Passing of Board resolution through circulation

Due to pandemic situation the companies are not able to hold the board meetings and few decisions
of the board are so urgent that the same need to be considered urgently. The companies may also
hold the Board meetings through video conferencing, however, in case of urgency, the board
resolutions can be passed by way of resolution by circulation.

This note is an attempt to explain the necessary provisions of the Companies Act in relation to the
passing of board resolution through circulation.

List of matters which cannot be passed through a resolution by circulation

1. List of powers as per Section 179(3) read with Rule 8 of Companies (Meeting of Board & its
Power) Rules, 2014

1. to make calls on shareholders in respect of money unpaid on their shares;

2. to authorise 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 i.e. items prescribed in Rule 8 of
Companies (Meeting of Board & its Powers) Rules, 2014, which are as follows:
(i) to make political contributions;
(ii) to appoint or remove key managerial personnel (KMP);
(iii) to appoint internal auditors and secretarial auditor.

2. The Secretarial Standards (SS1) as prescribed by the Institute of Company Secretaries of

India provides for illustrative list of items of business which shall not be passed by
circulation and shall be placed before the Board at its Meeting (SS1-1.3.8)
I. General Business Items

 Noting minutes of meetings of audit committee and other committees.

 Considering the compliance certificate to ensure compliance with the provisions of all the
laws applicable on the company.
 Specifying the list of laws applicable specifically to the company.
 Approving financial statements and the board’s report. (Section 179)
 Appointment of secretarial auditors and internal auditors.

II. Specific Items

 Borrowing money otherwise than by issue of debentures.

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 Passing of Board resolution through circulation

 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 the managing director, whole-time director and manager
 Appointment or removal of KMP.
 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.
 Approving payment to the director for loss of office.
 Items arising out of separate meeting of the independent directors, if so decided by the
independent directors.

Accordingly, if the item to be decided urgently is not enlisted above, the same can be passed
through circulation by following the below mentioned procedure.

Section 175 (1) of the Companies Act, 2013 states the following provisions;

o The resolution has to be circulated in draft, together with the necessary papers, if any,
o The resolution has to be circulated to all the directors, or members of the committee, as the
case may be,
o The resolution has to be circulated at Directors’ addresses registered with the company in
India by hand delivery or by post or by courier, or through such electronic means as may be
prescribed
o The resolution has to be approved by a majority of the directors or members, who are entitled
to vote on the resolution
Restriction
If 1/3rd (one-third) of the total number of directors (or not less than 1/3 rd of the total number of
directors) of the company for the time being feel that or require that any such resolution under
circulation must be decided at a meeting, the said resolution shall be required to be considered only
at the duly convened Board meeting

Process of confirmation of passing of resolution

Provisions of Table F to the Companies Act, 2013 (in case of company limited by shares), provides
that a resolution in writing, signed by all the members of the Board, or of a committee thereof, for
the time being entitled to receive Notice of the Board, or committee shall be valid or effective, as if it
had been passed at the Meeting of the Board or committee duly convened or held.

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 Passing of Board resolution through circulation

As per this provision, where the resolution is signed by all the directors of the Board, the same can
be treated to be passed at the Board Meeting.

Rule 5 of the Companies (Meeting of the Board and Its Powers) Rules, 2014 provides that, 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.

Noting of Passed Resolution at the consequent Board meeting

Where the resolution by circulation is passed by majority it is required to be noted in the subsequent
meeting of the Board or the committee thereof, as the case may be, and made part of the minutes
of such meeting (sec 175 (2)).

Provisions of the Secretarial Standard (SS1)

1 Authority for circular resolution (6.1.)

Any one of the following can decide whether the item to be discussed through a
resolution by circulation.

 The Chairman of the Board or in his absence,

 the Managing Director or in his absence,
 any Director other than an Interested Director,
2 Requirement of majority of 1/3rd of directors for circulation of a resolution (6.1.2)

In case the 1/3rd (i.e. not less than one-third) of the total number of Directors for the
time being require that the resolution under circulation should be decided at a Board
Meeting, then the Chairman shall put the resolution for consideration at a meeting of
the Board, instead of circulation of the same.

Calculation of the 1/3rd Number:

While calculating such 1/3rd number, the interested directors shall not be excluded for
the purpose of determining the total number of directors.

3 Procedure (6.2)

(i) 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.

(ii) 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.

(iii) The draft of the resolution and the necessary papers shall be sent 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.

(iv) Proof of sending and delivery of the draft of the resolution and the necessary

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 Passing of Board resolution through circulation

papers shall be maintained by the company for such period as decided by the
Board, which shall not be less than three years from the date of the meeting.

(v) 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 will 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.

(vi) 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.

(vii) Each resolution shall be separately explained.

(viii) The decision of the Directors shall be sought for each resolution separately.

(ix) Not more than (7) seven days from the date of circulation of the draft of the
resolution shall be given to the Directors to respond and the last date shall be
computed accordingly.

(x) An additional two days shall be added for the service of the draft resolution, in
case the same has been sent by the company by speed post or by registered post
or by courier.

4 Recording (6.4)

Resolutions passed by circulation shall be noted at the subsequent meeting of the Board
and the text thereof with dissent or abstention, if any, shall be recorded in the minutes
of such meeting

5 Validity (6.5)

Passing of resolution by circulation shall be considered valid as if it had been passed at a

duly convened meeting of the Board.

This shall not dispense with the requirement for the Board to meet at the specified
frequency.

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