Round robin resolutions: Ease in passing resolutions

by Steven Stuart-Steer on 11 March 2016
Broadly speaking, resolutions of the board of directors and the shareholders may be adopted in one of two ways: (i) at a meeting by way of a vote (whether on anonymous voting cards, a poll, by show of hands or otherwise); or (ii) written round robin resolutions. One of the many innovative features of the Companies Act, 2008 (the “Act”) is that it has brought the corporate decision-making procedure in line with modern business practice by expressly allowing for the adoption of resolutions by way of a round robin method.

Round robin resolutions can be done, for example, by circulating the written resolutions by way of e-mail and then allowing same to be signed in counterpart on separate printed documents and then sent back to the company so as to be put together to form a composite signed round robin resolution. 
 
If the written resolutions are supported by enough persons entitled to exercise sufficient voting rights, then the resolution is adopted and has the same effect as if it had been approved by voting at a validly called meeting. The question arises often as to when such round robin resolutions, if passed, become effective. There was some uncertainty following from our old company law regime, the Companies Act, 1973 which did not provide for an equivalent round robin procedure. Furthermore, it provided that all special resolutions of shareholders would only become effective upon registration with our companies registrar, the Companies and Intellectual Property Commission, abbreviated as “CIPC” (formerly the Companies and Intellectual Property Registration Office, abbreviated as “CIPRO”). The CIPC has issued guidance to help clarify this position, by stating in Guidance Note 1 of 2011, that unless otherwise expressly required by the Act a special resolution does not require registration to be effective and “consequently the resolution becomes effective when passed”.

Typically, where the correct procedure has been followed, a resolution has been passed and is effective once the required voting threshold has been met. Some confusion seems to surround section 60 of the Act which allows shareholders 20 business days in which to exercise their voting rights on such written resolutions. The question then arises whether one must wait out this voting period before the resolution can become effective if passed. 

It is our view that the wording of section 60 of the Act is quite clear on this point, namely that the round robin resolution will have been adopted and is effective once sufficient votes to meet the required voting rights to pass the particular resolution has been received by the company, notwithstanding the 20 business day period. This would be the case whether or not all the directors or shareholders had signed the written resolution or even opened the e-mail containing such resolutions (provided any required notice requirements have been satisfied, such as for example in the case of directors who must all be given notice of the matter to be decided in a written resolution or of a meeting, as the case may be).

The round robin method of adopting resolutions is a valid method in most cases, except where the Act or the company’s memorandum of incorporation requires otherwise. One such exception is that any business of the company to be conducted at the annual general meeting of the company may not be done by way of round robin. It is also important to note where a specific notice procedure and/or representations are required in order to comply with the relevant provisions of the Act. For example, the removal of a director from office has a specific procedure as set out in section 71 of the Act. This is just one such example.

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