Passing of resolution by circulation

Passing of resolution by circulation

No resolution by circulation shall be deemed to have been duly passed by the Board, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors at their 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 and has been approved by a majority of the directors who are entitled to vote on the resolution. [Section 175]

If one-third or more of the total number of directors of the company for the time being requires that any resolution under circulation must be decided at a meeting, the chairperson shall put the resolution to be decided at a meeting of the Board. [Proviso to Section 175(1)]

A resolution passed by circulation shall be noted at a subsequent meeting of the Board and made part of the minutes of such meeting.

The following procedure is to be followed for Passing a Board Resolution by Circulation [Section 175 and Rule No. 5 of the Companies (Meetings of Board and its Powers) Rules, 2014] read with SS 1 (Secretarial Standard on meetings of the board of directors) issued by ICSI:-

1. The Chairman of the Board or in his absence, the Managing Director or in his absence, the Wholetime Director and where there is none, any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation. [6.1.1 of SS 1 (Secretarial Standard on meetings of the board of directors)]

2. Prepare the draft of the resolution proposed to be passed by circulation and all other necessary papers. Each business proposed to be passed by way of Resolution by circulation shall carry a serial number and shall be explained by a note setting out the details of the proposal, relevant material facts that 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. 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.The last date given for responding shall not be more than seven days from the date of circulation of the draft resolution. [6.2.3 and 6.3.1 of SS 1 (Secretarial Standard on meetings of the board of directors)]

3. Circulate the draft of the resolution along with the necessary papers, individually, to all the directors including interested directors on the same day for seeking their approval, at their addresses registered with the company in India. Such resolution shall be circulated by hand delivery or by post or by courier, or through electronic means which may include E-mail or fax. [Section 175(1) and Rule 5 of the Companies (Meetings of Board and its Powers) Rules, 2014 and 6.2.1 of SS 1 (Secretarial Standard on meetings of the board of directors)]

4. Directors shall signify their assent or dissent by signing the Resolution to be passed by circulation or by e-mail or any other electronic means. Directors shall append the date on which they have signed the Resolution. In case a Director does not append a date, the date of receipt by the company of the signed Resolution shall be taken as the date of signing. . [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

5. In cases where the interest of a Director is yet to be communicated to the company, the concerned Director shall disclose his interest before the last date specified for the response and abstain from voting. . [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

6. In case the Director does not respond on or before the last date specified for signifying assent or dissent, it shall be presumed that the Director has abstained from voting. . [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

7. The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution. 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. An Interested Director shall not be entitled to vote. If the approval of the majority of Directors entitled to vote is not received by the last date specified for receipt of such approval, the Resolution shall be considered as not passed. . [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

8. In case not less than one-third of the Directors (including Interested Directors) wish the matter to be discussed and decided at a Meeting, each of the concerned Directors shall communicate the same before the last date specified for the response. [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

9. The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, if no other effective date is specified in such Resolution. [6.3.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

10. Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the minutes of such . Minutes shall also record the fact that the Interested Director did not vote on the Resolution. [Section 175(2) and 6.4 of SS 1 (Secretarial Standard on meetings of the board of directors)]

11. Enclose a copy of resolution passed by circulation to the agenda of the ensuing immediately next board meeting mentioning in the notes that the said resolution was approved by so many number of directors and a certain number of directors dissented from it, if any and also that it was passed by majority of directors.

12. Passing of Resolution by circulation shall be considered valid as if it had been passed at a duly convened Meeting of the Board. [6.5 of SS 1 (Secretarial Standard on meetings of the board of directors)]

Notes:

1. 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.[6.2.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

2. Proof of sending and delivery of the draft of the Resolution and the necessary papers shall be maintained by the company.[6.2.2 of SS 1 (Secretarial Standard on meetings of the board of directors)]

3. Each Resolution shall be separately explained and The decision of the Directors shall be sought for each Resolution separately. [6.2.3 of SS 1 (Secretarial Standard on meetings of the board of directors)]

4. Director shall be treated as interested in a contract or arrangement entered or proposed to be entered into by the company:

(a) with the Director himself or his relative; or

(b) 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

(c) with a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity.[6.3.1 of SS 1 (Secretarial Standard on meetings of the board of directors)]

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