← Back to blog

Company Management and Decision-Making for SQE1

Part of our SQE1 Business Law and Practice guide → View the full SQE1 Business Law and Practice guide

07 Apr 2026

Learn how company decisions are made: board authority, ordinary vs special resolutions, written resolutions, and general meeting procedures for SQE1.

Company Management and Decision-Making for SQE1

Business Law and Practice > Company Management and Decision-Making

If you don't understand the difference between an ordinary and a special resolution—and when a written resolution is prohibited—you will lose marks on some of the most straightforward SQE1 questions. The s.288(2) trap alone catches a significant number of candidates every sitting. This guide covers the decision-making procedures you must know cold: board authority, shareholder resolutions, and the procedural rules that examiners love to test.

What is Company Management and Decision-Making in SQE1?

A company is managed by its board of directors under powers granted by the articles and the Companies Act 2006. Shareholders, however, retain certain reserved powers that can only be exercised by them (ordinary resolution or special resolution, depending on the matter).

Company decisions are made through:

  • Board meetings - Directors exercise management authority
  • General meetings - Shareholders make reserved decisions
  • Written resolutions - Private companies only; a faster alternative to formal meetings

The key to SQE1 questions is identifying which procedure applies and whether it was followed correctly.

Key Principles for SQE1

  • Directors' general authority (Model Article 3): Under the model articles, the directors are responsible for managing the company and may exercise all company powers not excluded by the articles or the CA 2006. This is a broad default authority subject to directors' duties and liabilities. Directors are not constrained by what is stated in the memorandum (which no longer contains objects).

  • Ordinary resolution (s.282 CA 2006): A decision passed by shareholders where more than 50% of voting rights are exercised in favour. Ordinary resolutions are used for routine matters: approval of accounts, directors' remuneration, directors' appointment/removal (except by written resolution), declaration of dividends, and general shareholder business. Requires 14 days' notice.

  • Special resolution (s.283 CA 2006): A decision requiring at least 75% of votes cast. Special resolutions are used for fundamental matters: alteration of articles, change of company name, reduction of share capital, capitalization of reserves, and winding up. Requires 21 days' notice and must be flagged in the notice of meeting.

  • Written resolutions (ss.288-300 CA 2006): Private companies only. Members can pass written resolutions without a formal meeting, provided all members agree (for ordinary resolution) or 75% agree (for special resolution). Written resolutions are faster but have one key limitation: they cannot be used to remove a director (s.288(2)) or remove an auditor. This constraint connects to company formation and constitution rules that protect director security of tenure. This is a critical SQE1 trap.

  • Board meetings: Governed by the articles (model articles provide default rules). Directors must follow procedural rules on notice, quorum (usually 2 directors under model articles), and conduct. Valid board decisions bind the company.

  • Shareholder general meetings: Called by directors. Annual General Meeting (AGM) is mandatory for public companies (s.336 CA 2006) but not private companies. Extraordinary General Meetings (EGMs) are called to deal with specific matters. Notice periods: 14 days for private companies, 21 days for public companies (s.307 CA 2006).

  • Quorum for general meetings (s.318 CA 2006): Minimum two qualifying persons present. A person is "qualifying" if they are a member present in person or by proxy, or an authorised representative of a body corporate member.

  • Notice to members (s.307 CA 2006): Private companies: 14 days' notice. Public companies: 21 days' notice for AGM, 14 days for other meetings. Notice must state date, time, location, business to be conducted, and voting rights.

Exam tip

When a question involves a private company removing a director, immediately check whether it specifies a written resolution or a general meeting. Written resolutions cannot be used to remove a director (s.288(2))—the removal must happen by ordinary resolution at a properly convened general meeting with special notice.

Reserved powers of shareholders - The board manages the company, but certain decisions are reserved to shareholders: alteration of articles, declaration of dividends, appointment of directors, winding up, and approval of accounts. Shareholders exercise these through resolutions. The articles may reserve other powers. These reserved matters protect minority interests and prevent directors from acting unilaterally.

How This Appears in SQE1 Questions

For example, a question might describe a private company where members hold a vote to pass a written resolution removing the managing director. You'd identify that s.288(2) prohibits this and require instead an ordinary resolution at a general meeting (with 14 days' notice).

SQE1 typically tests:

  • "What procedure is required to decide X?" (Identify board decision vs ordinary vs special resolution)
  • "Can the directors decide this alone, or do shareholders need to approve?" (Distinguish director powers from reserved shareholder powers)
  • "Can a written resolution be used here?" (Test limitations: not for director removal, not for auditor removal)
  • "Was the correct notice period given?" (14 days private, 21 days public AGM)
  • "Is the decision valid?" (Check procedure: quorum, voting, notice)

This is a classic SQE1 trap: written resolutions cannot remove a director (s.288(2)). Candidates often forget this limitation and suggest a written resolution for director removal. Directors must be removed by ordinary resolution at a general meeting. The consequences of removal connect directly to corporate insolvency scenarios where directors face personal liability after being replaced too late.

