The Companies Act, 2013 makes the provision of Passing the resolution by circulation, to transact urgent matters in cases where the holding of Board Meeting is not possible on an immediate basis or due to non-availability of Directors.

As per Section 175 of Companies, Act 2013 read with Rule 5 of Companies (Meetings of Board and its Powers) Rules, 2014 the Board of directors may approve/reject the resolution circulated to them, by email or in writing.

Authority to Circulate resolution 

The Chairman/Chairperson of the Board or the Managing Director or any Director other than an Interested Director, shall decide whether the approval of the Board for particular resolution be obtained through a Resolution by circulation.

Procedure

Notice of Passing the resolution by circulation:  

• The Draft resolution, Circular Notice along with necessary documents should be shared among the board of directors or members of the committee to accord their assent or dissent;
• The notice should explain each resolution by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope, and consequences of the proposal, the nature of interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed.
• The Notice, draft resolution, and other necessary documents shall be sent through:
  • By hand delivery,
  • By speed post, registered post, or Courier,
  • Through electronic means like email or fax.

An additional two (02) days shall be given 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.

The time period for approval:

The director/members of the committee are required to return the same to the company not more than seven (07) days from the date of circulation of notice. Maximum seven (7) days shall be given to respond and the last date shall be computed accordingly.

When is the approval deemed to be accorded:

The resolution when signed by a majority of Directors/members of the committee entitled to vote on the Resolution, will be deemed to be approved and will be operational with immediate effect. The resolution may be transacted at a board meeting if not less than one-third of the total number of Directors of the Company requested to call a board meeting.

Treatment of interested Director:

Directors who have a particular interest in the transaction shall not be entitled to vote. For this purpose, a Director shall be treated as interested in a contract or arrangement entered or proposed to be entered into by the company:

• with anybody corporate, if such Director, along with other Directors holds more than two percent of the paid-up share capital of that body corporate, or he is a promoter, or manager or chief executive officer of that body corporate; or
• with a firm or other entity, if such Director is a partner, owner, or Member, as the case may be, of that firm or other entity.

Recording of circular resolution:

The circular resolution shall be serial number and resolution passed by circulation will note at a subsequent meeting of board or committees and made part of the minutes of such meeting.

Validity

Passing the resolution by circulation shall be considered valid as if it had been passed at a duly convened Meeting of the Board. Consent may be executed in one or more counterparts and by each director on a separate counterpart, each of which shall be deemed to be an original and all of which taken together shall be deemed to constitute a single document. If any special majority or the affirmative vote of any particular Director or Directors is specified in the Articles, the Resolution shall be passed only with the assent of such special majority or such affirmative vote.