When it is not feasible to call Board Meeting and approval of Directors is required on an urgent basis. In such cases, resolution can by passed through Circulation
As per Section 175 of the Companies Act, 2013 read with Rule 5 of Companies (Meeting of the Board and its Powers) Rules, 2016 and Secretarial Standards-1 issued by the Institute of Company Secretaries of India, the Company to pass a resolution by circulation without convening a Board meeting or a Committee meeting, as the case may be.
Draft resolution to be circulated
In order to pass a resolution by circulation, the draft of the resolution proposed to be passed along with the necessary documents if any, shall be circulated to all the directors of the Company or the members of the committee of the Company.
Mode of sending:
- By hand delivery;
- By registered post at the address registered with Company;
- By Speed post
- By courier at the address registered with Company or
- By email at their mail ids registered with the Company
Passing of Resolution
The resolution shall be deemed to be passed if approved by majority of the directors entitled to vote on the resolution. Here interested Director cannot vote on such resolution.
Time limit & method for responding
Maximum seven days shall be given to a Director from the date of circulation of draft Resolution to respond assent/dissent. In case a Director does not respond before last date of responding it shall be presumed that he has abstained from voting.
Power of Directors To Demand For Meeting:
However, if 1/3rd of the directors of the Company or the members of the committee of the Company, as the case may be, require that the resolution which is proposed to be passed by circulation must be passed at the physical meeting, then the Chairperson shall put the said resolution at the duly convened meeting.
Effective Date of the passing of the resolution
The resolution shall be effective from the date specified in such Resolution and if no such date specified then on the last date for signifying assent/dissent or date on which at least 2/3rd Director's assent has been received.
The note shall also indicate how directors of the Company or the members of the committee of the Company, as the case may be, shall signify assent or dissent to the Resolution proposed and the date by which the directors of the Company or the members of the committee of the Company, as the case may be, shall respond.
Entry in Minutes
The resolution which is passed by circulation shall be taken note in the subsequent meeting of the Board or Committee, as the case may be, and shall form the part of minutes of such subsequent meeting.
Validity
Passing of Resolution by circulation shall be considered valid as if it had been passed at a duly convened Meeting of the Board
Each business proposed to be passed by way of Resolution by circulation shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond.
The following are the list of matters which are to be passed only at a duly convened Board meeting and not by circulation:
• Noting minutes of Meetings of Audit Committee and other Committees
• Approving financial statements and the Board's Report
• Considering the Compliance Certificate to ensure compliance with the provisions of all the laws applicable to the company
• Specifying list of laws applicable specifically to the company
• Appointment of Secretarial Auditors, Cost Auditor, Statutory Auditor and Internal Auditors
• Declaration of any Dividend
• Borrowing Money otherwise than by issue of debentures
• Investing the funds of the company
• Granting loans or giving guarantee or providing security in respect of loans
• Making political contribution
• Making calls on shareholders in respect of money unpaid on their shares
• Approving remuneration of Managing Director, Whole-time Director and Manger
• Appointment or removal of Key Managerial Personnel
• Appointment of a person as a Managing Director / Manager in more than one company
• According sanction for related party transactions which are not in the ordinary course of business or which are not on arm's length basis
• Purchase and sale of subsidiaries/assets which are not in the normal course of business
• Approve payment to Director for loss of office
• Items arising out of separate meeting of the Independent Directors if so decided by the Independent Directors
• Authorize Buy Back of Securities
• Issue of Securities, including debentures, whether in or outside India
• Approving amalgamation, merger, demerger, acquisitions or reconstruction or takeover
• Diversify the business
• Takeover another company or acquiring controlling or substantial stake in another company
• To make calls on shares in respect of unpaid share capital of the company
• To issue debentures
• To give loans
• To fill casual vacancy in the Board
• To make investment in shares of other companies
• Granting loans to directors
• Appointment or resignation of Managing Director or whole-time director or Manager
• Appointment and removal of the Chief Financial Officer and the Company Secretary
• To accept fixed deposits and related matters
• To borrow monies
• To diversify the business of the company
Additional list of items in case of listed companies
• Approving Annual operating plans and budgets
• Capital budgets and any updates
• Information on remuneration of KMP
• Show cause, demand, prosecution notices and penalty notices which are materially important
• Fatal or serious accidents, dangerous occurrences, any material effluent, or pollution problems
• Any material default in financial obligations to and by the company or substantial non-payment of goods sold by the company
• Any issue, which involves possible public or product liability claims of substantial nature, including any judgement or order which, may have passed strictures on the conduct of the company or taken an adverse view regarding another enterprise that can have negative implications on the company
• Details of any joint venture or collaboration agreement
• Transactions that involve substantial payment towards goodwill, brand equity or intellectual property
• Significant labour problems and their proposed solutions. Any significant development in Human Resources / Industrial Relations front like signing of wage agreement, implementation of Voluntary Retirement Scheme etc.
