Resolution by Circular Companies Act 2013 Section 175

No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless –

the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or members of the committee, as the case may be, at their addresses registered with the company in India by hand delivery or by post or by courier, or through such electronic meansas may be prescribed, and

has been approved by a majority of the directors or members, who are entitled to vote on the resolution

Provided that, where not less than one-third of the total number of directors of the company for the time being require that any 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 under sub-section (1) shall be noted at a subsequent meeting of the Board or the committee thereof, as the case may be, and made part of the minutes of such meeting.

Companies (Meetings of Board and its Powers) Rules, 2014

Rule 5

A resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include E-mail or fax.

Secretarial Standards

Passing of Resolution by Circular

The Act requires certain business to be approved only at Meetings of the Board. However, other business that requires urgent decisions can be approved by means of Resolutions passed by circulation.

Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority

Authority

The Chairman of the Board or in his absence, the Managing Director or in his absence, the Whole time Director and where there is none, any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation.

Illustrative list of items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting

General Business Items

• Noting Minutes of Meetings of Audit Committee and other Committees.
• Approving financial statements and the Boards 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.

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 sanction for related party transactions which are not in the ordinary course of business or which are not on arms 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.

Corporate Actions.

• Authorize 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.

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 for goods sold by the company.
• Any issue, which involves possible public or product liability claims of substantial nature, including any judgment 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.

Procedure

A Resolution proposed to be passed by circulation shall be sent in draft, together with the necessary papers, individually to all the Directors including Interested Directors on the same day.

The draft of the Resolution to be passed and the necessary papers shall be circulated amongst 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.

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.

Approval

The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution, unless not less than one-third of the total number of Directors for the time being require the Resolution under circulation to be decided at a Meeting of the Board.

The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, if no other effective date is specified in such Resolution.

Recording

Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such 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.

Author of this Article is CS Yogesh Gupta & can be reached at [email protected] or 7742681270

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