Use Of Unanimous Consent Resolutions.
USE OF UNANIMOUS CONSENT RESOLUTIONS
1. Meaning of Unanimous Consent Resolutions
A Unanimous Consent Resolution (UCR) refers to a decision taken with the agreement of all members or directors, without convening a formal meeting, or by dispensing with procedural formalities, where the law permits such flexibility.
Unanimity substitutes the requirement of:
Notice
Quorum
Physical or formal meetings
but only where the act itself is within legal competence.
2. Legal Rationale Behind Unanimous Consent
The doctrine rests on the principle that:
“What all can lawfully do together, they can do informally with equal legal effect.”
Courts recognise UCRs to:
Avoid unnecessary formalism
Promote commercial convenience
Respect shareholder autonomy
Uphold substance over form
3. Conditions for Valid Use of Unanimous Consent Resolutions
Unanimous consent is valid only when:
All persons entitled to vote consent
Consent is free, informed, and genuine
The act is within statutory and constitutional powers
No mandatory provision requires a formal meeting
No minority or third-party rights are prejudiced
There is no fraud or oppression
Failure of even one member’s consent invalidates the resolution.
4. Situations Where Unanimous Consent Is Commonly Used
(a) Corporate Governance
Appointment or ratification of directors
Approval of contracts
Ratification of procedural irregularities
(b) Closely-Held Companies
Family companies
Joint ventures
Private arrangements with limited shareholders
(c) Board-Level Decisions
Urgent approvals
Circular resolutions
Post-facto ratification
5. Limits on Use of Unanimous Consent
Unanimous consent cannot override:
Statutory prohibitions
Mandatory meeting requirements
Ultra vires acts
Public interest safeguards
Unanimity cannot convert an illegal act into a legal one.
IMPORTANT CASE LAWS ON UNANIMOUS CONSENT RESOLUTIONS
1. Re Duomatic Ltd.
Principle:
Where all shareholders with voting rights assent to a matter, formal meeting requirements may be dispensed with.
Significance:
Laid the foundation of the Duomatic Principle, the cornerstone of unanimous consent doctrine.
2. In re Express Engineering Works Ltd.
Principle:
Unanimous informal consent of shareholders is equivalent to a formal resolution.
Significance:
Confirmed that substance prevails over procedural form.
3. Cane v. Jones
Principle:
Unanimous consent must be fully informed; mere acquiescence is insufficient.
Significance:
Introduced the requirement of knowledge and intention.
4. EIC Services Ltd. v. Phipps
Principle:
Unanimous consent cannot validate acts involving breach of fiduciary duty.
Significance:
Placed ethical limits on UCR usage.
5. Rolled Steel Products (Holdings) Ltd. v. British Steel Corporation
Principle:
Shareholder consent cannot ratify acts done for improper purposes.
Significance:
Distinguished consent from lawful ratification.
6. Prentice v. R
Principle:
Unanimous resolutions must respect directors’ fiduciary obligations and statutory intent.
Significance:
Prevented misuse of unanimity to bypass governance norms.
7. Re Barry Artist Ltd.
Principle:
Unanimous consent is effective even without written documentation, if clearly established.
Significance:
Emphasised evidentiary clarity over form.
8. Burland v. Earle
Principle:
Majority or even unanimous consent cannot justify fraud on the minority.
Significance:
Reaffirmed protection of minority rights.
6. Practical Advantages of Unanimous Consent Resolutions
Speed and efficiency
Reduced compliance costs
Flexibility in decision-making
Commercial practicality
7. Risks and Compliance Concerns
Evidentiary disputes
Exclusion of dissenting stakeholders
Abuse by dominant shareholders
Regulatory scrutiny
Hence, written records and transparency are strongly recommended.
CONCLUSION
Unanimous consent resolutions are a powerful governance facilitation tool, particularly in closely-held companies. Courts uphold such resolutions when they reflect informed, voluntary, and lawful consensus, but firmly reject their use to legitimise illegal, oppressive, or ultra vires acts. Unanimity simplifies procedure—but cannot replace legality.
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