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What is an Extraordinary Resolution? A Comprehensive Legal Overview
Definition & Meaning
An extraordinary resolution, often referred to as a special resolution, is a formal decision made by a company's shareholders that requires a higher level of approval than an ordinary resolution. Typically, this means that at least seventy-five percent of the voting shareholders must agree to pass the resolution. Extraordinary resolutions are necessary in significant situations, such as declaring a company insolvent or making major structural changes. It is important to note that the specific requirements for passing such resolutions can vary based on local laws and regulations.
Table of content
Legal Use & context
Extraordinary resolutions are primarily used in corporate law. They play a critical role in major corporate decisions and governance. This term is relevant in various legal contexts, including:
Corporate restructuring
Insolvency proceedings
Amendments to company bylaws
Changes in share capital
Users can manage some of these processes by utilizing legal templates provided by services like US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Here are a couple of examples of extraordinary resolutions:
Example 1: A company decides to undergo a merger with another firm. The shareholders must pass an extraordinary resolution to approve this significant change.
Example 2: A corporation faces financial difficulties and needs to declare insolvency. An extraordinary resolution is required to authorize this action. (hypothetical example)
State-by-state differences
Examples of state differences (not exhaustive):
State
Extraordinary Resolution Requirements
California
Requires a minimum of seventy-five percent approval for most extraordinary resolutions.
Delaware
Follows similar rules but may have additional requirements for specific actions.
New York
Requires a supermajority for certain corporate actions, aligning with the seventy-five percent standard.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Key Differences
Ordinary Resolution
A resolution passed by a simple majority of shareholders.
Requires less than seventy-five percent approval.
Special Resolution
Another term for extraordinary resolution, often used interchangeably.
Typically requires the same level of shareholder approval.
Common misunderstandings
What to do if this term applies to you
If you are involved in a situation that may require an extraordinary resolution, consider the following steps:
Review your company's bylaws for specific requirements.
Consult with a legal professional to ensure compliance with local laws.
Utilize legal templates from US Legal Forms to draft necessary documents.
Prepare for the shareholder meeting by notifying all relevant parties in advance.
If the situation is complex, seeking professional legal assistance is advisable.
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