Issues to consider in the use of
circular resolutions
Management and oversight
Circular resolutions are a mechanism that allows
directors of a company to pass a resolution without
a meeting of directors. They are commonly used for
non-contentious and routine resolutions that need to
be passed between board meetings. They should not be
used for resolutions that require extensive presentations
by management or discussion among directors.
Legal context
Under s 248A of the Corporations Act, which is a
replaceable rule (see s 135), the directors of a company
may pass a resolution without a directors’ meeting being
held if all the directors entitled to vote on the resolution
sign a document containing a statement that they are in
favour of the resolution. The resolution is passed on the
date when the last director signs the document.
Many companies displace or modify s 248A with
specific provisions in their constitutions with respect
to circular resolutions. The use of circular resolutions
may also be affected by shareholders’ agreements
and similar documents. An entity not governed by the
Corporations Act will need to refer to any authority
granted to it under any applicable legislation and/or
their own constitutional documents.
It is good governance therefore for circular resolutions
to be used sparingly. They should be limited to use
for procedural matters or recurring, non-controversial
matters (for example, administrative matters where a
decision is required on a monthly basis, but the board
does not meet monthly) or for matters that have had
prior board discussions in meetings, do not require
further discussion by directors and which cannot be
deferred to the next meeting.
A directors’ meeting should be convened, either in
person or by teleconference, for any urgent matter that
arises between board meetings that requires discussion
and the exercise of judgment in order to make a
decision. Circular resolutions should not be used for
dealing with urgent and controversial matters that arise
of which the directors are previously unaware.
It is good governance for directors to have a protocol
or understanding in place specifying the types of
decisions that can be put to the board for a decision by
circular resolution.
An overuse of circular resolutions can point to poor
governance, as it can:
Use of circular resolutions
• suggest poor controls and lack of organisation, if
urgent and unexpected matters frequently arise
Decisions of the board are ordinarily made by
resolutions passed by a majority of the votes cast by
directors present at a meeting of the board. Board
minutes record the passing of resolutions.
• confirm insufficient attention to planning, as matters
arising in the ordinary course of business should
be built into the board calendar and dealt with in
directors’ meetings
Directors are individually responsible for all decisions
taken by them and must always act in accordance with
their directors’ duties. Directors must be active and
diligent in performing their roles. They are required
to act in good faith and for a proper purpose, and to
exercise skill and care. Board meetings allow directors
to discharge their duties by receiving and considering
presentations from management, putting questions
to management and discussing matters among
themselves. There is less scope for doing this in respect
of a circular resolution.
• undermine the trust of the board in the secretariat
and senior management.
Even when used sparingly, the practical shortcomings
attached to circular resolutions need to be understood.
These can include:
• some directors do not look at emails or phone
messages regularly
• some directors live in or travel frequently to and from
remote locations
• some directors may not have access to scanners to
return signed documents, if required
© Governance Institute of Australia 2015. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute
of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held
liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice.
Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.
Management and oversight
Good Governance Guide
Good Governance Guide
• a significant volume of emailed questions and
answers may be required before all directors will
provide approval of the resolution, and it may be
easier and quicker for a meeting of directors to be
convened by teleconference.
Use of circular resolutions in wholly
owned subsidiaries
Circular resolutions may be used somewhat less
sparingly in a wholly owned subsidiary, where the
directors are often executives of the business and are
already familiar with the issue to which the circular
resolution relates.
Provision in constitution for less than 100
per cent approval of a circular resolution
The Corporations Act specifies that every director
eligible to vote on the resolution must sign the circular
resolution for it to be passed. However, the constitution
can specify that the number of directors required to
pass a circular resolution can be less than 100 per cent.
This can be a practical means of expediting the passing
of a circular resolution, given that:
• directors may be travelling and not easily contactable
• certain procedural matters can have tight deadlines
attached to them.
Management and oversight
It is good governance to consider quorum provisions
and conflict of interest issues when determining if the
constitution will permit less than 100 per cent approval
and when accepting signatures of less than 100 per cent.
While provisions relating to circular resolutions are
common in many listed company constitutions,
nevertheless listed public companies may need to apprise
proxy advisory firms and shareholders of the benefits to
the company of any constitutional amendment to limit the
number of directors required to pass a circular resolution.
A protocol or understanding that limits the decisions that
can be put to the board by circular resolution may assist in
providing clarity in this regard.
Circular resolution practice
It is good governance for the company secretary to
establish a protocol or understanding in relation to
circular resolutions in addition to the provisions in the
Corporations Act and company constitution. This may
be contained in a board or board committee charter,
in board or committee minutes (following discussion
at a board meeting) or in a circular resolution policy. It
is important that the directors have the opportunity to
discuss and agree how they would like the protocol or
understanding to operate and provide guidance to the
company secretary.
