What type of resolution is required to utilize a permissible capital payment?

What type of resolution is required to utilize a permissible capital payment?

• A. Ordinary resolution
• B. Special resolution
• C. Unanimous resolution
• D. Majority resolution

Answer: (B)

To utilize a permissible capital payment, a special resolution is required. This type of resolution involves a decision that is significant enough that it needs a higher threshold of approval, typically requiring at least 75% of votes in favor from members present at a meeting. The rationale here is that capital payments usually involve significant financial implications for a company, which warrants a more rigorous process to ensure that a substantial majority of stakeholders agree with the decision. In the context of company law, an ordinary resolution, on the other hand, requires only a simple majority (more than 50%) to pass. Unanimous resolutions necessitate that all members agree, which is often impractical in larger organizations. Similarly, a majority resolution can refer to any decision that receives more than half of the votes but does not meet the stricter criteria set for special resolutions. Thus, for transactions that could impact the company’s capital structure or how it manages its funds, a special resolution provides an extra layer of scrutiny and consensus among shareholders.

To utilize a permissible capital payment, a special resolution is required. This type of resolution involves a decision that is significant enough that it needs a higher threshold of approval, typically requiring at least 75% of votes in favor from members present at a meeting. The rationale here is that capital payments usually involve significant financial implications for a company, which warrants a more rigorous process to ensure that a substantial majority of stakeholders agree with the decision.

In the context of company law, an ordinary resolution, on the other hand, requires only a simple majority (more than 50%) to pass. Unanimous resolutions necessitate that all members agree, which is often impractical in larger organizations. Similarly, a majority resolution can refer to any decision that receives more than half of the votes but does not meet the stricter criteria set for special resolutions. Thus, for transactions that could impact the company’s capital structure or how it manages its funds, a special resolution provides an extra layer of scrutiny and consensus among shareholders.