Shareholder resolutions

How BC law treats it

Section 1 of the Business Corporations Act, SBC 2002, c 57 (BCBCA) defines the types. An ordinary resolution passes at a meeting by a simple majority of votes cast, or in writing if, after being submitted to all voting shareholders, it is consented to by shareholders holding at least a special majority of the votes (two thirds by default). A special resolution passes at a meeting by the special majority set in the articles, which must be at least two thirds and not more than three quarters of votes cast (two thirds by default), or in writing only if consented to by all of the voting shareholders. A unanimous resolution is one consented to in writing by all shareholders entitled to vote on it. The BCBCA and the articles decide which type is needed. Special resolutions are generally required to alter the articles or notice of articles, change the company's name, change authorized share structure (unless the articles allow a different resolution), amalgamate, continue out of BC, or approve a sale of all or substantially all of the undertaking. Some changes also need a separate special resolution of an affected class of shares. Routine business, such as electing directors, typically passes by ordinary resolution. A written resolution is as valid as one passed at a meeting and must be kept with the minutes at the records office. Resolutions are different from shareholder proposals under BCBCA s. 187, a separate process that applies only to public companies and lets qualifying shareholders put matters on the agenda of an annual general meeting.

What it means for your business

Using the wrong type of resolution can invalidate a major decision, such as a share reorganization or an asset sale, and buyers and lenders will check this in due diligence. For most private BC companies, signed written resolutions are the fastest way to make shareholder decisions, but they must reach the required majority and be properly filed. Some changes also require a filing with the BC Registry to take effect. Example: A Richmond family company wants to create a new class of preferred shares for an estate freeze. The shareholders pass a special resolution in writing altering the articles and notice of articles, and the company files a notice of alteration with the BC Registry.

Risks and common mistakes

Passing an ordinary resolution for a change that requires a special resolution, such as altering the articles, or circulating a written special resolution that not every voting shareholder signs. Forgetting a separate class vote where a change affects the rights of one class of shares. Failing to file a notice of alteration so a change to the notice of articles takes effect. Confusing a shareholder resolution with a shareholder proposal for the AGM agenda. Not keeping signed resolutions in the minute book at the records office.