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Resolution by circulation

charulata kabra (company secretary) (32 Points)

22 March 2010

Dear All,

Pls provide me the procedure/resoluiton for appointing an Additional Director by Circulation in a public ltd company

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2 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 22 March 2010

Passing of Board resolution by circulation under Section 289 of the Companies Act, 1956.

In the absence of any provision in the Act or the Company’s articles of association, requiring that the exercise of a particular power of the directors should be only at Board Meeting, there is no reason why they cannot exercise the same by passing resolution by circulation.

Further, the section enables any director to propose any resolution (other than those required to be passed only at Board Meeting) and have it passed by circulation, and thus discharge his responsibilities effectively under the Act.

The passing of resolution by circulation does not, however, dispense with the need for holding a meeting once at least in three months, as required by section 285.

Pasting of resolution passed by circulation in minute book

Where a resolution is passed by circulation the proper course will be for the resolution to be pasted in the minute book and minute also placed at the next meeting of the Board recording the fact of the resolution having been passed by circulation. Or, the minute recording it may itself copy or reproduce the whole of the circular resolution or a separate book may be maintained for recording resolutions passed by circulation. Whatever may be the mode of recording any such resolution, it should find a place in the minutes of the next Board Meeting, in order to ensure its authenticity.

Matters which require sanction at Board Meetings, and not by circulation

There are certain matters in reference to which the provisions of the act would require a resolution at an actual Board Meeting and not one by circulation. They are as follows:

S. No.	Provision/Section	Matter
1.	Section-262	Filling a casual vacancy in the Board
2.	Section-292	The power to: (i) make calls on shareholders; (ii) issue debentures; (iii) borrow moneys otherwise than on debentures; (iv) invest the company’s funds; (v) make loans;
3.	Section-297	Board’s sanction for certain contracts in which particular directors are interested;
4.	Section-299	Disclosure to the Board of a director’s interest in a transaction of the company;
5.	Section-308	Disclosure to the Board of a director’s shareholding
6.	Section-316 & 386	Approval to the appointment of a person as Managing Director or manager in more than one company;
7.	Section-372A	Sanction for inter-corporate loan, investment or giving of guarantees or providing security.

Regulation-81of table A is the Model Regulation pertaining to this section in the Article of Association.

Text of Regulation-81of table A: Save as otherwise expressly provided in the Act, a resolution in writing, signed by all the members of the Board or a committee thereof, for the time being entitled to receive notice of a meeting of the Board or committee, shall be as valid and effectual as if it had been passed at a meeting of the Board or committee, duly convened and held.

Is circulation resolution required to be confirmed in the next Board Meeting

There is no specific provision in the Act which requires that circulation resolution should be confirmed / recorded by the board at the next Board Meeting. However as a good secretarial practice, the resolutions of directors passed by circulation should be recorded at the next board meeting to ensure their authenticity.

Also the Secretarial Standard on Board Meeting (SS-1) issued by ICSI states that circular resolution should be placed before the next Board Meeting for noting and should be reproduced as part of minutes of that meeting.

While recording the minutes of the Board Meeting, it must be ensured that the whole of the resolution passed by circulation finds place in the minutes of the Board meeting.

Circular Resolution

Board Resolution (to be circulated to all directors)

Mr……………

……………………….

(Address in India only) Dated………….

Dear Sir,

It is proposed to……………..(here mention the purpose). This cannot wait till the next meeting of the Board of Directors. Accordingly I am sending herewith the following resolution, in duplicate, which is intended to be passed as a resolution by circulation as provided in section 289 of the Companies Act, 1956 for your kind consideration.

“RESOLVED THAT……………………………….”

(Set out the resolution intended to be passed)

For/Against

(Please tick)

…………………..

Signature

You are requested to return the duly signed duplicate copy of the same after indicating your assent or dissent to the proposal under your signatures at the registered office of the company at your early convenience.

Yours faithfully,

For…………Limited

To conclude we may say that a resolution passed by circulation does not, however, dispense with the need for holding a meeting once at least in three months, as is required under Section 285.

----------------JJJJJJJJJ-------------------

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 22 March 2010

Appointment of Additional Director:

“RESOLVED THAT pursuant to Section 260 of the Companies Act, 1956 and Article No.______ of the Articles of Association of the Company, Mr. Rajesh Gupta be and is hereby appointed as Additional Director of the Company.

RESOLVED FURTHER that any director of the Company be and is hereby authorized to file the return of appointment pursuant to section 303 of the Companies Act, 1956 with the Registrar of Companies concerned in the prescribed form.”