Companies Act, 2013 makes the provision of passing the resolutions by circulation, to transact urgent matters in cases where holding of Board Meeting is not possible. 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.

 

  1. Authority to Circulate resolution 

The Chairman 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.

 

  1. Procedure 

 

  1. Notice of Circular Resolution:

 

  1. 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;
  2. 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.
  3. 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.

 

 

  1. Time period for approval:

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

 

  1. When is the approval deemed to be accorded:

The resolution when signed by majority of Directors/members of 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 board meeting.

 

  1. Treatment of interested Director:

Director who have 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 any body 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.

 

  1. Recording of circular resolution:

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

 

  1. Validity

Passing of 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.

  • List of items of business which shall not be passed by circulation and shall be placed before the Board at its Meeting (SS1)

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

  • Authorise 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.
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