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Resolution by Circulation

April 2, 2016     by Kamini Goyal

Section 175 of Companies Act, 2013 and Rule 5 of Companies (Meeting of Board and its Powers) Rules, 2014 provides for passing of Resolution by Circulation.

In case of urgency, it may not be possible to wait for the approval or implementation of an item or proposal till the next meeting of Board or its Committee. In such case, it is permissible to pass a Resolution by Circulation under Section 175 of Companies Act, 2013.

 

S. No Particulars Provisions

1.

 

Circulation Resolution to be circulated in draft with all the necessary papers, if any.

2.

 

Whom to send? To all the Directors or members of the committee, as the case may be.

3.

 

Where to send? At their addresses registered with the Company in India.

4.

 

Mode By hand delivery or by post or by courier or through other E-means [E-mail or fax].

5.

 

Approval Has to be approved by a majority of the directors or members, who are entitled to vote on the resolution.

6.

 

When Resolution is required to be passed at Meeting? Where not less than 1/3rd of the total number of Directors require that RBC must be decided at a Meeting.*

7.

 

Noting at Board Meeting To be noted at the subsequent Meeting of the Board or the committee thereof, and made part of the minutes of such meeting.

 

*At a Meeting includes meeting through Video Conferencing. For more info on Board Meeting through VC, please visit… Board Meeting through Video Conferencing or other Audio Visual Means

 

Matters not to be passed through Circular Resolution: –

Since the Act requires certain matters to be approved only at the Meeting of the Board.

 

 [Section 179(3) and Rule 8 of Companies (Meeting of Board and its Powers) Rules, 2014] Section 179(3) of Companies Act, 2013

  •   To make calls on shareholders in respect of money unpaid on their shares;
  •   To authorize buy-back of securities under section 68;
  •   To issue securities, including debentures, whether in or outside India;
  •   To borrow monies;
  •   To invest the funds of the company;
  •   To grant loans or give guarantee or provide security in respect of loans;
  •   To approve financial statement and the Board Report;
  •   To diversify the business of the company;
  •   To approve amalgamation, merger or reconstruction;
  •   To take over a company or acquire a controlling or substantial stake in another company;
  •   Any other matter as may be prescribed.

Rule 8 of Companies (Meeting of Board and its Powers) Rules, 2014

  •   To make political contribution;
  •   To appoint or remove KMP;
  •   To appoint internal auditors and secretarial auditor.

 

Also, Rule 4 of Companies (Meeting of Board and its Powers), 2014 provides for the certain matters not to be dealt through video conferencing or other audio visual means. For more info on Board Meeting through VC, please visit… Board Meeting through Video Conferencing or other Audio Visual Means


 

16 thoughts on “Resolution by Circulation

  1. Can we use the Board Resolution by Circulation to get A Director included as authorized signatory in the Bank Account. The existing Director is siphoning off the company funds

    1. Yes, a resolution can be passed by circulation to appoint a Director as Authorized Signatory in the Bank Account. There is no such restriction in the SS-1(Illustrative list of items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting) but there is no restriction on the Director for voting in Resolution by circulation. Also, in case if the existing director is siphoning of the Company’s funds, then he can be removed from the directorship of the company by the shareholders by complying with section 169 of the Act and can prosecuted by the company under relevant laws of the country.

  2. Can we appoint Independent Director through Circular Resolution and the Notice of AGM can be approved by Circular Resolution

    1. In the Act, some agenda/business can be approved by the Board and some agenda is approved by the members (the board proposes and members approve the agenda).

      Section 179 read with Secretarial Standard 1 (SS-1) provides the agenda items to be approved by the board which shall not be approved by circular resolution.

      The Notice of the AGM can be approved by the circular resolution as the Financials and annexures thereto to be sent to the members along with the notice has already been approved by the Board at a meeting would not required detailed documents for decision.

      With regard to appointment of Independent Director, this agenda requires shareholder approval and therefore it is not mentioned in the prohibition list as stated in SS-1.

      The board proposes the appointment of Independent Director to the Members.

      Independent Director appointment would need the requisite qualification and experience and discussion on length which would be properly done at a meeting.

      Though, provisions does not prohibited to do this by circular resolution, it is advisable to do a meeting.

    1. In accordance to Section 179 (3) of Companies Act 2013, there are certain matter that require the approval only at the Board and hence cannot be dealt through RBC. This include issuing securities and hence you cannot issue securities on right basis by RBC.

  3. Whether in a Private Company, re-appointment of Managing Director whose tenure is getting completed can be re-appointed by passing Circular resolution and the remuneration be approved in next Board Meeting.

    1. After studying section 196 and 203 of companies act 2013 in detail, it can be construed that every appointment includes reappointment and as per Section 179 (3) read with rule 8, Appointment, Removal, Remuneration of Directors and Key Managerial Personnel cannot be done through a resolution by circulation.

      1. Sec 179 or Rule 8 does not say anything about the resignation of KMP or Director. It specifies “removal” which is not the same as resignation.

        1. Agreed to your point, the mentioned Rule specifies Removal and resignation and removal of KMP are governed by different sections.
          The answer to the above query has been amended as such.

  4. Issue of securities is prohibited under Section 175 of Companies Act. However could you please guide on whether following could be passed by circular resolution:
    1)Allotment of securrities
    2) Issue of share certificates

    Thanks

    1. Section 179(3) of Companies Act 2013, there are certain matters that are required to be dealt at the board meeting which includes “issuance of securities” i.e. Offer of securities. However, the allotment of securities and issuance of share certificate can be dealt through RBC.

  5. Sir, Can Private company appoint Whole time company secretary through circular resolution (paid up capital 20 cr.) and same company can appoint new Auditor in case of casual vacancy (due to resignation) through circular resolution.

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