Voluntary Winding Up

To resolve that the company be wound up voluntarily. [Refer Section 304]

Conferring certain powers on the Company Liquidator

To confer on the Company Liquidator of the transferor company to receive compensation for transfer or sale of business or property of company. [Refer Section 319(1)]

Manner of Raising Purchase Money

If the Company Liquidator elects to purchase the member’s interest, the purchase money, raised by him in such manner as may be determined by a Special Resolution, shall be paid before the company is dissolved. [Refer Section 319(4)]

That means SR in GM required to determine the manner of raising the purchase money in case the Company Liquidator elects to purchase the member’s interest.

Sanction any Arrangement

To sanction any arrangement (except Sec. 319) which shall be binding on the company being wound up and its creditors. [Refer Section 321(1)]

Authorizing Company Liquidator to exercise certain powers

To sanction to exercise certain powers of Company Liquidator in the case of a voluntary winding up. [Refer Section 343(1)(b)]

Disposal of Books and Papers

To direct the manner of disposing of books and papers of a company in the case of voluntary winding up when the affairs of that company have been completely wound up and it is about to be dissolved. [Refer Section 347(1)(b)]

For Application of Table F of Schedule I

A sanction by shareholders by passing a special resolution is required to adopt Table F in Schedule I. That means, when the company intends to make provisions of Table F in Schedule I applicable to it to any particular extent requires special resolution. [Refer Section 371(3)(a)]

I hope the above table will help you to understand the matters and provisions of various sections which requires sanction of shareholders of the company by passing a special resolution in the General meeting of the company.


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