Importantly, even where the constitution specifies
that not all directors are required to approve a circular
resolution for it to pass, it is good governance for
the resolution to be sent to all directors and for all
directors to be given the opportunity to participate in
the decision.
In developing such a protocol or understanding, the
issues to consider include:
The options that a company can consider in relation to
voting include:
• the form of the directors’ responses in order for the
circular resolution to be considered a valid approval,
including the management of verbal consents
• A simple majority of all directors must sign the
resolution (that is, 51 per cent).
• A minimum percentage of directors must vote in
favour (this could be 66 per cent or 75 per cent).
• All directors must sign the resolution except those
absent overseas at the time. This was previously
common but is now somewhat outdated, given
the ease of electronic communication with many
overseas locations and, in contrast, the difficulty in
communicating electronically with some locations
in Australia.
• who in the company normally decides which
matters can be sent to directors for approval by
circular resolution
• whether the chair has any specific responsibilities
• the management of any questions or requests for
additional information raised by one or more directors
• the dissent of a director or a request by a director
for a directors’ meeting, having regard to the general
principle that circular resolutions should be used for
routine or non-contentious matters
© Governance Institute of Australia 2015. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute
of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held
liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice.
Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.
Good Governance Guide
• authorisation processes where the constitution
permits less than 100 per cent approval and a director
has not responded to the circular resolution email
and/or is unable to be contacted and the circular
resolution requires a decision to which an important
deadline is attached, including the date on which the
resolution is passed
• communication of the outcome to the board
of directors
• what will be included in the minute book to evidence
that the circular resolution has been passed
• the management of board papers associated with a
circular resolution
• whether board committee practices in relation to
the use of circular resolutions is aligned with that of
the board.
There is a wide variety of approaches to how a protocol
or understanding may operate, particularly the form
the directors’ responses may take and what is to be
included in the minute book.
Decision as to which matters can be sent to
directors for approval by circular resolution
Consideration needs to be given to whether the persons
involved in the decision as to which matters can be
sent to directors for approval by circular resolution
includes the:
• chair
• company secretary
• managing director, or
• a combination of these, normally involving the chair.
The chair’s responsibilities
Consideration needs to be given to whether the chair
has any specific responsibilities in relation to circular
resolutions, which could include:
• the approval of the use of a circular resolution in
each instance
• approval of the resolution prior to it being circulated
Management and oversight
The form of directors’ responses
A decision needs to be taken as to the accepted form
of the directors’ responses in order for the circular
resolution to be considered a valid approval. These
can include:
• printed copies of the resolution with original signature
• scanned copies of the signed resolution emailed to
the company secretary (this does not include applying
scanned signatures to the resolution)
• consent received by email
• consent received by text message
• consent using voting buttons in a board portal in
response to an email
• verbal consent received by telephone
• a combination of any of the above.
The formal requirement of the replaceable rules in the
Corporations Act and many companies’ constitutions
is that directors are required to sign a document
containing a statement that they are in favour of the
resolution set out in the document. Verbal consent,
text messages and voting buttons in a board portal are
unlikely to satisfy this requirement. If it is necessary to
adopt these methods to ascertain the will of the board
and carry out a certain course of action regardless of
formalities, then the board should ratify the decision at
the first available opportunity. If these methods are not
formally allowed under a company’s constitution, they
should not be used for resolutions where it is essential
that they are immediately legally effective.
Constitutions differ to a wide degree and the form that
directors’ responses to circular resolutions should take
should be considered by the board and they should then
seek to amend the constitution, if required.
The company secretary should maintain appropriate file
notes and records in respect of all circular resolutions.
The management of any questions or requests
for additional information
• the decision as to what action to take should a
director express dissent, for example, whether a
meeting is required
Consideration needs to be given to:
• the decision that a resolution be carried in the
absence of one or some director responses
(where the constitution permits less than
100 per cent response).
• whether this practice will apply even if all other
directors have already consented to the resolution
• whether any questions and related answers are
circulated to all directors, and
© Governance Institute of Australia 2015. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute
of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held
liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice.
Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.
Good Governance Guide
• whether directors can withdraw their consent before
the resolution is passed, or
• whether the consent process should commence from
scratch if there are any questions.
Director dissent
Consideration needs to be given to what protocol will
operate if a director does not support the circular
resolution. The options include:
Management and oversight
For companies where 100 per cent of directors must
approve the resolution, it cannot proceed without all the
directors approving it.
Where less than 100 per cent of director votes are
required to pass the resolution, the company secretary
will also need to decide if the resolution is dated once
the requisite majority is received, or when all responses
have been received.
• the resolution is not passed (for example, where
consent is required from 100 per cent of directors)
Communication of the outcome to the board
of directors
• the resolution is withdrawn, or
Consideration needs to be given to the process for
communicating the outcomes of a circular resolution
to the board, including when the board will be advised
that the resolution has been carried (or not) and how
many directors voted for or against the resolution or
abstained from voting.