• Quarterly details of foreign exchange exposures and the steps taken by management to limit the risks of adverse exchange rate movement, if material
• Non-compliance of any regulatory, statutory or listing requirements and shareholder services such as non-payment of dividend, delay in share transfer etc.
Draft of Resolution by Circulation
RESOLUTION PROPOSED TO BE PASSED BY CIRCULATION
[Pursuant to Section 175 of the Companies Act, 2013 read with the Rules prescribed thereunder]
To,
Name of Director
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Date of Circulation |
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Subject |
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Total No. of Items proposed |
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Circular Resolution No. |
This is with reference to passing of following resolution by Circulation as per the provisions of Section 175 of the Companies Act, 2013 read with the Rules prescribed thereunder.
A brief note containing the details of the proposal is as under:
None of the Director is in any way concerned or interested in this resolution.
The Board is requested to consider and pass the following resolution by Circulation:
Item No. 1:
Proposed Draft Resolution:
NOTES:
- The circulated resolution shall deem to have been passed by circulation when it is approved by majority of Directors.
- In case of where not less than one-third of the total number of present Directors of the Company require that this resolution under circulation must be decided at a duly convened meeting, this resolution shall be placed before the next meeting of the Board for their approval. If your require this resolution to be decided at a duly convened meeting, pls intimate us within 7 days of receipt of this notice.
- The Companies Act, 2013 allows the Company or its Authorised Person to send the circular resolution by hand delivery/post/courier/electronic mode of communication to the Directors of the Company. In case of Hand deliver or by post or courier, the same shall be delivered to their address registered with the Company in India. In case of electronic mode delivery, the same shall be sent to the e-mail ID as provided and updated by the Directors with the Company as the case may be.
- You can send your acceptance/ rejection via hand delivery/post/courier to the Registered Office of the Company or through email.
- You are requested to send your acceptance/rejection in the format enclosed herewith within 7 days of receipt of notice
We will be happy to provide you further details/information as may be required by you in the concerned matter.
Thanking You
Format for Acceptance/ Rejection to the above Circular Resolution
I hereby convey my assent/ dissent to the above resolution as follows:-
Name of the Director:
DIN:
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Item No. |
Assent* |
Dissent* |
Signature** |
Date of Signing |
Remarks, if any |
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1. |
*Assent/ Dissent may be given by mentioning ‘YES' in the respective field.
*Signature is not required in case of response through e-mail.
Important Provisions relating to Circular Resolution:
- No Company can use Circular Resolution to escape the holding of Minimum Number of Board Meetings.
- Resolutions and items of business should not be passed through circular resolution, where the Act and applicable rules expressly provide that such items of business should be transacted only at duly convened Board Meeting.
- Circular Resolution can be passed by the Board or Committee
- Resolution shall be considered as approval only after acceptance of Resolution by Majority of Director and resolution passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority.
- The draft resolution, together with necessary papers should be sent to all the directors of Board/ members of committee, even if some of them are not entitled to vote.
FAQ
1. Whether Interested Director will be included in the counting of 1/3rd or not?
Yes.
2. If any director gives dissent on a circular resolution. Whether noting of same is mandatory in Minutes?
Yes
3. Details required to be mentioned in the Note of Circular Resolution.
- details of the proposal
- relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal
- the nature of concern or interest, if any, of any Director in the proposal
- note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. In No Event Shall I Shall Be Liable For Any Result Arising Out Of Or In Connection With the Use of the Information.
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