Sole shareholder resolution

What it means

A sole shareholder’s decision is a written document by which the only shareholder of a limited company exercises the powers of the general meeting. As there is nobody to vote with, no general meeting is called and the sole shareholder decides alone.

The shareholder decides on the same matters as a general meeting: approving the financial statements, distributing profit or covering a loss, appointing and removing the director, amending the deed of incorporation, increasing or reducing share capital, or winding up the company.

The decision must be in writing, dated and signed by the shareholder. For some decisions, especially amendments to the deed of incorporation and decisions entered in the commercial register, the law requires a stricter form, such as a notarial deed or an officially attested signature.

How it works in practice

Every year we prepare a decision approving the financial statements and distributing profit for clients with a sole shareholder. Dividends or transfers to retained earnings are booked on the basis of this decision, and the statements are filed with the register.

When the sole shareholder is also the director, as is common in small companies, we distinguish the capacity in which they act. Decisions within the general meeting’s powers are signed as shareholder, ordinary business decisions as director. Mixing the two leads to formal errors.

We archive the decisions together with other corporate documents. They must be produced on a sale of the company, an investor’s entry or a tax audit, and a missing profit distribution decision can cause problems when payments to the shareholder are assessed.

What to watch out for

Informal decisions, such as taking money out of the company without a dividend decision, are a common mistake in single-shareholder companies. The company’s money is not the shareholder’s, and a payment without a proper decision may be treated as a loan or hidden profit distribution.

If a limited company has more than one shareholder, the sole shareholder route cannot be used. When the ownership changes and a second shareholder joins, the company must switch to proper general meetings and minutes, or its decisions can be challenged.