What type of resolution is necessary for the reduction of share capital?

The reduction of share capital requires a special resolution because this process involves significant changes to the company's structure and financial standing. A special resolution is necessary as it demands a higher threshold of approval than an ordinary resolution, typically requiring at least 75% of votes in favor from shareholders present or represented at the meeting.

This higher threshold reflects the importance of decisions that affect the rights of shareholders, as reducing share capital can influence the company's solvency, impact shareholder equity, and alter the distribution of remaining assets should the company be wound up. The requirement for a special resolution ensures that such a crucial change garners sufficient support from the shareholders, indicating their agreement to accept potential risks or changes in their investment in the company.

In contrast, the other types of resolutions are designed for less significant decisions where a lower consensus is acceptable. An ordinary resolution would suffice for routine matters, while a unanimous resolution would require all shareholders to be in agreement, often making it impractical for larger companies with many shareholders. Majority resolution is not a recognized term in the context of share capital reduction and does not align with the legal requirements established under company law.