If you run a company in Australia, you’ll eventually need to make formal decisions through “resolutions”. Knowing whether a decision requires an ordinary resolution or a special resolution matters a lot - it affects the notice you give, the voting threshold you need, what you file with ASIC, and whether the decision is legally effective.
In this guide, we’ll break down ordinary vs special resolutions in plain English, highlight common scenarios for each, and walk you through the practical steps to call, draft and record resolutions properly. We’ll also explain how your Company Constitution and any Shareholders Agreement can change the default rules so you can avoid surprises and stay compliant.
What Is A Company Resolution In Australia?
A resolution is a formal decision made by either the company’s members (shareholders) or the board of directors. Resolutions can be passed at a meeting (in person or virtual) or via written circulation if your rules allow it.
There are two broad types:
- Ordinary resolutions (simple majority)
- Special resolutions (higher threshold and stricter notice)
Members typically vote on high‑level company matters (like adopting a constitution or winding up). Directors pass resolutions about day‑to‑day management (like appointing officers or approving contracts), unless the matter is reserved to members by law or your company’s rules.
Ordinary Resolutions: The Default For Routine Decisions
An ordinary resolution usually needs a simple majority of votes cast (more than 50%) to pass. This is the default voting threshold for most standard business dealt with at a members’ meeting (often called “ordinary business”).
Typical uses include:
- Approving the minutes or routine reports at an AGM
- Electing directors (subject to your constitution)
- Authorising certain share issues or transfers if not otherwise restricted
- Confirming the appointment of an auditor (for companies required to have one)
Always check your Company Constitution to see which decisions require member approval and what threshold applies, as constitutions can adjust and clarify decision‑making.
Special Resolutions: For Significant Changes
A special resolution generally requires at least 75% of votes cast in favour. The Corporations Act 2001 (Cth) and many constitutions use special resolutions for fundamental changes to the company’s structure or rights.
Common examples include:
- Adopting, modifying or repealing a constitution
- Changing the company name
- Altering share capital (for example, capital reductions or certain restructures)
- Approving selective share buy‑backs
- Converting company type (e.g. proprietary to public)
- Voluntary winding up
Because special resolutions carry a higher threshold, the law also sets stricter notice requirements. If you’re calling a meeting, the notice must clearly state that a special resolution will be considered and include the exact wording of the resolution.
When Do You Use Ordinary Vs Special Resolutions?
Think of ordinary resolutions as your go‑to for regular governance decisions, and special resolutions for structural changes or any decision that the Corporations Act or your constitution explicitly elevates.
Scenarios That Typically Use Ordinary Resolutions
- Routine AGM matters (adopting financial statements, receiving reports)
- Electing or re‑electing directors (depending on your constitution)
- Approving non‑fundamental share allotments where permitted by your rules
- Ratifying certain transactions or delegations if your constitution requires member approval
Note that many operational decisions are handled by the board, not shareholders. In practice, proprietary companies rely heavily on director resolutions for management and only go to members when the law or constitution says so.
For quick, day‑to‑day governance, boards often use written circulations. If you need a simple format, a Directors Resolution Template can help the board record decisions cleanly between meetings.
Scenarios That Typically Use Special Resolutions
- Adopting or changing your Company Constitution
- Changing the company name
- Approving a selective buy‑back of shares (often with additional procedural steps)
- Reducing share capital or varying class rights
- Converting company type or undertaking major restructures
- Voluntary winding up or other fundamental corporate changes
If you’re considering a buy‑back as part of a capital management plan, it’s wise to align your approvals with the terms in your buy‑back documentation, such as a Share Buyback Agreement, and follow any ASIC lodgement requirements that apply.
How Do You Call And Pass A Valid Resolution?
Whether you’re using an ordinary or special resolution, the process matters. Invalid notice or voting can undermine the decision and create legal risk.
