What Is A Special Resolution?

As your business grows, you’ll eventually hit “big decision” moments - changing your company’s name, updating your constitution, approving a major restructure, or winding up the company.

In Australia, a lot of those decisions can’t be made with a casual agreement between directors or a simple show of hands from shareholders. Instead, the law often requires a special resolution (which has a higher voting threshold and stricter process requirements than everyday decisions).

If you’ve been searching what is a special resolution, you’re probably trying to work out two things: (1) what it actually means, and (2) whether you need one for the decision you’re about to make.

Below, we’ll break down special resolutions in plain English, explain when you’ll need one, and walk you through the practical steps to get it done properly (without drowning you in legal jargon).

What Is A Special Resolution?

A special resolution is a formal decision made by a company’s shareholders that must be passed by a higher majority than an ordinary decision.

In most cases, under the Corporations Act 2001 (Cth), a special resolution is passed when:

• shareholders are given proper notice that the resolution is intended to be a special resolution; and
• at least 75% of the votes cast by shareholders are in favour.

That 75% threshold is the key difference. It exists because special resolutions are typically used for decisions that can significantly change the company’s structure, rules, or existence - so the law expects a stronger level of shareholder agreement.

If you’re comparing decision types, it can help to think of it like this: ordinary resolutions are for “business as usual” shareholder decisions, while special resolutions are for “major change” decisions. (If you want a quick comparison, Ordinary Vs Special Resolutions is a useful reference point.)

Who Votes On A Special Resolution?

Special resolutions are generally passed by members (shareholders), not directors.

Directors run the company day-to-day, but shareholders approve certain major decisions - especially where the company’s “rules” are changing or the company is taking a big step that affects ownership rights.

That said, it’s very common for a board to propose a change and then ask shareholders to approve it via a special resolution.

When Do You Need A Special Resolution?

Whether you need a special resolution depends on:

• what the Corporations Act requires for that decision; and
• what your company’s own rules require (for example, your constitution and any shareholders agreement).

Here are some common situations where Australian companies often need a special resolution.

1. Changing Your Company Constitution

If you want to adopt, repeal, or modify your company’s constitution, the Corporations Act typically requires a special resolution of shareholders.

Your constitution affects how your company is governed (for example, share transfers, director appointment rules, meeting rules, and decision-making thresholds). Because it’s foundational, the law expects a higher voting threshold to change it.

Many businesses also review their Company Constitution when they bring on investors, restructure their shareholdings, or want more tailored governance rules than the replaceable rules.

2. Changing Your Company Name

Changing a company name usually requires a special resolution. Practically, the process often involves:

• shareholders passing the special resolution; and
• lodging the change with ASIC within the required timeframe.

If you’re rebranding or aligning your company name with a business name or product line, it’s worth checking your current constitution too - sometimes it has extra requirements about how changes must be approved.

3. Voluntarily Winding Up The Company

If the company is going to be voluntarily wound up (for example, the business is closing, or the structure is no longer needed), a special resolution is often required to approve that decision.

This is a major “end of life” corporate decision, so it makes sense that it needs strong shareholder support and a formal process.

4. Approving Certain Share Capital Changes (Depending On Structure)

Some changes to a company’s share structure can trigger special resolution requirements - for example, in more complex situations involving class rights or changes that affect shareholder entitlements.

If you’re planning changes to shares (like changing rights, issuing different share classes, or doing a restructure), it’s also a good time to check whether your Shareholders Agreement contains extra voting thresholds or veto rights beyond the legal minimum.

5. Other “Major Change” Decisions Under The Corporations Act Or Your Own Rules

Sometimes, a special resolution is required not because the Corporations Act says so, but because your company’s constitution or agreements say so.

For example, your constitution or shareholders agreement might require special resolutions for:

• issuing new shares (especially if it could dilute existing shareholders);
• approving a major asset sale;
• changing dividend policies;
• bringing on new shareholders; or
• approving a significant related party transaction.

This is why, before you start drafting documents or calling a meeting, it’s worth checking your governance documents and working out which decision you’re actually making, and what approval pathway applies.

Special Resolution Vs Ordinary Resolution: What’s The Difference?

This is one of the most common pain points for small business owners: you know you need a “resolution”, but you’re not sure which one.

In practical terms:

• Ordinary resolution: typically requires more than 50% of the votes cast to pass (a simple majority).
• Special resolution: typically requires at least 75% of the votes cast to pass, and must be clearly proposed as a special resolution.

The other big difference is process. Special resolutions usually have stricter notice wording requirements, and are often linked to ASIC lodgements (depending on what the resolution is for).

If you’re ever unsure, it’s safer to confirm early. Using the wrong type of resolution can cause delays later - or mean the decision is challenged.

How Do You Pass A Special Resolution? (Step-By-Step)

Passing a special resolution is usually straightforward, but you need to follow the correct steps. The right process depends on your company type (for example, proprietary vs public company), what your constitution says, and whether you’re holding a meeting or using a circulating resolution.

Below is a general step-by-step guide.

1. Confirm The Decision And The Required Approval Pathway

Start by clarifying:

• What exactly are you approving?
• Is it a shareholder decision or director decision?
• Does the Corporations Act require a special resolution?
• Do your internal documents add extra requirements?

If your company’s governance is more sophisticated (multiple shareholders, investors, different share classes), this is where you want to be extra careful - because your constitution and shareholders agreement may impose requirements above the statutory minimum.