• it is put to a meeting (teleconference), or
• it is deferred to the next meeting of directors.
Consideration also needs to be given to whether:
• any director can request that a matter be dealt with in
a meeting rather than by circular resolution, and
• if so, whether that request will always be met, and/or
Further consideration needs to be given as to whether
such communication will:
• whether the chair determines if it will go to a meeting
of directors.
• take place by email immediately after the resolution
has been passed (or not passed)
Authorisation process
Where the constitution permits less than 100 per
cent approval of a circular resolution and the circular
resolution requires a decision to which an important
deadline is attached, consideration needs to be given
to the authorisation process. While the resolution is
passed if the requisite percentage of votes is met, there
needs to be clarity as to process the company follows if
a director has not responded to the circular resolution
email and/or is unable to be contacted.
Regardless of whether the constitution permits approval
of a resolution by 75 per cent or less of directors, it
is good governance for the directors to agree that
this should only be relied on as a last resort, where
it is genuinely not feasible to secure 100 per cent of
directors’ consent. This allays any concern that the
directors may have that the voting limit could be abused
by seeking to pass a resolution by deliberately seeking
to exclude potential dissent.
In any event, the consent of all directors must be sought
by ensuring that the communication requesting the
circular resolution to be passed is sent to all directors.
• be reported in the board papers and recorded
in the minutes of the next scheduled meeting of
directors (but not communicated by email). In this
instance, consideration needs to be given as to
whether the circular resolution is noted, or if the
formal requirements of the applicable legislation or
constitution have not been met, ratified by the board.
It is prudent for record-keeping purposes that all
circular resolutions passed between board meetings be
noted in the minutes of the next board meeting.
The minutes
Consideration needs to be given to what will be included
in the minute book to evidence that the circular
resolution has been carried by the requisite numbers.
The resolution must be entered in the minute book
within one month of the decision being taken (s 251A).
There are different approaches to entering the circular
resolution in the minute book:
• one copy only of the original resolution with all original
signatures (should only one paper page have been
circulated to all directors, one at a time)
• each director’s original signed resolution
(separate pages)
© Governance Institute of Australia 2015. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute
of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held
liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice.
Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.
Good Governance Guide
• a combination of signed originals and or scanned/
faxed copies
• copies of any approval emails
• one paper copy of the resolution which has been
re-signed at the next formal meeting, retaining the
original dates on which the resolution was signed by
each director (and which is underpinned by the multiple
documents collected during the approval process, all of
which are stored outside the minute book).
The management of associated board papers
Consideration needs to given to how to deal with any
board papers that were associated with the circular
resolution. The options include:
• The board paper associated with the circular
resolution is kept with the board papers.
• The board paper is kept in the minute book. This may
depend on the length of the paper.
Retaining the board paper with the circular resolution in
the board papers is preferable.
Board committees
Management and oversight
However, it may not be apparent that a director has a
conflict of interest until after the resolution is circulated.
In this instance, the director needs to advise the
company secretary of the conflict of interest and their
vote cannot be included in calculating the required
majority and, if 100 per cent approval is required, unless
the constitution deals with this particular issue then a
circular resolution cannot be used.
When determining a circular resolution protocol or
policy that permits the carriage of circular resolutions
by less than 100 per cent, for example, 51 per cent or
75 per cent of the board or committee, the protocol
or policy should also clarify how that number may be
determined or varied in the event there are conflicts of
interest, as well as whether or not minimum approval
numbers need to take into account quorums that
would otherwise apply in a meeting scenario. If there
are inadequate numbers for an important decision, the
response might be that the matter must be determined
in a meeting of directors rather than by circular
resolution, or that a committee must refer the matter to
the full board for decision.
Consideration needs to be given as to whether circular
resolutions will be permitted for board committees, and
if so, whether the protocol for board committees should
be aligned with that of the board. The constitution is
frequently silent on how circular resolutions will be dealt
with for board committees.
Conflicts of interest
The existence of conflicts of interest must be taken
into consideration in all decision-making by boards and
committees, whether the decision is by a meeting of
the full board/committee or a subset where decisions
can be made by a majority or by the number permitted
where the constitution permits less than 100 per cent
approval of a circular resolution.
How an actual or perceived conflict of interest is to
be dealt with for a particular decision generally needs
to be addressed within the circular resolution and the
accompanying board paper if the existence of the
conflict is known in advance.
© Governance Institute of Australia 2015. This material is subject to copyright. The Good Governance Guides indicate, in the view of Governance Institute
of Australia Ltd, one interpretation of good practice. They are not designed to cover or comply with all applicable legislation or case law. We cannot be held
liable or accountable to any person who acts or relies upon the information provided. The guides are not a substitute for professional advice.
Visit our website at governanceinstitute.com.au to find more Good Governance Guides and information on governance.