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Special Business vis-a-vis Ordinary Business

Ashok Monga (Adviser) (161 Points)

14 March 2009

What is the distinction between

a) Special Business and Ordinary Business

b) Special Resolution and Ordinary Resolution.

Are there any specific sections of Indian Companies Act, 1956 where these have been defined ?

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19 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 17 March 2009

Dear Ashok,

Kindly appreciate- the funda of Special or Ordinary business is that to judge whether a business is speacial or ordinary you must look in to the relevant section i.e. whether it is required to be passed by Special or ordinary resol.

Whether a business is special or ordinary is not dependant on passing majority. To elaborate further only 4 business as mentioned in section 173 (1)(a) are ordinary business and rest all the businesses u/s 173(1)(b) are special businesses whether they are reqired to be passed by Special or ordinary resolution.

For example Alteration of Article is required to be passed by Special Resolution u/s 31 but it is an ordinary business.

Similarily appointment of auditor u/s 224 or approval of balance sheet in AGM u/s 209 by shareholders is to be done by ordinary resolution but still they are special business read with section 173.

Distinction between SR and OR:

The definition of SR & OR is given u/s 189.

Ordinary Resolution is required to be passed by simple majority. For example out 100 persons voting at least 51 persons should vote in favour of the resolution. Remember 100 persons above does not include the persons who are not voting or disqualified or remain motual.

Special Resolution is passed when the vote cast in favour of the resolution is three times higher then the votes cast against the resolution.

Further a resolution is required to be registered with ROC via Form-23 only if it is required by Section 192 and not otherwise. All the Best. For any query please revert.

Regards-Ankur garg ankur_gargcs @ rediffmail.com

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Amruta (-) (60 Points)
Replied 03 July 2009

@ ankur garg

only 4 business as mentioned in section 173 (1)(a) are ordinary business and rest all the businesses u/s 173(1)(b) are special businesses whether they are reqired to be passed by Special or ordinary resolution.

For example Alteration of Article is required to be passed by Special Resolution u/s 31 but it is an ordinary business.

Similarily appointment of auditor u/s 224 or approval of balance sheet in AGM u/s 209 by shareholders is to be done by ordinary resolution but still they are special business read with section 173.

After reading 173, i found tht apt of auditors is ordinary business n not special and also why do u say that alteration of articles is an ordinary business? 173(1)(a) does not include alteration of articles as an ordinary business in the 4 provided. Please clarify as i am a bit confused.

thanx

Amruta

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 03 July 2009

Hello Amruta,

Yes you are absolutely right in pointing out error in my reply. There is a drafting error in the answer which i clarify through Personal Message (PM) at that time only but i left my answer unrectified.

Correct answer with correct example would be as follows:

For example Appointment of Auditor u/s 224A is an ordinary business but it is required to be passed by Special Resolution.

Similarily Alteration of share capital u/s 94 is a special business as it is not covered in Section 173 ordinary business list but it is required to be passed by ordinary resolution.

In case of any doubt please revert.

Best Regards

Vaibhav Shukla (Company Secretary) (142 Points)
Replied 03 July 2009

Dear Ashok,

As per Section 173 (1) (a) there are 4 ordinary business. In an AGM only these four businesses are ordinary business rest all are special businesses. in case of any other general meeting all business are special business

thus only these 4 are ordinary business . Rest all are sp. businesses

4 ordinary busineses are:

(i) the consideration of the accounts, balance sheet and the reports of the Board of directors and auditors,

(ii) the declaration of a dividend,

(iii) the appointment of directors in the place of those retiring, and

(iv) the appointment of, and the fixing of the remuneration of, the auditors

Pursuant to Section 189-ORDINARY AND SPECIAL RESOLUTIONS.

(1) A resolution shall be an ordinary resolution when at a general meeting of which the notice

required under this Act has been duly given, the votes cast (whether on a show of hands, or on a

poll, as the case may be), in favour of the resolution (including the casting vote, if any, of the

chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed,

by proxy, exceed the votes, if any, cast against the resolution by members so entitled and voting.