1) Check Your Rules First
Start with the Corporations Act and your Company Constitution. The Act sets minimum standards. Your constitution can add or clarify things like quorum, voting methods, and which matters require member vs board approval.
If you don’t yet have a tailored constitution and rely on replaceable rules, consider whether adopting a customised constitution would give you clearer governance settings.
2) Decide: Meeting Or Circulating Resolution?
For members, many proprietary companies can use circulating resolutions instead of meetings if all members entitled to vote sign the resolution in the required form. For directors, circulating resolutions are quite common and efficient.
When a meeting is needed (or preferred), it pays to set it up properly - especially for significant decisions. If you’re planning a major change, consider whether an Extraordinary General Meeting is the right forum to present the proposal, answer questions and secure the correct majority.
3) Give Proper Notice
Notice periods differ depending on the company type, your constitution, and whether you’re putting a special resolution to members. The notice must include enough information for voters to understand the nature and effect of the resolution.
For special resolutions, the notice must say it’s a special resolution and set out the exact wording. Build in enough time for members to review any explanatory materials and to appoint proxies if required.
4) Run The Vote And Record The Outcome
At the meeting, ensure the chair confirms quorum, explains the business, handles any conflicts of interest, and calls the vote in line with your rules (show of hands or poll). For written resolutions, ensure all required signatories execute the document correctly.
Once passed, record the resolution in minutes or a written record. For significant decisions, consider how the company will sign any follow‑on documents. Using the Corporations Act’s execution methods can streamline things - see how section 127 works for company execution and how section 126 allows authorised officers or agents to bind the company.
Some resolutions trigger ASIC notifications or filings (for example, a name change or share capital changes). Update your registers (members, option holders, etc.), issue new share certificates if relevant, and keep all records with your company books.
Drafting Resolutions And Explanatory Notes
Clear wording helps prevent disputes later. Keep the resolution precise and make sure it reflects the decision that the board or members will actually make.
Key Drafting Tips For Ordinary Resolutions
- State the decision plainly. For example: “That Jane Smith be appointed a director of the company, effective immediately.”
- Reference supporting documents if the decision depends on them (e.g. “in the form tabled at the meeting”).
- Note any conditions precedent or delegated authority (e.g. authorising a director to finalise non‑material amendments).
Key Drafting Tips For Special Resolutions
- Label it as a “special resolution”.
- Include exact wording, especially for changes to the constitution, company name or share capital.
- Attach or annex the new constitution or the marked‑up changes so members can see the effect.
- Ensure the notice period and content meet the higher requirements for special resolutions.
After a resolution passes, follow through with proper execution of any contracts, deeds or filings. If you’re unsure about execution formalities, it helps to review the legal requirements for signing documents to avoid invalidating an agreement due to a technical error.
How Your Constitution And Shareholders Agreement Affect Resolutions
Two documents shape how your company makes decisions: the Company Constitution and any Shareholders Agreement. They work alongside the Corporations Act and can add helpful detail or customised thresholds.
Company Constitution
Your constitution sets out rules for meetings, voting, quorum, share classes and director appointments, among other things. Many constitutions specify which matters must go to members and which can be handled by the board.
Well‑drafted rules reduce ambiguity and speed up decision‑making. If your business is evolving, consider whether your current settings still fit or whether adopting an updated Company Constitution would make governance easier.
Shareholders Agreement
A Shareholders Agreement often sets “reserved matters” - key decisions that need member sign‑off at a higher threshold (for example, 75% of all shares) even if the Act would only require an ordinary resolution. It can also include drag/tag rights, pre‑emption on new share issues or transfers, and dispute resolution pathways.
If you’re adding a founder or investor, it’s wise to agree decision rights upfront in a Shareholders Agreement so everyone knows when ordinary vs special approval is needed.
Replaceable Rules Vs Custom Rules
If you rely on replaceable rules (the default rules in the Corporations Act), you’ll have a workable baseline but less customisation. Many growing companies prefer a tailored constitution and a clear shareholders agreement so routine approvals are streamlined and major decisions get the right level of scrutiny.
