Resolution by Circulation under Section 175: Procedure, Recording and Minutes

Summary: A Resolution by Circulation (RBC) under Section 175 of the Companies Act, 2013 enables the Board or a committee to approve urgent business without convening a meeting, provided the draft resolution and necessary papers are circulated to all entitled directors or committee members and approved by the required majority. The process also involves compliance with Secretarial Standard-1, including the right of at least one-third of the directors to require consideration at a Board meeting, prescribed response timelines, recording of assent or dissent, and appropriate preservation of circulation records. A resolution validly passed by circulation must subsequently be noted at a Board or committee meeting and made part of the minutes, with the text of the resolution and any dissent or abstention appropriately recorded. The minutes themselves are subject to the requirements of Section 118 concerning preparation and entry within 30 days of the conclusion of the relevant meeting. Proper documentation therefore requires attention not only to the initial circulation and approval but also to the subsequent noting, minutes-book entry and preservation of supporting records.

Resolution by Circulation under Section 175: Procedure, Recording and Entry in Minutes Book

Introduction

A resolution by circulation (RBC) is used when the Board or a committee needs to approve an urgent matter without convening a meeting. Under Section 175 of the Companies Act, 2013, it becomes valid only when the draft resolution and necessary papers are circulated to all directors or committee members and approved by a majority of those entitled to vote.

An important point often missed is that an RBC is not fully complete merely because directors have signed or emailed their approval. It must also be noted at the next Board or committee meeting and made part of the minutes of that meeting.

When Can an RBC Be Used?

An RBC is generally used for urgent business between two board meetings—for example, opening a bank account, approving a vendor proposal, issuing a power of attorney, or authorising signing of a routine agreement. Secretarial Standard-1 recognises that urgent decisions can be approved through circular resolutions.

However, it should not be used where the law requires the matter to be decided at an actual meeting. Certain board powers under Section 179(3), such as approval of financial statements, borrowing, investment of company funds, and issue of securities, must be exercised at a board meeting and cannot be passed by circulation.

Step-by-Step Procedure

1. Identify the urgent matter and confirm that it can legally be approved by circulation.

2. Prepare the draft resolution, explanatory note, and supporting papers.

3. Obtain permission from the Chairman, or the authorised director where the Chairman is absent or interested, to circulate the resolution.

4. Circulate the draft to every director at the address registered with the company, through hand delivery, post, courier, or email.

5. Give directors time to respond. Under Secretarial Standards, directors are generally given not more than seven days from the date of circulation to respond.

6. Collect assent, dissent, or abstention in writing or through valid electronic means.

7. Check majority approval. The resolution is passed only if approved by a majority of directors or committee members entitled to vote.

8. Check the one-third requirement. If at least one-third of the total directors require that the matter be discussed at a meeting, the RBC cannot be passed and must be placed before a board meeting.

9. Date the resolution as passed on the date on which the required majority approval is received.

10. Note the resolution at the next meeting and record it in the minutes.

How to Record an RBC Internally

The company should maintain a separate file or register for resolutions passed by circulation. This file should normally contain:

• Serial number of the circular resolution.
• Date of circulation.
• Subject or title of the resolution.
• Draft resolution and explanatory note.
• Copies of supporting documents.
• Proof of circulation, such as email delivery records or signed acknowledgement.
• Written approval, dissent, or abstention of each director.
• Date on which the resolution was actually passed.
• Reference to the next board or committee meeting where it was noted.

The Company Secretary, or another authorised officer, should number and preserve these records carefully. In practice, each RBC is given a serial number so that it can be easily traced from the circulation file to the minutes book.

When Is the RBC Entered in the Minutes Book?

The resolution is not entered in the minutes book on the date it is passed by circulation. Instead, Section 175(2) requires that a resolution passed by circulation be noted at a subsequent meeting of the Board or committee and made part of the minutes of that meeting.

Secretarial Standard-1 and the Secretarial Standard on Passing of Resolutions by Circulation confirm that the text of the resolution, along with any dissent or abstention, must be recorded in the minutes of the next meeting.

So, the practical position is:

Section 118 requires minutes of board and committee meetings to be prepared and entered in the minutes book within 30 days of the conclusion of the meeting. Therefore, if an RBC is passed on 10 October and the next board meeting is held on 20 October, the RBC should be recorded in the minutes of the 20 October meeting, and those minutes should be entered in the minutes book within 30 days of that meeting.

What the Minutes Should Contain

While recording the RBC in the minutes, the Company Secretary should include:

• A statement that the resolution was passed by circulation under Section 175.
• The date of circulation and the date on which it was passed.
• The full text of the resolution.
• Names of directors who approved, dissented, or abstained.
• A note where an interested director did not vote.

The minutes should not merely say, “The resolution circulated was noted.” It should record the actual resolution and the directors’ responses, because SS-1 specifically requires the text of the resolution, dissent, and abstention to be recorded.

Format for Noting an RBC in Minutes

A simple format that companies commonly use is:

Resolution Passed by Circulation

The Board noted that the following resolution was circulated to all the Directors of the Company on [date] under Section 175 of the Companies Act, 2013, along with the necessary explanatory note and supporting papers.

The resolution was approved by a majority of the Directors entitled to vote and was accordingly passed by circulation on [date].

“RESOLVED THAT approval of the Board be and is hereby accorded for [state the approval].

RESOLVED FURTHER THAT [name/designation] be and is hereby authorised to sign, execute, and submit all documents and do all acts necessary for giving effect to this resolution.”

The Directors who approved the resolution were [names]. [Name], if any, did not vote as he/she was interested in the resolution. No dissent was received, except as recorded below.

The resolution was noted by the Board and taken on record.

This format ensures that the resolution, approval, dissent, and interested-director position are all properly documented.

Example: Opening a Bank Account

Suppose the Board of ABC Pvt. Ltd. has four directors. On 1 October, the Company Secretary circulates a draft resolution for opening a bank account, along with the bank’s account-opening forms.

• Director A approves on 2 October.
• Director B approves on 3 October.
• Director C approves on 3 October.
• Director D does not respond.

Since three out of four directors entitled to vote have approved, the RBC is passed on 3 October. The company may immediately use the resolution for the bank account, because an RBC has the same authority as a resolution passed at a duly convened meeting.

However, the Company Secretary must place the resolution before the next board meeting—say, on 25 October—and record it in the minutes of that meeting. The minutes book entry will therefore be made as part of the 25 October board meeting minutes, within 30 days of that meeting.

Example: Director Dissents

Suppose a resolution for appointing a vendor is circulated to five directors. Three approve, one dissents, and one abstains because he is interested in the vendor.

The resolution is passed because a majority of directors entitled to vote approved it. But while recording it in the minutes of the next meeting, the Company Secretary must include:

• The complete resolution.
• The name of the dissenting director and the fact of dissent.
• The name of the interested director and the fact that he did not vote.

A dissent does not automatically invalidate the resolution, but it must be honestly recorded in the minutes.

Common Mistakes Companies Make

• Circulating the draft only to available directors instead of all directors.
• Not attaching explanatory notes or supporting papers.
• Treating the RBC as complete without noting it at the next meeting.
• Writing only “noted” in the minutes instead of reproducing the resolution.
• Ignoring dissent or the interested director’s abstention.
• Using circulation for matters that must be decided at a board meeting.
• Failing to maintain proof of circulation and directors’ replies.

Conclusion

For an RBC under Section 175, the resolution is passed on the date majority approval is received, but it is recorded in the minutes book only through the minutes of the next Board or committee meeting. The next meeting must note the resolution and the minutes must contain the full text of the resolution, along with dissent, abstention, and the position of interested directors.