(2) A resolution shall be a special resolution when -

(a) the intention to propose the resolution as a special resolution has been duly specified in the

notice calling the general meeting or other intimation given to the members of the resolution;

(b) the notice required under this Act has been duly given of the general meeting; and

case may be) by members who, being entitled so to do, vote in person, or where proxies are

allowed, by proxy, are not less than three times the number of the votes, if any, cast against the

resolution by members so entitled and voting.

Regards,

Vaibhav

3 Like

Amruta (-) (60 Points)
Replied 06 July 2009

@ anurag,

Thanx a lot!

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meenu (cs) (416 Points)
Replied 07 July 2009

Thanks for Clarifing the Concept.

Best Regards,

Meenu jha.

Kumar Ankit (Service) (53 Points)
Replied 08 October 2009

What kind of resolution needs to be passed for fixing the remuneration of statutory auditor, appointed in accordance with Section 619?

The nature of business will be that of a ordinary business, but I am not sure about the kind of resolution. And do we need to add Explanatory Note in such scenario.

Will the minutes of the such a resolution, will have to be filed to Registrar/ MCA.

Please mention Section No. in support of your answer.

Thanks.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 08 October 2009

Hi,

As per section 224(8)(a) In your given situation Auditors’ remuneration may be fixed by the board of director or Central Govt.

Board may approve the remuneration by passing a board resolution with simple majority. No need to add any explanatory statement.

Explanatory statement is required to be attached u/s 173 only with special businesses which is to be passed by shareholders in the general meeting.

No need to submit minutes with ROC.

Regards

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Kumar Ankit (Service) (53 Points)
Replied 08 October 2009

Dear Sir,

Your information was really helpful. However, if you could just tell me the relevant section which says that in such fixation of remuneration of a Government Company, need not be done via special resolution, it would be really greatful.

I just went through HPCL AGM notice, which has a explanatory statement attached for fixation of remunerations of CAG appointed auditors. The link is https://www.hindustanpetroleum.com/Upload/En/UPdf/HPCL_Notice_of_57th_AGM.pdf

What was the requirement which made HPCL do it?

And if a simple resolution is passed as a special resolution, then what is the effect. Is it rendered ineffective, and do we need to submit it to the ROC.

Thanks.

1 Like

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 09 October 2009

Hi,

It is true that special resolution is not required for fixation of Auditor’s remuneration. Reason being it is not required by law.

As per adopted and settled legal practice if law requires special resolution to be passed then it is specifically desired by law through the section. For example in case of reduction of share capital u/s 100 special resolution is required as it is desired by section 100 itself. Another opposite example would be alteration of share capital u/s 94. In section 94 kind of resolution is not mentioned hence you can alter your share capital by passing ordinary resolution.

As far as HPCL notice and explanatory statement is concerned it doesn’t require special resolution anywhere. Please check/read it again.

If you want to pass any resolution as special resolution then it should be specifically mentioned in the notice/agenda of meeting otherwise you can’t pass such resolution as special resolution.

Regards

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Kumar Ankit (Service) (53 Points)
Replied 09 October 2009

Dear Sir,

Your point is noted, and is well written. I know that the HPCL does not mention about special resolution, but yet it has given Explanatory Notes to it. Is it permissible to give explanatory notes to such ordinary business by simple resolutions.

Thanks

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 09 October 2009

YES. You can voluntarily provide explanatory statement for ordinary business as the same is not prohibited and it is in the interest of shareholders.

Best Regards

chandra kanth (ca) (22 Points)
Replied 01 March 2012

dear sir

give me exmaples when board resolutions has to pass

Manish Kumar Singh (Proprietor ) (26 Points)
Replied 27 August 2012

Can you all let me know that

Appointment of auditor is an Ordinary Business but appointment of the new auditor to fill casual vacancy of statutory auditor due to resignation will be ordinary or special business ?

Manish Singh

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