Every resolution of shareholders of a company is either an ordinary resolution or a special resolution. Ordinary resolutions must be supported by more than 50% (fifty percent) of the voting rights exercised on the resolution and special resolutions must be supported by more than 75% (seventy-five) percent of the voting rights exercised on the resolution.

A company’s memorandum of incorporation (“MOI”) may allow for a different percentage of voting rights to approve any special resolution, or one or more different percentages of voting rights to approve special resolutions concerning one or more particular matters, provided that at all times there are at least 10 (ten) percentage points between the highest requirement to pass an ordinary resolution and the lowest requirement to pass a special resolution.

How does on determine whether a resolution which is proposed for voting, requires “ordinary” or “special” approval?

Section 65(11) of the Companies Act, No. 71 of 2008 (“Companies Act”) sets out a closed list of resolutions that need “special” approval in so far as they must be supported by more than 75% (seventy-five) percent of the voting rights exercised on the resolution. These resolutions include, inter alia, resolutions to:

  1. amend a company’s MOI;
  2. ratify a consolidated revision of a company’s MOI;
  3. ratify actions by the company, or its directors, in excess of their authority;
  4. approve an issue of shares or granting of rights;
  5. authorise the board to grant financial assistance;
  6. approve a decision of the board for re-acquisition of shares;
  7. authorise the basis for compensations for directors of a profit company;
  8. approve the voluntary winding up of a company; and
  9. approve any proposed fundamental transaction.

In addition to the above, a company’s MOI may require a special resolution to approve any other matter not contemplated in section 65(11) of the Company’s Act.

In conclusion, the shareholders of a company have a limited albeit important scope for decision making in a company. All proposed resolutions must be expressed with sufficient clarity and specificity and must be accompanied by sufficient information to allow a shareholder, who is entitled to vote on such resolution, to participate in the vote and influence the outcome of the resolution.