Another trap: confusing ordinary resolution (>50%) with special resolution (≥75%).

Common Mistakes Students Make

  • Confusing ordinary (>50%) with special resolution (75%). Check the matter carefully; different decisions require different thresholds.
  • Using written resolution to remove a director. This is not permitted (s.288(2)). Director removal requires ordinary resolution at a general meeting.
  • Assuming shareholders can override board decisions. Shareholders cannot override day-to-day board decisions unless they exercise a reserved power via resolution.
  • Forgetting private companies don't need an AGM. Private companies are not required to hold annual general meetings (unlike public companies).
  • Miscalculating notice periods. 14 days for private companies and extraordinary meetings; 21 days for public company AGMs.

Quick Summary

  • Model Article 3: Directors have broad management authority unless articles or CA 2006 exclude powers
  • Ordinary resolution: >50% voting (14 days' notice private companies; routine matters: dividends, director appointment)
  • Special resolution: 75% voting (21 days' notice; fundamental matters: articles alteration, capital reduction, winding up)
  • Written resolutions: Private companies only; cannot remove directors (s.288(2)) or auditors
  • General meetings: Private companies don't require AGM; quorum is two qualifying persons
  • Notice periods: 14 days for private companies and extraordinary meetings; 21 days for public company AGMs

Want to test this now? Try a few SQE1-style questions below before moving on.

Test Yourself

Test yourself

Quick check questions based on this article.

Question 1

Scenario

A private company limited by shares has two directors: Ms Young and Mr Zachary. The company's articles are based on the model articles for private companies. The company has 500 issued ordinary shares. Ms Young holds 300 shares and Mr Zachary holds 200 shares. Ms Young wishes to remove Mr Zachary as a director. She proposes to pass an ordinary resolution at a general meeting under s.168 Companies Act 2006. Ms Young requisitions a general meeting, and the company secretary issues notice of the meeting to all shareholders fourteen clear days in advance. The notice includes the text of the proposed resolution to remove Mr Zachary. Mr Zachary has received the notice and has submitted written representations to the company, requesting that they be circulated to all shareholders before the meeting. The company has not circulated Mr Zachary's representations. Mr Zachary has also indicated that he wishes to speak at the meeting before the vote is taken. At the meeting, Ms Young votes all 300 of her shares in favour of the resolution. Mr Zachary votes his 200 shares against. No other shareholders are present or voting by proxy. The company's articles do not contain any Bushell v Faith clause or weighted voting provision.

What is the effect of the company's failure to circulate Mr Zachary's written representations?

Question 2

Scenario

A private company limited by shares has three directors: Mr Allen, Ms Barker, and Mr Chen. The company's articles of association are based on the model articles for private companies. The company has been operating profitably for eight years. Mr Allen has recently been approached by a supplier who offers to sell a commercial property to the company at a discounted price. Mr Allen is interested in purchasing the property personally instead. He has not disclosed this interest to the other directors or to the company. Mr Allen's wife works as a part-time administrator for the company, although this is not relevant to the proposed transaction. At the next board meeting, Mr Allen votes in favour of the company declining the supplier's offer, without disclosing his personal interest. The board resolves, by a majority of two to one, not to proceed with the purchase. Ms Barker voted against the resolution. Mr Allen then purchases the property in his own name at the discounted price. Ms Barker discovers the circumstances of the purchase three weeks later and seeks advice. She is concerned that Mr Allen has breached his duties as a director. The company's articles contain no specific provisions modifying the statutory duties of directors. Mr Allen argues that the board validly decided not to purchase the property and therefore no breach has occurred.

Which director's duty has Mr Allen most likely breached?

Question 3

Scenario

A private company limited by shares has three directors and five shareholders. The company's articles adopt the model articles for private companies without amendment. The board proposes to amend the company's articles of association to introduce a new restriction on the transfer of shares. The proposed amendment would require any shareholder wishing to sell shares to first offer them to the existing shareholders at a price determined by the company's auditors. The board believes this will help maintain stability in the ownership structure. Two shareholders, who together hold 60% of the voting rights, support the proposal. The company was incorporated 10 years ago and has never previously amended its articles. The company's solicitor has advised that proper procedures must be followed. One shareholder, who holds 10% of the voting rights, opposes the amendment on the grounds that it would restrict her ability to sell her shares freely.

What type of resolution is required to amend the company's articles of association?

Practice with full exam-style questions

Try DemoView Pricing

Related Topics

Practise Decision-Making Questions for SQE1

Try SQE1 company management questions now—covering the s.288(2) trap, ordinary vs special resolution thresholds, notice periods, and board vs shareholder authority. Each question includes a step-by-step explanation showing how to identify the correct procedure and eliminate distractors. Sharpen your ability to spot procedural defects under timed exam conditions.

Practise decision-making questions: https://actusprep.com/demo

View pricing and plans: https://actusprep.com/pricing