At Omam Legal Consultancy, we strive to keep businesses informed about the latest legal requirements and corporate governance standards. One of the essential aspects of running a company is understanding when and how the general assembly must make decisions, especially those that require special resolutions. The Companies Law 2021 outlines specific procedures and actions that necessitate such resolutions.
In this blog post, we walk through the key procedures that require special resolutions from the general assembly according to the Companies Law No. 32 of 2021. These procedures cover a wide range of corporate actions, from changing the company’s name to merging with other companies. Understanding these provisions is crucial for company owners, board members, and legal teams to ensure compliance and smooth operations.
1. Changing the Company Name
Article 12 of the Companies Law states that a company may, through a special resolution passed by the general assembly, change its name. The new name must be approved by the relevant authorities and accepted by the registrar. Importantly, changing the name does not affect the company’s rights, obligations, or any legal actions it has taken or is involved in.
2.Extending or Reducing the Company’s Duration
Article 108 allows a company to extend or reduce its duration, as specified in the founding contract or articles of association, through a special resolution. This is particularly relevant when business circumstances require a revision of the company’s operational timeline.
3.Amending the Memorandum or Articles of Association
Article 139 outlines that a company may amend its founding documents, including the memorandum and articles of association, with a special resolution. These amendments could include changes to the company’s objectives, organizational structure, or governance.
4.Board’s Authority to Contract Loans for Periods Exceeding Three Years
Article 154 restricts the board of directors from entering into long-term loan agreements (over three years), selling company assets, or releasing debtors from obligations unless specifically authorized by the company’s articles of association. In the absence of such authorization, a special resolution from the general assembly is required.
5.Increasing the Company’s Capital
Under Article 196, a company can issue new shares to increase its capital only after receiving approval from the shareholders through a special resolution. This step is vital for companies looking to expand and raise additional funds from shareholders.
6.Incorporating Reserves into Capital
Article 202 allows companies to convert their reserves into capital through a special resolution. This can be done by issuing bonus shares to shareholders or by increasing the nominal value of existing shares, without placing any financial burden on the shareholders.
7.Reducing the Company’s Capital
A company may reduce its capital only with the approval of the relevant authorities and a special resolution passed by the general assembly, following a report by the company’s auditor (Article 204).
8.Splitting the Nominal Value of Shares
As per Article 209, a company may, through a special resolution and with the authority’s approval, split the nominal value of its shares. This procedure is often undertaken to make shares more accessible or to meet market requirements.
9.Increasing Capital with the Entry of a Strategic Partner
Article 225 allows the company to increase its capital by welcoming a strategic partner, through a special resolution. The specific terms and procedures for the entry of the strategic partner must be outlined by the company’s board of directors.
10.Converting Cash Debts into Shares
In accordance with Article 227, a company may convert its cash debts into shares as a means of increasing its capital. This method can help companies restructure their financial obligations.
11.Employee Stock Ownership Plans (ESOP)
Article 228 provides that a company may, by a special resolution, create a program for employees to acquire shares in the company. This can be a valuable incentive for employees and align their interests with the company’s success.
12.Allocating a Portion of Profits for Social Responsibility
Under Article 244, a company may allocate a percentage of its profits to corporate social responsibility (CSR) initiatives, provided this decision is approved through a special resolution and with the consent of the relevant authority.
13.Converting the Company into a Public Joint-Stock Company
Article 277 requires that the company must pass a special resolution (or its equivalent) to convert into a public joint-stock company. This transition is often a critical move for companies looking to raise capital from public investors.
14.Selling Shares or Increasing Capital During Conversion
When a company converts into a public joint-stock company, it may, through a special resolution, sell shares or increase its capital by issuing new shares to the public, subject to approval by the relevant authority (Article 281).
15.Merging with Other Companies
Article 285 allows a company to merge with another company through a special resolution passed by the general assembly. This could involve creating a new entity or absorbing the other company. Mergers are strategic decisions that require careful consideration.
16.Merging Holding and Subsidiary Companies
Article 288 permits a holding company to merge with one or more of its wholly owned subsidiaries without the need for a merger contract. The special resolution is required to finalize the merger process between the companies.
17.Dividing the Company
A company may divide itself into two or more entities through a special resolution passed by the general assembly (Article 295). This is usually done to streamline operations or focus on specific business areas.
18.Acquiring Other Companies
Under Article 299, a company may increase its capital to acquire another company by issuing new shares to the shareholders of the acquired company. This process requires a special resolution from the general assembly and is exempt from certain provisions of the law.
19.Dealing with Accumulated Losses Reaching Half of Issued Capital
If the company’s accumulated losses reach half of its issued capital, Article 309 mandates that the board of directors call a general assembly meeting to decide whether the company should continue its activities or dissolve. A special resolution is required for this decision.
20.Extending the Liquidation Period
Article 328 allows the company to extend its liquidation period, but this requires a special resolution by the general assembly, based on a report from the liquidator detailing the reasons for the delay in completing the liquidation.
Why is This Important?
Understanding the procedures that require a special resolution is critical for ensuring compliance with the Companies Law 2021. Special resolutions give the general assembly the authority to make key decisions that affect the company’s structure, operations, and long-term strategy. Whether you're looking to change the company’s name, increase capital, or merge with another company, a well-informed approach to these resolutions ensures smooth transitions and protects the company’s interests.
At Omam Legal Consultancy, we are committed to guiding you through these legal processes. Whether you need assistance drafting resolutions, navigating compliance requirements, or addressing any corporate governance matters, our team of experts is here to help.
For more information or personalized legal advice, feel free to reach out to us.
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