Circular Resolution – Understanding Meaning, Process Structure

Quick Summary

A circular resolution is a mechanism that allows a company’s board of directors or its committees to make decisions without convening a formal meeting. As outlined in Section 175 of the Companies Act, 2013, this process involves circulating the draft resolution to each director or committee member via hand delivery, post, courier, or electronic means. The resolution is deemed approved when a majority of entitled members provide their consent. However, if at least one-third of the total directors request deliberation in a formal meeting, the resolution must be addressed accordingly. Certain critical matters, such as issuing securities, borrowing funds, or approving financial statements, are excluded from this process and require formal board meetings. Implementing circular resolutions can enhance decision-making efficiency, but it’s essential to recognize their limitations and ensure compliance with statutory requirements.