It is not feasible to call Board Meeting when approval of Directors is required on urgent basis. In such cases, resolution is approved by circulation as envisaged under section 175 of the Companies Act, 2013. Before circulating any resolution to be passed by way of circulation, it should be ensured that the resolution wasn’t required to be passed at Board Meeting only.
Further, procedure as specified in Secretarial Standard-1 should mandatorily be followed for passing a resolution by Circulation.
For passing a resolution by Circulation, Draft Resolution along with necessary papers shall be sent to all Directors at address registered with the Company.
The Documents aforesaid shall be sent by way of hand delivery or by post or by courier or e-mail/fax.
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.
Where at least 1/3rd of total Directors require that resolution under circulation must be decided at a meeting, the chairperson shall put the resolution to be decided at a meeting of the Board.
A resolution passed by circulation shall be noted at a subsequent meeting and made part of the minutes of such meeting.
A Resolution may be passed by way of Circulation in respect of a Committee meeting also after complying wiith above mentioned requirements.
Secretarial Standard – 1
Secretarial Standard-1 provides secretarial practice which should be followed for passing of resolution by circulation. Adherence to the standard is mandatory as per section 118(10) of Companies Act, 2013 w.e.f. 01/07/2015. The provisions of the standard are discussed below.
This shall be decided by Chairman of Board, in his absence MD, in his absence WTD and where there is none by any Director (other than interested) before circulating draft resolution whether to take approval for a particular business by way of resolution by circulation.
Draft Resolution along with necessary papers shall be sent to all Directors (including Interested Director) on the same day.
A note shall also be sent setting out details of proposal, its scope, implications and concern or interest of any Director. The Note shall also provide how & last date by which assent or dissent will be signified by a Director.
The documents refered above can be sent by hand delivery/speed post/regd. Post/ courier/e-mail/fax. Proof of sending & Delivery shall be preserved permanently.
Maximum seven days shall be given to a Director from the date of circulation of draft Resolution to respond his assesnt/dissent.
Directors shall signify their assent/dissent by signing the Resolution(date of appending signatures should be mentioned otherwise date of receipt shall be taken as date of signing) or by e-mail/fax.
In case a Director does not respond before last date of responding it shall be presumed that he has abstained from voting.
If 1/3rd of total Directors require that resolution under circulation must be decided at a meeting and they have communicated their intention before last date of responding, the chairperson shall put the resolution to be decided at a meeting of the Board.
The resolution shall be deemed to be passed if approved by majority of the directors entitled to vote on the resolution by signifying their assent before last date of responding.
However, if Articles require special majority or affirmative vote of any particular Director then the Circular resolution shall be deemed to be passed only if such condition is complied with.
Interested Director cannot vote on resolution in which he is interested and has to inform about his interest before last date for responding. As per the standard, definition of interested Director is wider than section 174 read with 184(2) which even includes Director himself, his relative or a firm/entity in which relative is partner/owner/member.
The resolution shall be effective from date specified in such Resolution and if no such date specified then on last date for signifying assent/dissent or date on which at least 2/3rd Director’s assent has been received.
The resolution shall be noted at next Board meeting. The text of the Resolution shall be recoded in minutes of next meeting along with any dissent/ abstention/concern of interested Director.
Matters to be taken at meeting only
There are various matters which need thorough discussions and deliberations to take place before the Directors give their approval for such business and therefore Companies Act, 2013 provides that for certain matters decision shall be taken at a Board meeting only. The items are listed bellow:-
|Section 179(3) and rule 8||Other Sections||ILLUSTRATIVE LIST of SS-1|
|1.||Making of calls||1.||Approving circular inviting Deposits||1.||Noting minutes of Committees|
|2.||Authorising Buy Back|
|3.||Issuing securities||2.||Appointment of MD/WTD||2.
|Payment of compensation for loss of office|
|4.||Borrowing monies||3.||Taking note of disclosure of int. of Director|
|Inter-corporate loan/ guarantee/ security/Inv.||4.
|Items arising out of separate meeting of the Independent Directors|
|6.||Granting loan/ guarantee/ security|
|7.||Taking over a company||5.
|Related party Contract which are not on arm’s length basis||5.
|Compliance Certificate to ensure compliance with all applicable laws|
|9.||Approving amalgmation/ reconstruction||6.||Authorising Dir. to inspect books of subsidiaries||6.||Purchase/Sale of subsidiaries/assets (not in normal course of business)|
|10.||Approving financial statement & Board Report||7.||Filling casual vacancy in Board||7.||Other specific items for a listed Company mentioned in Annexure-A of SS-1|
|11.||Prescribed matters(as per amended rules)|
|a.||Making political contributions|
|b.||Appointing or removing KMP|
|c.||Appointing internal and secretarial auditor|