Resolution by Circulation: Compilation of

Companies Act, 2013 & Secretarial

Standards
Company is an artificial person created by law, with a distinctive name, a common seal and
perpetual succession of members. It can sue and be sued in its own name. The shareholders
are the owners of the company and give the right to the directors to manage the affairs of the
company. Hence, any decision in the company has to be taken by the Board of Directors after
passing a resolution.

Resolution is of two types:

 Unanimous Board Resolution
 Board Resolution

The word ‘Resolution’ as per the Oxford Dictionary means a formal expression of opinion or
intention agreed on by a legislative body or other formal meeting, typically after taking a vote.
From the company’s viewpoint, resolution has to be passed by the Board of Directors for taking
certain decisions in the Board Meeting or the Committee Meeting.

Some decisions which arise due to unavoidable circumstances and are of urgent nature for
which convening a Board Meeting is not impossible, resolution by circulation then comes into
picture. Section 175 of Companies Act, 2013, Rule 5 of The Companies (Meetings of Board
and its Powers)Rules, 2014 and Para 6 of SS-1 (Secretarial Standard on Meetings of the
Board of Directors) prescribes the passing of resolution by circulation. Secretarial Standards-1
has been approved by the Central Government under section 118(10) and companies
mandatorily have to follow them.
There are number of matters which cannot be passed through Resolution by Circulation and
can only be discussed in the duly convened Board Meeting. Section 179 of the Companies
Act, 2013 confers on the Board of Directors following powers which will be passed in the duly
convened Board Meeting through Board Resolution:
1. to make calls on shareholders in respect of money unpaid on their shares;
2. to authorize buy-back of securities under section 68;
3. to issue securities, including debentures, whether in or outside India;
4. to borrow monies;
5. to invest the funds of the company;
 6. to grant loans or give guarantee or provide security in respect of loans;
7. to approve financial statement and the Board’s report;
8. to diversify the business of the company;
9. to approve amalgamation, merger or reconstruction;
10. to take over a company or acquire a controlling or substantial stake in another company;
11. any other matter which may be prescribed:
 to make political contributions;
 to appoint or remove key managerial personnel (KMP);
 to appoint internal auditors and secretarial auditor.

The Secretarial Standards also add certain 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 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.

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.
• In case of a public company, the appointment of Director(s) in casual vacancy subject to the
provisions in the Articles of the company.
• According sanction for related party transactions which are not in the ordinary course of
business or which are not on arm’s length basis.
• Sale of subsidiaries.
• Purchase and Sale of material tangible/intangible assets not in the ordinary 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 Key Managerial Personnel.
• 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 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.

When the particular business is decided whether it can be passed by circulation or not, then we
can proceed with the further steps that has to be taken in passing the resolution. Steps for
passing of resolution by circulation in conformity with the law have been illustrated:
 The Chairman of the Board or in his absence, the Managing Director or in their absence,
any Director other than an Interested Director, shall decide, whether the approval for a
particular business shall be obtained by means of a resolution by circulation.
 If at least 1/3rd of the directors require that such resolution must be decided at a meeting
not by circulation, the Chairperson shall put the resolution to be considered at the
meeting of the Board.
Note: Interested Directors shall not be excluded for the purpose of determining the
above.
 Resolution by circulation can be passed by the Board or Committee and each Resolution
should be separately explained.
 Resolution proposed to be passed by Circulation shall be sent in draft together with
necessary papers to all the directors of Board/ members of committee, even if some of
them are not entitled to vote.
 Resolution shall be sent at the postal or e-mail addresses registered with the company
by hand delivery or by registered post or by courier, or by any other electronic means. In
case of absence of details or any change in address, the information as mentioned in the
Director’s Identification Number should be used.
 A maximum of seven days from the date of receipt of draft of the resolution may be
given to the Directors to respond and last date should be computed accordingly.
 If any special majority or the affirmative vote of any particular Director or Directors is
specified in the Articles, the resolution should be passed only with the assent of such
special majority or such affirmative vote.
 The resolution 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 responses from all the
Directors have been received, whichever is earlier.
 It shall be effective from the date on which it is specified to be assented or dissented, if
no other effective date is specified in such Resolution.
 Resolution shall be considered as approval only after acceptance of resolution by
majority of directors.
 If the approval of the majority of Directors entitled to vote is not received by the last date
specified for receipt of such approval, the resolution shall be considered not passed.
 The resolution passed by circulation is considered to be valid as if it was passed in the
duly convened Board Meeting.
 The resolution passed should be minuted in the next Board or Committee meeting.
 Minutes should also record the fact that the Interested Director did not vote on the
resolution.