Company law related to resolutions

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medharoy (Querist)
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27 December 2012 whether restricting of passing of special resolution would amount to having control over the company?

urgent please

Venkat Rao Marella

Venkat Rao Marella (Expert)
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27 December 2012 If the company law specifically says that special resol should be passed, no choice than to obey it. Similarly, in cases where articles say that certain things are to be decided only by passing special resolution, then no choice than to obey the articles of the company.

medharoy

medharoy (Querist)
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28 December 2012 i know that sir. i want to ask what if some one restricts the passing of special resolution does it amount to having control over the company?

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Asha Kanta Sharma

Asha Kanta Sharma

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19 July 2024 Restricting the passing of a special resolution alone may not necessarily amount to having control over the company in the traditional sense of corporate governance. Control over a company typically refers to the ability to influence or determine its strategic decisions, policies, and management.

However, restricting the passing of special resolutions could indicate an attempt to influence the decision-making process in significant matters that require a special resolution. Special resolutions in a company usually involve critical decisions such as altering the articles of association, changing the company's name, approving fundamental structural changes, etc.

Here are a few considerations regarding restrictions on passing special resolutions:

1. **Shareholding and Voting Power:** If a shareholder or group of shareholders holds a substantial majority of voting shares, they may effectively control the passing of special resolutions. This control can be exerted by voting against such resolutions or by proposing amendments that make it difficult for certain resolutions to pass.

2. **Articles of Association:** The articles of association of a company may include provisions regarding the passing of special resolutions. For example, they may require a higher majority of votes or specify conditions under which a resolution can be passed. Restrictions in the articles can influence the ability to pass special resolutions.

3. **Board and Management Influence:** Control over the board of directors and management can indirectly affect the passing of special resolutions. Directors appointed or influenced by certain shareholders may align their decisions with the interests of those shareholders, impacting how special resolutions are dealt with.

4. **Legal and Regulatory Compliance:** Companies must comply with the provisions of the Companies Act, 2013, and other applicable laws regarding the passing of resolutions, including special resolutions. Restrictions that violate these legal requirements could lead to regulatory scrutiny or legal challenges.

In conclusion, while restricting the passing of special resolutions may not confer direct control over the company, it can indicate influence over critical decision-making processes. Control over a company is typically assessed based on a combination of factors including shareholding, voting power, board composition, and management influence. Any restrictions on passing resolutions should be carefully considered in light of corporate governance norms and legal requirements.