Making decisions as a shareholder in a private limited company can be straightforward – if you follow the right process. Whether you’re a founder, investor or director-shareholder, it’s essential to know how shareholder decisions are made, what requires a shareholder vote (rather than a board decision) and the correct process for passing shareholder resolutions.
This guide explains the key methods of shareholder decision-making, including shareholder meetings, written resolutions and the role of the chairperson. We also explore when written procedures are allowed, what a quorum means and how proxies and electronic voting can be used.
Types of shareholder decisions and how they’re made
Shareholders make decisions by passing resolutions. These resolutions are either ordinary resolutions, which require approval by a simple majority (more than 50%) of votes cast, or special resolutions, which require a higher threshold – at least 75% of the votes.
Whether a decision needs to be passed as an ordinary or special resolution depends on the type of decision being made. The Companies Act 2006 outlines which decisions require a special resolution, such as changing the company’s name or amending the articles of association. In other cases, the company’s articles of association or a shareholders’ agreement might specify that the decision must be approved by a greater majority of shareholders for example, requiring a 75% vote (a special resolution) rather than just over 50% (an ordinary resolution). If none of these sources specify otherwise, then the decision can usually be made by an ordinary resolution.
What types of decisions need to be taken by shareholders rather than directors?
Not all company decisions require shareholder input. Day-to-day management decisions are generally made by the board of directors. However, shareholders are required to approve a range of more significant actions, including:
- Amending the company’s articles of association
This means changing the company’s constitutional documents, which outline how the company is governed, including voting rights, share structures, and procedures for decision-making. Because changes can affect shareholder rights, they usually require approval by special resolution. - Issuing new shares or altering share rights
Creating new shares without offering them to shareholders can dilute existing shareholders’ interests. Changing the rights attached to shares – for example, creating a new class of share with preferred rights to dividends – can shift economic rights of shareholders. Shareholders usually need to approve both actions, often by special resolution. - Approving certain transactions involving directors
Some transactions between the company and its directors – including loans to directors and what are known as “substantial property transactions” – must be approved by shareholders under the Companies Act. This ensures transparency and prevents conflicts of interest. - Appointing or removing directors
Although directors can usually appoint others to the board, shareholders often have the power to confirm appointments or remove directors entirely. Removing a director requires an ordinary resolution passed at a shareholder (general) meeting. - Approving dividends in some cases
While directors often recommend dividends, shareholders may need to approve them. - Authorising changes to share capital
This includes consolidating shares, subdividing them, or converting them into a different class. These changes affect shareholder structure and control and must usually be approved by the shareholders. - Changing the company name Unless the articles of association provide otherwise, this will require a shareholder special resolution.
The exact list of decisions that must be referred to shareholders will depend on the company’s articles of association, any shareholders’ agreement and statutory requirements under the Companies Act 2006 and other legislation applicable to companies. If you’re unsure whether a particular decision needs shareholder approval, check these documents first or seek legal advice.
Can all shareholder decisions be made in writing?
Most shareholder decisions can be passed by written resolution, without holding a general meeting. This is often quicker and more efficient, especially for small private companies.
Written resolutions must follow a specific process set out in the Companies Act 2006, which includes:
- sending the proposed resolution to every eligible shareholder.
- setting a deadline (28 days, or a shorter period if stated in the articles of association).
- ensuring that the required majority approve it — over 50% for an ordinary resolution, or at least 75% for a special resolution, based on the total voting rights of all shareholders, not just those who respond.
There are two key exceptions – shareholder decisions to:
- remove a director, or
- remove an auditor.
These cannot be made by written resolution. They must be passed at a general meeting, where the person concerned has the legal right to attend and be heard before a decision is taken.
Tip: If you’re unsure whether a decision can be made in writing, always check the Companies Act 2006 and your company’s governing documents first.
What happens after a shareholder resolution has been passed?
Once a shareholder resolution has been passed, certain filing and administrative steps may need to be taken, most notably for special resolutions or resolutions that result in changes to company officers or share capital.
- special resolutions must be filed with Companies House within 15 days of being passed.
- ordinary resolutions generally do not need to be filed, unless the company’s articles or specific legislation require otherwise.
In some cases, a Companies House form may also need to be submitted – for example, if a director is appointed or removed, or if share capital is altered. The exact filing requirements depend on the nature of the decision. To be sure nothing is missed, we recommend checking the Companies Act 2006, your articles of association, and Companies House guidance to confirm whether any further filings are needed and which forms to use. It’s important to submit any required documents on time, to avoid delays or issues later.
Shareholder meetings: when and why
Do we need to hold shareholders’ meetings?
Private limited companies are not required to hold annual general meetings (AGMs) unless their articles of association specifically say so. In most startups and SMEs, this means that shareholder meetings are relatively rare, and many decisions canbe made using written resolutions.
However, there are situations where holding a meeting is either legally required or practically useful:
- some decisions must be made at a general meeting – for example, a resolution to remove a director or an auditor cannot be passed in writing under the Companies Act 2006.
- a shareholders’ agreement or the company’s articles may require certain decisions to be made at a meeting, or may specify that meetings must be held under particular circumstances.
