Section 111 Of Companies Act 2013: Circulation Of Members' Resolution
Updated: Oct 7, 2022
Circulation of members' resolutions generally indicates the resolution authorized by the circulation among the members of the board of directors. The resolutions were often passed under the state of urgency or to avoid the requirement of assembling the physical board meeting.
Alternatively, the board members can play the same role in this regard. Those members who have a right to call an AGM can intervene in a company’s matters and send the notice before the 6 weeks or 14 days of AGM, depending on the type of resolution they want to propose. Once the company gets familiar with its members, a resolution must be circulated among all the members in the form of a draft.
Circulation of Members' Resolution
Generally, Directors and company board executives prepare a meeting agenda. The agenda was further compiled and adjusted in the form of a framework that needed to be submitted to all relevant board members. The member, himself, has a small role to play in this. However, some provisions under the Companies Act allow members to present proposals at a meeting and to inform other officials of the commencement of the meeting.
If members possess one-twentieth of all board members’ total voting rights, they have the right to cast a vote or if 100 members have held paid-up capital of Rs1,00,000 or more, the company must:
1. Sent a notice to all members of the next annual general meeting.
2. Give notice of general meeting between members, no more than 1000 names indicating matters relating to proposed decisions to be discussed at that annual meeting.
Some obligations need to be complied with after the company has been registered by the company (according to the companies act, 2013) regarding the dissemination of members' decisions. For example, dealing with board members and senior officials before making an important decision. As such, board members have the same responsibility to be part of this process and must adhere to the provisions to avoid any kind of dissolution.
Authority Engaged in the Circulation of a Member Resolution
The chairman or in his absence, the top official of the company, is entitled to take decisive action whether the aid of resolution by circulation will obtain the approval of the board regarding the specific business.
Records Maintaining related to circular of a member resolution
The company is liable to maintain the draft and its associate documents for at least three years from the meeting date.
Notice and agenda don’t play a crucial role in the context of resolution by circulation. However, necessary papers could send along with the draft provided they explain the purpose of the notice in brief. It would be advisable to provide a brief explanation of why approval is sought by circulation.
Time of response
A time frame of 7 days shall be given to the directors once the draft delivers to them. Based on urgency or necessity, the organization may permit directors to react in this time frame.
No resolution shall be assumed authorized by a committee unless the resolution is circulated in the form of a draft along with vital documents. The circulation shall be shared among the directors at their registered address via courier or typical post services. The electronic medium can also be used for this purpose. The time frame also plays a crucial role in the approval of the resolution. If the approval process fails to complete before the due date, it will be considered of no value. Having said that, a minimum of one-third of directors is required for the approval process at a meeting. The resolution under circulation should be decided under the guidance of a chairperson along with board members. “Total number of Directors” is equivalent to the “total strength of the Board”, which excludes Directors with a place that needs to be filled.
Keys Provisions of Circular of a Member Resolution
· No organization can take advantage of Circular Resolution to secretly dissolve the holding of the Minimum Number of Board Meetings.
· Resolutions and items of business cannot be a part of the circular resolution. According to Section 111 of the Companies act 2013, such items of business can only pass at a duly convened Board Meeting.
· The Board or Committee can pass the circular resolution
· The resolution shall be considered as approval only after acceptance of resolution by the Majority of Directors and resolutions passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority.
· The draft resolution must be sent with necessary papers to all the Board/ members of the committee, even if some of them don’t hold the power of voting.
· A Serial No. must be given to Circular Resolution so that tracking becomes easier in the future.
· If 1/3rd of Directors decided that the resolution cannot be passed a by circulation, the Chairperson should forward the resolution to the AGM.
Necessary Papers for circular of a member resolution
Each business to be passed via resolution by circulation shall be explained by documents implicating:
· A brief explanation of the proposal.
· Relevant material facts letting Directors get through the meaning, implications, and scope of the proposal
· The nature of concern of any Director in the proposal
· The note shall also instruct the Directors on how to react to the resolutions and the date of validation.
Section 111 of the Companies Act, 2013
[Circulation of Members' Resolution]
Section 111 - (1) A company shall, on the requisition in writing of such number of members, as required in section 100,—
(a) give notice to members of any resolution which may properly be moved and is intended to be moved at a meeting; and
(b) circulate to members any statement concerning the matters referred to in the proposed resolution or business to be dealt with at that meeting.
(2) A company shall not be bound under this section to give notice of any resolution or to circulate any statement unless—
(a) a copy of the requisition signed by the requisitionists (or two or more copies which, between them, contain the signatures of all the requisitionists) is deposited at the registered office of the company,—
(i) in the case of a requisition requiring notice of a resolution, not less than six weeks before the meeting;
(ii) in the case of any other requisition, not less than two weeks before the meeting; and
(b) there is deposited or tendered with the requisition, a sum reasonably sufficient to meet the company’s expenses in giving effect thereto:
Provided that if, after a copy of a requisition requiring notice of a resolution has been deposited at the registered office of the company, an annual general meeting is called on a date within six weeks after the copy has been deposited, the copy, although not deposited within the time required by this subsection, shall be deemed to have been properly deposited for the purposes thereof.
(3) The company shall not be bound to circulate any statement as required by clause (b) of sub-section (1), if on the application either of the company or of any other person who claims to be aggrieved, the Central Government, by order, declares that the rights conferred by this section are being abused to secure needless publicity for the defamatory matter.
(4) An order made under sub-section (3) may also direct that the cost incurred by the company by this section shall be paid to the company by the requisitionists, notwithstanding that they are not parties to the application.
(5) If any default is made in complying with the provisions of this section, the company and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees.