Step-by-Step Procedure for Passing Resolution by Circulation

Under the corporate governance framework of the Companies Act, 2013, the Board of Directors is responsible for managing the various affairs of a company. Ordinarily, decisions of the Board are taken at duly convened board meetings. However, the law recognises that certain matters may be urgent, routine or procedural in nature and may not warrant convening a physical or virtual meeting.

To address such types of situations, the Companies Act, 2013 allows the Board to pass resolutions by circulation, enabling valid decision-making without holding a board meeting, subject to strict procedural and statutory safeguards. This mechanism ensures operational efficiency while maintaining transparency, accountability and compliance with governance standards.

This blog explains the meaning, legal framework, restrictions and step-by-step procedure for passing a resolution by circulation.

Meaning of Resolution by Circulation

A resolution by circulation is a resolution passed by the Board of Directors or a committee of the Board without convening a meeting. The draft resolution, together with the necessary explanatory notes and supporting documents, is circulated to all directors or committee members and their assent or dissent is obtained in writing or through electronic means.

The resolution is considered to be passed on the date on which the last approval required to constitute the prescribed majority is received, provided all statutory requirements are fulfilled.

Governing Provisions

The procedure for passing resolutions by circulation is governed by the following provisions: -

• Section 175 of the Companies Act, 2013
• Section 179 and Section 180 of the Companies Act, 2013 (where applicable)
• Rule 5 and Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014
• Secretarial Standard-1 (SS-1) on Meetings of the Board of Directors
• Secretarial Standard-7 (SS-7), where resolutions are passed by committees of the Board

Secretarial Standards are mandatory under Section 118(10) of the Companies Act, 2013 and non-compliance may render the resolution invalid.

Matters That Cannot Be Passed by Circulation

Although Section 175 permits passing resolutions by circulation, certain powers of the Board must be exercised only at duly convened board meetings, as prescribed under Section 179(3) read with Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014.

The following matters cannot be passed by circulation, even with unanimous consent, unless expressly permitted by the Act: -

• Approval of financial statements
• Approval of the Board’s report
• Approval of a prospectus
• Approval of schemes of merger, amalgamation or restructuring
• Appointment or removal of Key Managerial Personnel (KMP)
• Taking note of disclosure of directors’ interest and shareholding
• Borrowing of monies
• Granting loans, giving guarantees or providing security

These matters involve significant policy decisions and require collective deliberation at formal board meetings.

Step-by-Step Procedure for Passing Resolution by Circulation

Step 1: Identification of the Matter

The proposed business should be examined to ensure that it: -

• Falls within the powers of the Board or its committee
• Is not mandatorily required to be decided at a board meeting
• Does not involve complex deliberations or policy decisions

Routine, non-contentious or urgent matters are generally suitable for passing by circulation.

Step 2: Drafting of the Resolution

A clear and precise draft resolution must be prepared, specifying: -

• The subject matter of the proposal
• The statutory or contractual authority being exercised
• Any conditions, limits or approvals required

An explanatory note should accompany the resolution, setting out: -

• Material facts relating to the proposal
• The concern or interest, if any, of any director
• Relevant supporting documents enabling informed decision-making

Step 3: Circulation to All Directors

The draft resolution, explanatory note and supporting papers must be circulated to all directors, including interested directors or to all members of the concerned committee.

Circulation may be affected by: -

• Hand delivery
• Post or courier
• Email or any other recognised electronic means

The documents must be sent to the registered addresses of the directors, whether in India or abroad.

A minimum period of seven days must be provided to each director to respond, unless an urgent matter justifies a shorter period, which should be appropriately recorded.

Step 4: Mode of Approval or Dissent

Directors may signify their assent or dissent by: -

• Written communication
• Electronic communication
• Signing and returning the circulated resolution

Each resolution must be responded to separately. If a director does not respond within the prescribed time, then in that case it shall be presumed that the director has abstained from voting and such non-response shall not be treated as consent.

Step 5: Majority Approval Requirement

A resolution by circulation is deemed to be passed only when it is approved by a majority of the directors entitled to vote.

• Interested directors shall disclose their interest and abstain from voting
• Their assent shall not be counted for determining the majority

If one-third of the total number of directors or two directors, whichever is higher, require that the resolution be decided at a board meeting, the resolution cannot be passed by circulation and must be placed before the Board at a duly convened meeting.

Where the Articles of Association requires a special majority or affirmative vote of any particular director(s), the resolution shall be passed by circulation only if such requirement is fulfilled.

If approval of the requisite majority is not received by the last date specified, the resolution shall be deemed not passed.

Step 6: Date of Passing the Resolution

The resolution is considered to be passed on the date on which the last approval necessary to constitute the required majority is received.

This date is relevant for: -

• Statutory filings
• Implementation of the decision
• Computation of compliance timeline

Step 7: Recording and Noting in Minutes

Every resolution passed by circulation must be: -

• Noted at the next Board meeting, and
• Recorded in the minutes book of the Board or the relevant committee

The minutes must contain: -

• The text of the resolution
• The names of directors who approved or dissented
• The date of passing of the resolution

Applicability to Committees and Private Companies

The procedure for passing resolutions by circulation applies mutatis mutandis to committees of the Board.

Further, no specific exemption is provided to private companies under the Companies Act, 2013. Accordingly, the provisions relating to resolutions by circulation apply equally to private companies.

Role of the Company Secretary

The Company Secretary plays a critical role in ensuring the validity of resolutions passed by circulation by: -

• Verifying the legal permissibility of the matter
• Drafting compliant resolutions and explanatory notes
• Ensuring timely and proper circulation
• Monitoring approvals, dissents and abstentions
• Recording the resolution in statutory registers and minutes

Procedural non-compliance may result in invalidation of the resolution and regulatory consequences.

Advantages of Passing Resolution by Circulation

• Faster decision-making for urgent matters
• Operational flexibility
• Cost and time efficiency
• Convenience for the geographically dispersed directors

Limitations and Cautions

Despite its advantages, resolutions by circulation should be used sparingly because: -

• They limit collective discussion and deliberation
• Complex matters require in-person consideration
• Excessive reliance may weaken board governance
• Strict procedural compliance is essential for the validity

Conclusion

Passing a resolution by circulation is a legally recognised and efficient mechanism under the Companies Act, 2013. However, its validity depends entirely on strict adherence to statutory provisions, Rules and Secretarial Standards. If you are seeking for professional help, do contact to Remind Legal, our experts will help you.

When used judiciously and in compliance, resolutions by circulation strike an effective balance between the operational efficiency and sound corporate governance, ensuring that Board decisions remain lawful, transparent and accountable.