Circulating Resolutions Under the Corporations Act

Running a company often means making decisions quickly - approving a new supplier, opening a bank account, appointing a director, entering a lease, or signing a customer contract.

But if you’re a director, you also need to make sure those decisions are made properly. That usually means documenting them in a way that satisfies the Corporations Act 2001 (Cth) (Corporations Act), your company’s constitution (if you have one), and good governance practice.

That’s where circulating resolutions can be incredibly useful. They’re a practical way to pass a valid resolution without holding a meeting - so you can keep the business moving while still keeping your records tight.

Below, we’ll walk you through what a circulating resolution is, when you can use one, how to do it correctly, and the common traps we see small businesses fall into.

What Is A Circulating Resolution (And Why Use One)?

A circulating resolution (sometimes also called a “circular resolution”) is a resolution that directors or shareholders pass without holding a meeting, usually by signing a written document (including by using a compliant electronic signing method).

For small businesses, circulating resolutions are popular because they’re:

• Fast: you don’t need to coordinate calendars for a meeting.
• Simple: the resolution sets out the decision in writing, and each person signs (or otherwise formally agrees in writing, where permitted) to indicate approval.
• Good for record-keeping: you create a clean paper trail of decisions, which is useful for banks, investors, auditors and (if it comes to it) disputes.

In practice, circulating resolutions are commonly used for:

• appointing or resigning directors and company officers
• approving share issues or share transfers
• opening or changing bank facilities and signatories
• approving major contracts or leases
• approving financial statements or solvency resolutions
• declaring dividends (where appropriate)

Even when everyone is “on the same page”, documenting the decision matters - because verbal agreement can be difficult to prove later, and informal decision-making can cause problems when the business grows.

Which Law Applies? Directors Vs Shareholders (And Proprietary Vs Public Companies)

The Corporations Act deals with circulating resolutions differently depending on:

• whether it’s a directors’ resolution or a members’ (shareholders’) resolution
• whether your company is a proprietary company (most small businesses are) or a public company
• what your Company Constitution says (if you have one)

Two key categories are worth separating from the start.

1) Circulating Resolution Of Directors

A directors’ circulating resolution is a decision made by the board without a directors’ meeting.

Under the Corporations Act, directors can generally pass a circulating resolution if:

• the resolution is in writing (including electronic form), and
• all directors entitled to vote sign it (unless your constitution provides otherwise).

“All directors” is the key point. This requirement is one of the biggest reasons circulating resolutions go wrong (we’ll cover common pitfalls below).

If you’re a sole director, a circulating resolution is still useful - it creates a clear record that you made the decision as director, rather than informally as the business owner.

2) Circulating Resolution Of Members (Shareholders)

A members’ circulating resolution is when shareholders pass a resolution without holding a shareholders’ meeting.

For proprietary companies, the Corporations Act can allow members to pass a resolution by signing a document if all members entitled to vote sign it. This is often used for:

• adopting or amending a constitution
• approving certain share transactions
• removing or appointing directors (where members have that power)
• approving related-party matters (depending on the structure and scenario)

Because shareholder decisions can affect ownership and control, it’s especially important to make sure you use the right process and the right type of resolution (ordinary vs special), and that your company documents line up with what you’re doing.

If you have (or plan to have) more than one shareholder, a Shareholders Agreement can be a practical way to set expectations on voting thresholds, deadlocks, and how major decisions are made.

When Should You Use A Circulating Resolution (And When Should You Hold A Meeting)?

A circulating resolution is ideal where:

• the decision is relatively straightforward and everyone is aligned
• you need the decision documented quickly for a third party (like a bank or landlord)
• you want a clean written record without meeting minutes
• you have directors/shareholders who are in different locations

However, a circulating resolution isn’t always the best option.

When A Meeting Might Be Better

Even if you can use a circulating resolution, consider a meeting (even a short one) when:

• there’s disagreement or uncertainty and you need discussion
• conflicts of interest need to be declared and managed
• the decision is high-risk or high-value (for example, taking on significant debt)
• you need to consider multiple options and record the reasoning

Remember: a circulating resolution generally records the final decision, but not always the discussion behind it. If you later need to show you acted with care and diligence, having fuller minutes and context can help.

How To Pass A Circulating Resolution Properly (Step-By-Step)

Here’s a practical process you can use to pass a valid circulating resolution and keep your company records in good shape.

Step 1: Confirm Who Has Power To Decide

Before you draft anything, identify whether this is a decision for:

• directors (board decision), or
• members/shareholders (ownership/control decision).

This sounds obvious, but it’s a common error - especially in small businesses where the director and shareholder are the same person (until they aren’t).

Also check:

• your Company Constitution (if you have one), as it may add extra rules or flexibility or replace the usual rules under the replaceable rules regime
• any Shareholders Agreement (if applicable)
• any external requirements (for example, a lender may require specific wording or evidence)

Step 2: Draft The Resolution Clearly

A strong circulating resolution is short, specific and unambiguous. It should generally include:

• Company name and ACN
• Type of resolution: directors’ resolution or members’ resolution
• The decision: written in plain English, with enough detail to be enforceable
• