Most decisions at a unit holders’ meeting are ordinary resolutions, passed by a simple majority. The Capital Market Act 2015 reserves a stronger form, the special resolution, for decisions that change the life of the scheme. Which majority applies, and how it is counted, decides whether a hard-fought vote binds the trustee.
The definition in section 2(1)
“Special resolution”, in relation to holders of units in managed investment schemes or a unit trust, “means a resolution approved by unit holders holding units with a combined value of no less than 75 percent of the value of the managed investment units held by those persons who are entitled to vote and who vote on the question”.
Three features stand out. The test is by value, not by number of units or members, which is why section 242 says how an interest is valued for a poll. The denominator is the units held by those who actually vote, so absentees do not count against the resolution. And the threshold is 75 per cent, the same figure the Act uses for debenture holders. The definition governs every reference to a special resolution in Part V unless the context requires otherwise.
When the Act requires a special resolution
- Winding up. Members who want the scheme wound up must pass “a special resolution directing the trustee to wind up the scheme” (sections 265 and 268(1)(b)). See how a unit trust is wound up.
- Members’ resolutions. A resolution members force onto the agenda under section 223 must be a special resolution unless it is a resolution to remove and replace the trustee (section 223(4)).
- Requested and member-called meetings. Meetings requested under section 214, called by members under section 216, or ordered by the Court under section 217 are all meetings “to consider and vote on a proposed special resolution”; so is a members’ meeting on a trustee’s proposal to wind up (section 266(2)(b)).
Notably absent is the removal of the trustee. Sections 201 and 223(4)(b) speak only of “a resolution” to remove the trustee and choose a new one, so, unless the deed says otherwise, removal is decided by ordinary majority. See can unit holders remove the trustee.
A special resolution is always decided on a poll
Section 245(1) provides that “a special resolution put to the vote at a meeting of a scheme shall be decided on a poll”. A show of hands counts people, not units or value, so it cannot measure a 75 per cent by value majority. The notice of meeting must set out the intention to propose the special resolution and state its exact wording (section 221(c)); a resolution amended on the floor into something materially different is not the resolution notified. See how voting is conducted.
The tension with section 245(3)
Section 245(3) says: “The resolution is passed on a poll if it has been passed by at least 50 percent of the votes cast by members entitled to vote on the resolution.” Read literally and applied to a special resolution, that would allow half the votes cast to pass what section 2(1) says needs 75 per cent by value. Part V contains no definition of its own. The better view is that section 245(3) states the general rule for polls on ordinary resolutions, while section 2(1) continues to define a special resolution, since nothing in section 245 displaces the definition. Until a court or an amendment settles the point, a trustee declaring a special resolution carried on less than 75 per cent by value invites challenge. Note also that “at least 50 percent” is not a majority: a tied poll technically satisfies the words.
A different test for changing the deed
Changing the trust deed uses yet another measure. Section 211(4)(a) requires a supplementary deed to be accompanied by “a resolution of not less than two-thirds of all unit holders or members at a unit holders’ or members’ meeting duly convened and held according to Division 5”, where the Commission requires it or the change increases the trustee’s fees (section 211(5)–(6)). On its face this is a headcount of all unit holders, not a percentage of votes cast; whether it means all members of the scheme or all those present is unclear. See how a deed is amended.
How company special resolutions compare
Under the Companies Act 1997, a special resolution of shareholders is one approved by a majority of 75 per cent, or a higher majority if the constitution requires, of the votes of those shareholders entitled to vote and voting. The unit trust definition borrows the 75 per cent and the “entitled to vote and voting” formula, but substitutes value for votes and does not expressly let the deed raise the threshold. Directors of a landowner company or church corporation that holds units should not assume the rules they know from shareholder meetings carry across. See unit trusts and companies compared.
Many deeds define “special resolution” themselves. A deed definition cannot lower the statutory threshold where the Act requires a special resolution, but it can govern decisions the deed alone reserves to members. Read both before counting the votes.
Sources
- Capital Market Act 2015 — ss 2(1) (“special resolution”), 201, 211(4)–(6), 214, 216, 217, 221(c), 223(4), 235, 239, 242, 244, 245, 265, 266(2)(b), 268(1)(b)
- Companies Act 1997 — s 2 (“special resolution”)
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.