Every Company shall hold meeting of Board of Directors of the Company to review performance, consider policy issues and address problems in the business. The participation of Directors in the meeting may be either in person or through video conferencing or other audio-visual means.
During the Board Meeting, the Board of Directors gives their assent or dissent on a Resolution to decide a particular matter. Generally, the resolutions are passed in the physical meeting of Board of Directors but, the Companies Act, 2013 read with Secretarial Standard-1 also specify the provisions regarding passing of Board Resolution through circulation.
Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of Board of Directors and have equal authority.
In this Article, we will explain the provisions with respect to passing of Board Resolution through circulation and list of resolutions which cannot be passed through circulation.
Introduction
Every Company shall hold meeting of Board of Directors of the Company to review performance, consider policy issues and address problems in the business. The participation of Directors in the meeting may be either in person or through video conferencing or other audiovisual means.
During the Board Meeting, the Board of Directors gives their assent or dissent on a Resolution to decide a particular matter. Generally, the resolutions are passed in the physical meeting of Board of Directors but, the Companies Act, 2013 read with Secretarial Standard-1 also specify the provisions regarding passing of Board Resolution through circulation.
Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of Board of Directors and have equal authority.
In this Article, we will explain the provisions with respect to passing of Board Resolution through circulation and list of resolutions which cannot be passed through circulation.
Passing of Resolution through Circulation
During day to day business of the Company, there might be situation where the Company cannot call physical board meeting, however, for certain business, approval of Board may be required viz. opening of current bank account on urgent basis for which Company cannot call Board Meeting.
In such situations, the Chairman of the Board shall decide whether the approval of the Board for a particular business shall be obtained by means of a resolution by Circulation.
If at least one-third of the total number of Directors requires that the resolution under circulation need to be decided in a duly convened Meeting, then the Chairman shall put the resolution before the Board in a duly convened Board Meeting. Interested Directors shall not be excluded for the purpose of determining the one-third number of Directors.
Regulatory Framework Governing Resolution by Circulation
Resolution by Circulation is governed by following provisions:
1) Section 175 of Companies Act, 2013;
2) Clause 6 of the Secretarial Standard-1
Procedure for Passing of Resolution by Circulation
SS -1 i.e., Secretarial Standard on Meetings of Board of Directors specify the procedure for passing a resolution by Circulation:
> The draft resolution along with necessary papers which is proposed to be passed by circulation shall be sent to the Directors including Interested Directors.
> The draft Resolution and necessary papers shall be circulated among the Directors by hand or by speed post or by registered post or by courier or by e-mail or by any other recognized electronic means. Proof of sending and delivery of the draft resolution and necessary papers shall be maintained by the Company for at least three years from the date of the meeting.
> Each resolution which is proposed to be passed by circulation shall contain all material facts that enable directors to understand the meaning, scope and implications of the proposal.
> The decision of the Directors shall be sought for each Resolution separately.
> The Directors shall give assent or dissent to the draft of the resolution under circulation within seven days from the date of circulation.
Approval of Resolution by Circulation
> The Resolution will be passed when it is approved by majority of Directors and not more than one-third of total number of Directors requires that the Resolution need to be passed in duly convened Board Meeting.
> The Resolution shall be deemed to have been approved on the date which is specified for assent or dissent of Directors or the date on which assent from more than two-third of the total number of Directors has been received, whichever is earlier.
> Directors shall signify their assent or dissent by signing the resolution to be passed by circulation or by e-mail or by any other electronic means.
> In case at least one-third of the Directors wish the matter to be discussed and decided at the meeting, each of such directors shall communicate the same before the last specifying date.
Recording of Resolution passed by Circulation
> The Resolution passed by circulation shall be noted at the next Board Meeting with assent or dissent of directors shall be recorded in the minutes of such meeting.
> Minutes shall also record the fact that the interested Director did not vote on the resolution.
Validity of Resolution passed by Circulation
> The Resolution passed by circulation shall be considered valid as if it had been passed at a duly convened Meeting of the Board.
Negative List
Annexure A of Secretarial Standard-1 list out the items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting.
A. General Business Items
> 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 and Internal Auditors.
B. Specific Items
> 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 contributions.
> Making calls on shareholders in respect of money unpaid on their shares.
> Approving Remuneration of Managing Director, Whole-time Director and Manager .
> Appointment or Removal of Key Managerial Personnel.
> Appointment of a person as a Managing Director / Manager in more than one company.
> According to 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.
C. Corporate Actions
> Authorise Buy Back of securities
> Issue of securities, including debentures, whether in or outside India.
> Approving amalgamation, merger or reconstruction.
> Diversify the business.
> Takeover another company or acquiring controlling or substantial stake in another company.