Practical Tips And Common Pitfalls
Getting the threshold wrong or overlooking notice requirements can unravel a decision months later. Here are practical tips to keep things on track.
Match The Resolution Type To The Decision
Before you draft anything, ask: Is this routine governance (ordinary) or a structural change (special)? Check the Act and your constitution. If your Shareholders Agreement sets a higher threshold for a reserved matter, follow that higher standard.
Get The Notice Right
For special resolutions, the notice must say it’s a special resolution and include the full wording. Provide enough time for members to consider the proposal, appoint proxies and ask questions. If you’re running a high‑stakes vote, think carefully about your meeting agenda and materials - an EGM can be the right forum for complex changes.
Use Polls When Precision Matters
A show of hands is quick but can be challenged. For contested or material votes, a poll (counting votes by shareholding) gives a more accurate picture and reduces the risk of disputes.
Mind Class Rights And Consents
If you have different share classes, some changes require a separate class vote or class consent. Check your constitution for variation or cancellation of class rights and follow the correct process for each class affected.
Document Everything Cleanly
Keep copies of notices, proxy forms, circulated resolutions, signed minutes and annexures. If the resolution leads to contracts or filings, make sure you use proper company execution - section 127 for execution by officers, or authority under section 126 if an authorised person signs on the company’s behalf.
Follow Through On ASIC And Register Updates
Some changes (like a name change or capital reduction) aren’t complete until ASIC records are updated. Diarise deadlines, update internal registers and issue new certificates where relevant.
Don’t Forget Board Approvals
Even when members approve something, the board often needs to implement it. Record the directors’ decision to give effect to member approvals and to settle final documents, using a straightforward board paper and resolution or a short circulating resolution (your Directors Resolution Template can help here).
Step‑By‑Step: Passing A Special Resolution
Because special resolutions are used for major changes, here’s a practical run‑through you can adapt:
- Identify the need - confirm the Act or your rules require a special resolution for the proposed change (e.g. adopting a new constitution, selective buy‑back).
- Prepare the materials - draft the resolution, explanatory note and any annexures (for example, the new constitution or buy‑back terms).
- Set the meeting - choose the date/time, venue or virtual platform, and prepare the notice. Make sure the notice states it’s a special resolution and includes the precise wording.
- Send the notice - give notice in accordance with your rules (method, timeframe, recipient list). Allow time for proxy lodgement if required.
- Hold the meeting - confirm quorum, manage conflicts, present the proposal, and call a poll if appropriate. Record the votes carefully.
- Record the outcome - draft and sign minutes; have the chair confirm the result. Keep all records with the company books.
- Implement - file any ASIC forms, update registers and implement follow‑on board actions. Execute any documents under section 127 or via an authorised officer under section 126, as appropriate.
If your special resolution is part of a capital management project (like a selective buy‑back), make sure the shareholder approval aligns with the transaction documents (for example, the Share Buyback Agreement) and any additional procedural steps in the Act.
Key Takeaways
- Ordinary resolutions usually need a simple majority and cover routine governance; special resolutions need 75% and are used for significant structural changes set by the Corporations Act or your company’s rules.
- Always check your Company Constitution and any Shareholders Agreement to see whether a decision requires member approval and what threshold applies.
- Valid process matters: give proper notice (and label special resolutions), run the vote correctly, and keep clear minutes or signed written resolutions.
- After a resolution passes, implement it properly - update registers, make any ASIC filings, and execute documents using the correct company execution methods.
- Plan ahead for big decisions. An EGM, detailed explanatory notes and accurate polling can help you secure the right approval and reduce dispute risk.
- Tailored governance documents make life easier. A current constitution and clear shareholder decision rights streamline routine approvals and protect against deadlock.
If you’d like a consultation on company resolutions, governance documents or updating your constitution, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
