In the modern corporate landscape, timely decision-making is often essential to maintain business continuity. However, convening a full board meeting for every operational decision is not always practical. Recognizing this, the Companies Act, 2013 provides a mechanism for boards to take decisions through resolutions passed by circulation, enabling directors to express assent or dissent without physically meeting.
This mechanism strikes a balance between efficiency and governance — allowing urgent matters to be approved lawfully while maintaining transparency and accountability. However, it is an exception, not an alternative to board deliberation, and must be exercised within the strict boundaries of law and secretarial standards.
Legal Framework
Section 175 — Passing of Resolutions by Circulation
Under Section 175(1) of the Companies Act, 2013, the Board of Directors may pass a resolution by circulation instead of holding a meeting, provided that the draft resolution, along with necessary papers and an explanatory note setting out material facts, is circulated to all directors at their registered email addresses or by other approved electronic means.
A resolution is considered valid if a majority of directors entitled to vote signify their approval. However, if one-third of the directors request that a particular matter be discussed in a meeting, the resolution must be placed before the Board Meeting instead.
Every resolution passed by circulation must be placed before the next Board Meeting and recorded in its minutes, ensuring transparency and collective acknowledgment of the decision.
Matters Excluded from Circulation
Certain matters cannot be passed by circulation.
Under Section 179(3) of the Companies Act, 2013 read with Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014, specific powers such as approving financial statements, borrowing, investing funds, or making calls on shares require approval only at duly convened Board Meetings.
In addition, Annexure A to Secretarial Standard–1 (SS–1) lists matters that must be decided in meetings and not through circulation, such as:
Noting minutes of committees
Appointment/removal of key managerial personnel
Approval of annual operating plans and budgets
Appointment of internal, secretarial, or cost auditors
Secretarial Standard–1 (SS–1) — Procedural Guidance
SS–1, issued by the Institute of Company Secretaries of India (ICSI), prescribes a structured procedure for passing resolutions by circulation, ensuring uniformity and governance discipline. It requires that:
The draft resolution and notes be circulated to all directors, including interested directors, at their registered email IDs.
A response period of at least seven days be provided unless urgent circumstances justify a shorter period.
The Company Secretary or a Director must maintain proof of dispatch and receipt of responses.
All resolutions passed by circulation must be noted at the next Board Meeting and recorded in the minutes.
Practical Insights and Scenarios
1. Timing of Circulation
Resolutions circulated after the previous Board Meeting and before notice of the next meeting must be noted in the upcoming meeting.
If an issue arises after the notice for the next meeting is sent, it should ideally be taken up as “Any Other Matter with the Permission of the Chair”, rather than through circulation.
2. Demand for Board Discussion
If one-third of the directors demand that a matter be placed before the Board, the company must hold a meeting (physical or virtual). The circular process automatically lapses in such cases.
3. Role of Interested Directors
An interested director is not entitled to vote on a circular resolution. However, private companies are exempt from this restriction under the relevant notifications, allowing their interested directors to vote unless the Articles provide otherwise.
4. Expiry of Response Time
If the stipulated response period expires without sufficient replies, the resolution is deemed passed on the date when majority assent is received or on the last date for response, whichever is earlier.
5. Step-by-Step Procedure
The Company Secretary or a Director drafts the resolution and explanatory note.
The draft is circulated electronically to all directors.
Directors are given at least seven days to respond.
Upon receiving the majority assent, the resolution is considered passed.
The resolution is entered into the Register of Circular Resolutions.
It is placed before the next Board Meeting for noting and inclusion in the minutes.
Key Compliance Points
Resolutions by circulation require a simple majority of directors entitled to vote.
One-third of directors can demand a meeting instead.
Maintain proof of circulation, responses, and voting for records.
Must not cover matters under Section 179(3) or Annexure A of SS–1.
Must be numbered, dated, and recorded systematically.
Interested directors cannot vote (except in private companies).
Date of passing = majority assent date or response deadline, whichever earlier.
Conclusion
Resolutions passed by circulation are an effective governance mechanism for addressing routine or time-sensitive matters without delay. However, their use should remain exceptional, guided by prudence and regulatory discipline.
The Company Secretary plays a pivotal role in ensuring compliance with Section 175, Section 179(3), and Secretarial Standard–1, safeguarding both procedural integrity and board accountability.
Ultimately, good governance is not about speed, but about transparency, documentation, and collective responsibility.
Disclaimer
This article provides a general overview of the legal framework and procedure for passing resolutions by circulation under the Companies Act, 2013 and SS–1. It is restricted in scope and may omit certain specific or exceptional elements applicable in practice. Professionals are advised to refer to the latest statutory provisions, circulars, and secretarial standards for detailed compliance.