2. Draft The Special Resolution With The Correct Wording

A special resolution should be drafted clearly, with the outcome written in a way that can be implemented immediately after it passes.

It should generally:

• state that it is a special resolution;
• describe the decision precisely (for example, “to amend the constitution by…”); and
• include any required details or attachments (for example, the updated constitution).

Depending on the decision, you may also need supporting documents (for example, updated governance documents, notices to ASIC, or implementation deeds).

3. Provide Proper Notice To Shareholders (If A Meeting Is Needed)

For many companies, the resolution is put to shareholders at a general meeting.

You’ll generally need to issue a notice of meeting that:

• gives the minimum notice period required (by law and your constitution);
• includes the text of the resolution; and
• makes it clear the resolution is proposed as a special resolution.

Notice requirements can be technical, especially if you have shareholders overseas, different voting rights, or restrictions in your constitution. If the notice is defective, it can undermine the validity of the resolution.

4. Hold The Vote And Ensure You Reach The 75% Threshold

At the meeting, the resolution must be voted on according to your company’s rules (and the Corporations Act).

To pass a special resolution, you’ll generally need:

• at least 75% of the votes cast to be in favour; and
• the vote to be properly counted and recorded.

It’s important to remember this is 75% of votes cast, not necessarily 75% of all shareholders. The practical result can depend on who turns up and how voting rights are allocated.

5. Record It Properly (Minutes And Company Records)

Once the resolution passes, you need to document it correctly.

That usually means:

• preparing minutes of the meeting (or a record of the circulating resolution);
• keeping the resolution with the company’s records; and
• updating any registers or governance documents affected by the change.

For a lot of small businesses, good record-keeping is where things fall over - not because anyone is trying to do the wrong thing, but because everyone is busy running the business. Unfortunately, missing records can cause major headaches later (for example, when selling the business or raising capital).

6. Lodge With ASIC If Required

Some special resolutions trigger ASIC lodgement obligations. Common examples include changing the company name, and adopting, modifying or repealing a constitution.

The deadline matters. Late lodgements can lead to penalties and delays, particularly if the resolution relates to something time-sensitive (like a rebrand or restructure).

Common Practical Issues (And How To Avoid Them)

Special resolutions aren’t just a legal technicality - they often come up during stressful or high-stakes business moments. Here are some common issues we see, and how you can avoid them.

Your Documents Don’t Match Your Decision

Sometimes a business knows what it wants to do, but the paperwork doesn’t reflect it accurately.

For example, you might want to bring in a new investor and “update the rules”, but what you actually need is:

• a constitution amendment (special resolution);
• new shareholder arrangements (often contractual); and
• proper signing and implementation steps.

Having the right corporate documents in place from the beginning (and keeping them updated) makes these decisions far easier later.

Confusion Between Shareholder Resolutions And Director Resolutions

Directors and shareholders have different powers.

Many day-to-day decisions can be handled by directors (often through board minutes), while special resolutions are typically shareholder decisions.

If you’re documenting decisions internally, it can help to keep templates consistent. For example, businesses often use a Directors Resolution for board decisions, and separate shareholder resolutions for member approvals.

Execution Problems (Signing Incorrectly)

Even when the resolution is valid, the next step is often to sign documents to implement it - and that’s another common risk point.

For companies, execution requirements can vary depending on whether you’re signing under section 127 of the Corporations Act, using a sole director, or appointing an attorney.

It’s worth checking correct signing mechanics before you circulate documents, especially where third parties (banks, investors, landlords) will scrutinise the execution. This is where guidance on signing under section 127 can be particularly relevant.

Shareholder Disputes Or Deadlocks

Because special resolutions require 75% approval, they can become difficult if your ownership structure is split in a way that makes it hard to hit that threshold.

For example:

• a 50/50 company will struggle to pass special resolutions unless both shareholders agree;
• a minority shareholder with more than 25% can block special resolutions; and
• different share classes may carry different voting rights.

This isn’t necessarily a bad thing - it can be a deliberate protection for minority shareholders - but it does mean you should plan ahead when setting up your shareholder arrangements.

Not Updating Share Records After The Decision

Some special resolutions sit alongside share transfers or changes in ownership.

If you’re changing who owns what (or planning to), it’s important that the paperwork and registers are updated properly. For example, when ownership is changing within a private company, the steps around How To Transfer Shares can be just as important as the resolution itself.

Key Takeaways

• A special resolution is a formal shareholder decision that generally needs at least 75% of votes cast in favour, plus proper notice and documentation.
• Special resolutions are commonly required for major company decisions like changing your constitution, changing your company name, or winding up the company.
• The difference between an ordinary and special resolution is mostly the voting threshold (and often stricter process and notice requirements).
• To pass a special resolution properly, you’ll usually need correct drafting, correct notice (if a meeting is required), accurate minutes, and (sometimes) ASIC lodgement.
• Your constitution and shareholder arrangements can impose additional requirements, so it’s important to check your documents before you start.
• Many issues arise not from the vote itself, but from record-keeping and implementation - especially signing and updating company registers after the resolution passes.

Note: This article is general information only and does not constitute legal advice. Because requirements can vary depending on your company type, constitution and circumstances, consider getting professional advice for your specific situation.

If you’d like help preparing or reviewing a special resolution (or making sure your company’s approvals and documents are set up properly), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.