circular resolution-reg

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 March 2011 Hi,

Can final accounts of the Company be approved by circular resolution and placed before AGM for shareholders adoption.

Is circular resolution for approving accounts valid in law.

Pl advise

Querist : Anonymous

Querist : Anonymous (Querist)

22 March 2011 The Companies Act does not specifically prohibit passing of circular resolution for approval of accounts.

But Clause 7.1 of Secretarial Standards for meetings on Board of Directors reads as follows:
“ The annual accounts of a company should be approved at a meeting of the Board and should not be approved by means of a resolution passed by circulation”.

Wish to bring to your notice that though secretarial standards are recommendatory in nature, it seeks to supplement the laws, rules and regulations and formulated to achieve desired objective of standardization of secretarial practices.

The possible difficulties that might arise in approving accounts through circular resolution are:

1.The directors will have to discuss the accounts which will be almost impossible in circulation
2. Recommendation of dividend and appropriation of post tax profits will need discussions
3. Authorisation to sign accounts to specific directors will be finalised after discussion depending upon availability of directors
4. The notes on account may warrant discussion.

Hence it is advisable to hold Board meeting to discuss and finalise accounts of the Company.

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