D. 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 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 for 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.
Annexure-1: Suggested format of the notice for obtaining approval of Board on resolution through circulation
To,
The members of the Board of Directors
[●] Private Limited
Address: [●]
Subject: Circulation of Draft of the resolution to be passed by circulation
| Date of Circulation | [●] |
| Total No. of items proposed | [●] |
Dear Sir / Madam,
We give below resolutions which are proposed to be passed by circulation pursuant to the provisions contained in Section 175 of the Companies Act, 2013 read with Rules prescribed there under and Articles of Association of the Company and Secretarial Standard – 1.
A note explaining the urgency and necessity for passing the said Resolution by circulation and the supporting papers (if any) are given below. The Board is requested to consider and to pass the following resolution by this circular:
| Item No. | 1 | Subject: [●] |
| Item No. | 2 | Subject: [●] |
Explanatory Note explaining the urgency and necessity for passing the said Resolution by circulation: Subject: [●] (add explanation on each item of business so that directors can understand the urgency of passing the resolution through circulation)
DRAFT OF THE RESOLUTION PROPOSED TO BE PASSED:
Item No. 1: Add here draft of the resolution to be passed
Item No. 2: Add here draft of the resolution to be passed
Note to resolution by circulation
(a) The Companies Act, 2013, read with the Rules prescribed there under and SS-1, allows the company or its authorized person to sent the draft of the Resolution and the necessary papers to the postal address or e-mail address registered by the Director with the company or in the absence of such details or any change thereto, any of the addresses appearing in the Director Identification Number (DIN) registration of the Director.
(b) You can send your acceptance/rejection on the above resolutions – (i) by way of replying to your inbox e-mail received from our side in the format prescribed below; or (ii) by way of sending a Xerox copy of this Circular, expressing your acceptance/rejection in the format prescribed below and signing there against, via hand delivery/post/courier to the registered office of the Company.
(c) You are requested to send your assent/dissent within 7 (seven) days of the date of this circulation.
(d) In case a Director is interested or concerned in the proposed resolution/(s) and such interest or concern is yet to be communicated to the Company, he shall disclose his interest before the last date specified above for response to this circular and abstain from voting.
For this purpose a Director shall be deemed to be interested or concerned in the resolution if contract or arrangement, which is subject matter of the proposed resolution, entered or proposed to be entered into by the Company –
(i) With the Director himself or his relative; or
(ii) with any Body Corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate; or
(iii) with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity.
(e) The circulated resolution/(s) shall be deemed to have been passed by circulation when it is approved by a majority of the Directors, entitled to vote on the resolution.
(f) If the approval of majority of Directors, entitled to vote, is not received by the last date specified for receipt of approval, the resolution shall be considered as not passed.
(g) The circulated resolution/(s), if passed, shall be deemed to have been passed on the last date specified for specifying assent/dissent by the directors or the date on which assent from more than two-thirds of the Directors have been received, whichever is earlier.
(h) The circulated resolution/(s), if passed, shall be effective from date on which the same is/are deemed to have been passed, if no other date is specified in such resolution/(s).
(i) In case a Director does not respond the last date specified for signifying assent or dissent, it shall be presumed that he has abstained from voting.
(j) In case of where not less than one-third of the total number of directors of the company require that any of this resolution under circulation must be decided at duly convened meeting, then such resolution/(s) shall be placed before the next meeting of the Board for their approval.
We will be happy to provide you with any details/information/documents as may be required to provide your acceptance/rejection on the above said circulated resolution/(s).
None of the Directors are deemed to be concerned or interested in the Resolutions.
Yours faithfully,
FOR [●] PRIVATE LIMITED
[●]
(Director) DIN: [●]
E-mail id: [●]
Address: [●]
Annexure-2: Suggested format of letter providing acceptance or rejection of the resolutions to be passed by circulation under section 175 of the Companies Act, 2013
Date: [●]
To,
The Board of Directors,
[●] Private Limited
Subject: Acceptance / rejection of the resolution to be passed by circulation
Reference: Circulation of draft Board Resolution on [●]
Dear Sir,
I hereby convey my assent /dissent to the above resolution/(s) as follows:
Name of the Director: [●]
DIN: [●]
| Item No. |
Assent* | Dissent* | Signature** | Date of Signing | Remarks, if any |
| 1 | Yes | X | [●] | [●] | |
| 2 | Yes | X | [●] | [●] |
*Assent/Dissent may be given by mentioning ‘YES’ in the respective field.
** Signature is not required in case of response through e-mail.
Kindly indicate your response to the aforesaid Resolutions, by appending your signature and the date of signing in the space provided and return one copy to the undersigned or by e-mail so as to reach us on or before [●].
*******
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