Ordinary Resolution vs. Special Resolution — What's the Difference?
By Tayyaba Rehman — Published on December 18, 2023
Ordinary Resolution typically requires >50% approval, while Special Resolution often needs >75% approval.
Difference Between Ordinary Resolution and Special Resolution
Table of Contents
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Key Differences
In corporate governance, both Ordinary Resolution and Special Resolution are tools used by shareholders to make decisions. Ordinary Resolution refers to a standard decision-making process where, typically, more than 50% of shareholders' votes are required to pass a proposal. This kind of resolution is used for routine business decisions. On the other hand, Special Resolution is used for more significant or impactful changes to a company. To pass a Special Resolution, typically more than 75% of shareholders' votes are required. This higher threshold ensures that there's broader consensus before making substantial changes.
The necessity for Ordinary Resolution arises when companies need to take decisions on routine matters. Examples include appointing or reappointing directors or approving the annual accounts. In these instances, Ordinary Resolution is deemed sufficient because they're regular business practices. Conversely, Special Resolution is reserved for more profound decisions that might alter the course of the company. This can include changing the company's name, amending its constitution, or altering its share structure.
A company's Articles of Association or bylaws usually dictate when Ordinary Resolution or Special Resolution is required. While the general rule is that Ordinary Resolutions pass with a simple majority and Special Resolutions require a supermajority, exact percentages can vary based on jurisdiction and company policy.
In the context of meetings, whenever a vote is called, shareholders will be informed whether an Ordinary Resolution or a Special Resolution is needed. Ordinary Resolutions tend to be more common due to the nature of routine business. In contrast, Special Resolutions, given their weight, are less frequent but signify a major change or decision in the company's trajectory.
To illustrate, imagine a company deciding on distributing dividends. This would likely require an Ordinary Resolution. However, if the same company wanted to merge with another, a Special Resolution might be required to ensure the decision has wider support.
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Comparison Chart
Approval Percentage
Typically >50%
Typically >75%
Usage
Regular business decisions
Significant company changes
Frequency
More common
Less frequent
Impact
Routine
Substantial
Examples
Appointing directors, approving accounts
Changing company name, altering share structure
Compare with Definitions
Ordinary Resolution
Ordinary Resolution often deals with non-contentious issues.
The decision to renew the office lease was made using an Ordinary Resolution.
Special Resolution
Special Resolution is a decision requiring usually more than 75% shareholder votes.
A Special Resolution was passed to change the company's name.
Ordinary Resolution
Ordinary Resolution pertains to routine corporate decisions.
The appointment of new directors was confirmed through an Ordinary Resolution.
Special Resolution
Special Resolution indicates a supermajority decision.
Introducing a new class of shares required a Special Resolution for approval.
Ordinary Resolution
Ordinary Resolution is a standard shareholder decision requiring over 50% votes.
The company passed an Ordinary Resolution to approve the annual financial statements.
Special Resolution
Special Resolution ensures broader consensus.
To dissolve the company, shareholders passed a Special Resolution.
Ordinary Resolution
Ordinary Resolution signifies a simple majority decision.
An Ordinary Resolution was sufficient to decide on the venue for the next annual meeting.
Special Resolution
Special Resolution pertains to significant corporate changes.
Amending the company's constitution needed a Special Resolution.
Ordinary Resolution
Ordinary Resolution is used for daily operational business matters.
Through an Ordinary Resolution, shareholders approved the new supplier contract.
Special Resolution
Special Resolution is used for matters that may have long-term implications.
A Special Resolution was essential to finalize the company's merger.
Common Curiosities
When is an Ordinary Resolution typically used?
Ordinary Resolution is used for routine business decisions like appointing directors or approving accounts.
How is a Special Resolution different from an Ordinary Resolution?
A Special Resolution often requires a higher approval percentage, typically over 75%, compared to an Ordinary Resolution.
What is an Ordinary Resolution?
An Ordinary Resolution is a standard shareholder decision requiring over 50% of votes.
What kind of decisions require a Special Resolution?
Decisions like changing the company's name, amending its constitution, or altering share structure typically need a Special Resolution.
Can a company bypass an Ordinary Resolution for a Special Resolution?
No, the type of resolution required is often dictated by the company's Articles of Association or bylaws.
Do all decisions in a company require a resolution?
No, only specific decisions as stipulated in the company's bylaws or regulatory guidelines require a resolution.
Can the required percentages for Ordinary and Special Resolutions vary?
Yes, while the general rule is >50% for Ordinary and >75% for Special, exact percentages can vary based on jurisdiction and company policy.
Are there any legal ramifications for not following Ordinary or Special Resolution procedures?
Yes, not adhering to proper resolution procedures can have legal consequences and can invalidate decisions.
What's the significance of a Special Resolution?
A Special Resolution ensures broader consensus for significant company changes.
Can the thresholds for Ordinary and Special Resolutions be changed?
Thresholds are typically set in a company's Articles of Association, but they can be amended with appropriate resolutions.
How often are Ordinary Resolutions passed compared to Special Resolutions?
Ordinary Resolutions are more common due to routine business, while Special Resolutions are less frequent, indicating major changes.
Is Ordinary Resolution a simple majority?
Yes, an Ordinary Resolution typically signifies a simple majority decision.
How are shareholders informed about the type of resolution required?
Shareholders are informed through meeting notices, which specify whether an Ordinary Resolution or a Special Resolution is needed.
Are Ordinary and Special Resolutions applicable globally?
While the concepts are global, the specifics and thresholds can vary by country and jurisdiction.
Is it possible for a decision to fail both as an Ordinary and a Special Resolution?
Yes, if a proposal doesn't meet the required approval percentage for either resolution, it fails.
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Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