- The directors may also choose to call a meeting when a decision is sensitive or likely to be contested, allowing shareholders to hear each other’s views and ask questions before a vote is taken.
In most other cases, using a written resolution will be quicker, easier, and less formal – making it the preferred route for routine decisions in smaller companies.
How are shareholder meetings organised?
To hold a shareholder meeting, the company must give formal written notice to all shareholders and directors. If the company has an appointed auditor, they must also receive notice of the meeting, in accordance with the Companies Act 2006 – although they’re only entitled to speak on matters that relate to their role.
The notice must include:
- the date, time and place of the meeting.
- a description of the business to be discussed.
- information on shareholders’ rights to appoint a proxy (someone to attend and vote on their behalf).
The minimum notice period is 14 clear days, unless the articles of association specify a longer period. However, the meeting can be held at shorter notice if shareholders representing at least 90% of the voting shares (or a higher percentage if the articles say so, up to 95%) agree.
Notice can be sent in hard copy or electronically, including by email or through a website – but only if the relevant conditions under the Companies Act 2006 are met and the shareholder has agreed to receive communications in that way.
What is a quorum for a shareholders’ meeting and what happens if a quorum isn’t present?
A quorum is the minimum number of people who must be present at a shareholders’ meeting for any decisions made to be valid. A meeting can still go ahead even if some shareholders are absent – as long as the quorum is met.
By default, under the Companies Act 2006, the quorum for a shareholders’ meeting is two qualifying persons, unless the company has only one shareholder. A “qualifying person” can be:
- a shareholder.
- a proxy appointed by a shareholder.
- a representative of a corporate shareholder.
The company’s articles of association may specify a different quorum – such as requiring more people to attend or a certain percentage of shares to be represented. It’s always worth checking the articles before arranging a meeting.
If the required quorum isn’t present within the time set out in the articles (commonly 15 minutes), the meeting usually can’t proceed and must be adjourned. The articles will say whether the chairperson can set a new date and time, or whether that decision rests with the directors or shareholders.
Sometimes, a shareholder might deliberately withhold attendance to prevent a quorum – usually as a tactic to block a vote. In those cases, a court may be asked to intervene, but it’s unlikely to do so if the deadlock is a result of the company’s agreed structure (for example, in a 50/50 ownership split). If this happens, it’s best to seek legal advice as early as possible.
Can shareholders propose resolutions at general meetings?
Yes. Shareholders can propose resolutions, but there are formal steps they must follow, and certain thresholds apply.
Shareholders who hold at least 5% of the total voting rights (or a lower percentage, if specified in the articles of association) can require the directors to circulate a proposed resolution to all shareholders. To do this, they must submit the resolution in writing and may be required to cover any reasonable expenses the company incurs in distributing it.
Once received, the board must circulate the proposed resolution to the shareholders within 21 days – a timetable set out in the Companies Act 2006. This obligation is mandatory, unless the request is invalid or the resolution is not one that can legally be passed by the shareholders.
The role of the chairperson
Do we have to appoint a chairperson for each shareholders’ meeting?
It depends on the company’s articles of association.
Many startups and small private companies adopt the default model articles. These say that a chairperson must be appointed to chair each meeting of the shareholders. In practice, if the board has already appointed a chairperson of the board, that person will usually also chair shareholder meetings – even if they are not a shareholder themselves – unless they’re unwilling or unable to do so.
If the board has not appointed a chairperson, or the appointed chair is unwilling or absent at the start of the meeting (typically within 10 minutes of the scheduled start time), then the directors present must choose one of their number to act as chair. If the directors do not appoint someone, the shareholders at the meeting can select a chairperson instead.
If your company doesn’t use the model articles, you should check your own articles to see what they say about appointing a chairperson for shareholder meetings. If they don’t say anything about it, the shareholders attending the meeting can simply agree who should chair it.
What does the chairperson do in shareholders’ meetings?
The chairperson is responsible for ensuring that the meeting runs smoothly, fairly and in line with the law and the company’s articles. Their key duties usually include:
- organising and presiding over the meeting.
- ensuring proper notice is given and shareholders receive the necessary pre-meeting information.
- managing the meeting proceedings, including maintaining order and ensuring everyone has a chance to be heard.
- recording decisions accurately, often by ensuring that minutes are taken and resolutions documented properly.
Depending on the company’s articles of association, the chairperson may also have a casting vote – that is, a second or deciding vote if there’s a tie. However, the model articles do not give the chair this power at a general meeting unless specifically amended.
At the start of a general meeting, voting is typically done by a show of hands, where each shareholder present gets one vote. However, the chairperson also typically has the authority to call for a poll – a vote based on the number of shares each shareholder holds.
Calling for a poll can be important where shareholders have appointed multiple proxies. On a show of hands, each proxy gets one vote – meaning a shareholder who appoints several proxies could potentially cast more votes than if they attended in person. If the chairperson thinks a poll would result in a fairer or more accurate outcome, they are usually expected to call one.
Electronic communication and proxies
Can we send and receive shareholder meeting documents electronically?
For most startups and private limited companies, it’s much easier to send shareholder communications by email or through a digital platform. The Companies Act 2006 allows this – but there are rules to follow to make sure it’s done correctly.
