Participation Through Electronic Mode and Circular Resolutions

Understand Participation Through Electronic Mode and Circular Resolutions

Key rules to remember

Modes of attendance

In person OR video conferencing / other audio-visual means (Section 173(2))

The facility must record and recognise participation and record and store proceedings with date and time.

Quorum with remote directors

Quorum = higher of one-third of total strength or 2 directors; remote directors count (Section 174(1))

Fractions are rounded up to one; total strength excludes vacant places.

Notified matters

Matters notified by Central Government not to be dealt with by video conferencing, unless quorum is physically present (further proviso to Section 173(2))

Then any other director may join remotely.

Passing by circulation

Draft + papers to all directors → approval by a majority of directors entitled to vote (Section 175(1))

Majority is of directors entitled to vote, not of those who reply.

Right to demand a meeting

Directors requiring a meeting ≥ one-third of total number of directors → resolution goes to a Board meeting

The chairperson must then put it to a meeting.

Noting the resolution

Circular resolution noted at a subsequent meeting and made part of its minutes (Section 175(2))

Applies to Board and committee resolutions.

How to solve Participation Through Electronic Mode and Circular Resolutions questions

1. 1Identify whether the matter is decided at a meeting or by circulation.
2. 2If remote attendance is involved, check the facility records and recognises participants and stores proceedings with date and time.
3. 3Check whether the matter is one notified as not to be dealt with by video conferencing. If so, test whether quorum is physically present.
4. 4Compute quorum: higher of one-third of total strength (rounded up, vacancies excluded) or two. Count remote directors.
5. 5For circulation, check: draft and papers sent to all directors, at registered addresses, by a permitted mode.
6. 6Count approvals against a majority of directors entitled to vote. Check whether one-third have demanded a meeting.
7. 7Check the resolution is noted at the next meeting and recorded in the minutes.
8. 8State the conclusion in one line: valid or not valid, with the section.

Quickest way: Three-check test

Common mistakes in Participation Through Electronic Mode and Circular Resolutions

• Saying a circular resolution needs a majority of directors who responded.

  Students think of ordinary meeting voting.

  Fix: Section 175 requires approval by a majority of the directors entitled to vote on the resolution.

• Treating a circular resolution as valid even when one-third of directors want a meeting.

  The proviso is overlooked.

  Fix: If not less than one-third of the total number of directors require it, the chairperson must put the resolution to a Board meeting.

• Saying remote directors do not count for quorum.

  Confusing attendance with physical presence.

  Fix: Section 174(1) counts participation by video conferencing or audio-visual means for quorum.

• Saying notified matters can never involve a remote director.

  Reading only the first proviso.

  Fix: The further proviso lets other directors join remotely if quorum is present through physical presence.

• Forgetting to note the circular resolution at the next meeting.

  Students think no meeting means no minutes.

  Fix: Section 175(2) requires it to be noted at a subsequent meeting and made part of the minutes.

• Sending the draft to only some directors, or without papers.

  Treating circulation as informal.

  Fix: The draft with necessary papers must go to all directors at their registered addresses in India.

Worked examples