Discover the difference between ordinary and special resolutions in Nigeria. Learn their requirements, uses, and CAC compliance rules under CAMA 2020.

Ordinary and Special Resolution Explained

When running a company in Nigeria, certain major decisions cannot be made casually. They must follow due process as outlined in the Companies and Allied Matters Act (CAMA) 2020. These decisions are typically formalized through resolutions passed at a company’s general meeting. Two major types exist: ordinary resolutions and special resolutions. Understanding their differences, requirements, and applications is crucial for company owners, directors, and shareholders.

What is a Resolution?

A resolution is a formal decision or agreement made by members (shareholders) or directors of a company. Resolutions give legal backing to company actions and ensure decisions are binding and recognized under the law.

Resolutions can be passed either at:

• Board meetings (by directors), or
• General meetings (by shareholders).

For this article, we focus on resolutions passed by shareholders at general meetings.

Ordinary Resolution

An ordinary resolution is passed when a simple majority (more than 50%) of the shareholders present at a general meeting vote in favor of a decision.

Requirements:

• Notice of the meeting must be properly given.
• A simple majority (51% and above) is required to pass.
• It does not need special filings unless required for certain actions.

Common Uses of Ordinary Resolutions:

• Appointment or removal of company directors.
• Approval of annual financial statements.
• Declaration of dividends.
• Appointment of auditors.
• Routine decisions relating to company operations.

Special Resolution

A special resolution requires a higher threshold of approval compared to an ordinary resolution. It is used for decisions that fundamentally alter the company’s structure or legal standing.

Requirements:

• At least 21 days’ notice must be given unless members agree to shorter notice.
• Requires at least 75% majority of shareholders present and voting.
• Must be filed with the Corporate Affairs Commission (CAC) within 15 days.

Common Uses of Special Resolutions:

• Alteration of the company’s Memorandum and Articles of Association (MEMART).
• Change of company name.
• Conversion of a private company to a public company.
• Reduction or increase of share capital.
• Voluntary winding up of the company.
• Merger or restructuring of the company.

Key Differences Between Ordinary and Special Resolutions

Why It Matters for Business Owners

Many entrepreneurs overlook the importance of resolutions until issues arise. Passing the wrong type of resolution, or failing to file with CAC when required, can invalidate major company decisions.

• For investors: ensures legal compliance and protects shareholder rights.
• For directors: provides authority to act on behalf of the company.
• For compliance: avoids CAC penalties or disputes among shareholders.

Conclusion

Ordinary and special resolutions are the backbone of decision-making in Nigerian companies. While ordinary resolutions cover routine matters, special resolutions are reserved for more significant structural changes. As a business owner or director, knowing when and how to use each resolution will help keep your company compliant and avoid legal setbacks.

If you need professional guidance on drafting, filing, or passing resolutions with the CAC, our firm can assist you every step of the way.