You can send key shareholder documents electronically, including:
- notices of general meetings.
- written resolutions.
- proxy forms and invitations to appoint a proxy.
- annual reports and accounts.
- requests to call a shareholders’ meeting.
These can be sent by email, text, or made available on a website, as long as:
- the shareholder has agreed to receive documents this way, and
- they’ve provided a suitable electronic address (like an email address).
If you want to use a website to make documents available, the company must first send a formal request to the shareholder asking for consent. If the shareholder doesn’t respond within 28 days, they’re treated as having agreed – but only if the request includes the right wording and details, as set out in the Act.
Be cautious when including an email address or phone number in a notice or proxy form. If you do, the company is usually considered to have agreed to receive communications from shareholders via that address – unless the document says otherwise.
Shareholders who have agreed to receive electronic communications can withdraw their consent at any time, and can also request a hard copy of any document, which the company must provide free of charge within 21 days.
Can a shareholder appoint a proxy to attend a shareholders’ meeting so they do not have to attend?
Yes – shareholders are entitled to appoint one or more proxies to attend a meeting and vote on their behalf. A proxy does not need to be a shareholder themselves, and this right cannot be restricted by the articles of association – it is guaranteed by the Companies Act 2006.
A shareholder can appoint as many proxies as they hold shares. For example, if someone holds ten shares, they can appoint ten different proxies, each of whom can attend and vote. However, this only matters in certain voting situations – such as when voting is by a show of hands.
Here’s why it matters:
- on a show of hands, each proxy gets one vote, regardless of how many shares they represent.
- if the shareholder had attended the meeting in person, they would have had just one vote, not one per share.
- this means appointing multiple proxies can give a shareholder more influence in a show of hands vote than attending themselves.
To prevent this from skewing results, the chairperson of the meeting usually has the power to demand a poll, a different form of voting where each vote is counted in proportion to the number of shares held. This ensures fairness, especially in meetings where multiple proxies are involved.
To appoint a proxy, the shareholder must complete and submit a proxy form – typically no later than 48 hours before the meeting. The articles of association may set additional formalities, so it’s worth checking them in advance.
Corporate shareholders can either appoint a proxy or send an authorised corporate representative, who has full rights to attend and vote as if they were the shareholder.
Written Shareholder Resolutions
Who proposes written shareholder resolutions?
In most private companies, written resolutions are usually proposed by the board of directors. They will circulate the resolution to all eligible shareholders when a decision is needed. But, a meeting isn’t required for example, to approve the grant of authority to the directors to issue new shares or adopt revised articles.
However, shareholders can also propose a written resolution themselves. Shareholders holding at least 5% of the total voting rights (or a lower percentage if specified in the articles) can require the company to circulate a proposed resolution. They must submit the request in writing and may be asked to cover the company’s reasonable expenses for doing so. However, in practice, this cost is usually small, especially if sent by email.
The directors must circulate the resolution to all shareholders within 21 days of receiving a valid request.
Where there’s any doubt – particularly around eligibility, voting thresholds, or whether a resolution is appropriate for written procedure, it’s sensible to take advice before proceeding.
How are written shareholder resolutions circulated and signed?
To pass a resolution in writing, the company must send the proposed resolution to every eligible shareholder, along with:
- a statement explaining how they can indicate agreement, and
- the deadline by which the resolution must be passed, usually 28 days, or a shorter period if the articles allow.
The resolution can be circulated by post, email, or through an agreed electronic signature platform, provided that the company and shareholder have consented to communicate electronically.
Shareholders can indicate agreement by:
- signing a hard copy and returning it, or
- responding electronically, as long as the company has approved the method of identification – for example, by requiring confirmation from an agreed email address or using a digital signing tool.
A written resolution is passed when the required percentage of shareholders agree in writing within the specified period – that is:
- over 50% of the total voting rights for an ordinary resolution, or
- at least 75% of the total voting rights for a special resolution.
Importantly, these percentages are calculated based on all eligible shareholders, not just those who choose to vote – unlike at a meeting, where abstentions and absences don’t count. This difference can affect the outcome, especially where turnout is low or opinions are split.
When is a written shareholder resolution passed?
A written shareholder resolution is passed as soon as the required percentage of shareholders have signed and returned their agreement, within the allowed timeframe. The time limit is typically 28 days from the date the resolution is circulated, unless the company’s articles of association specify a shorter period.
If the necessary number of shareholders haven’t agreed by the deadline, the resolution automatically lapses, meaning it is not passed and must be proposed again if still needed.
The company is not required to wait until the full 28 days have passed. If enough shareholders respond early and the required threshold is reached, the resolution is passed immediately and can be acted upon without delay.
Conclusion
Understanding how shareholder decisions are made in a private limited company helps ensure your business runs smoothly and lawfully – whether you’re passing resolutions, appointing directors or simply keeping accurate records. For most startups and SMEs, knowing when to use written resolutions, when meetings are required, and how votes are counted can save time and prevent costly mistakes. If in doubt, check your articles and shareholders’ agreement – or seek advice before proceeding.
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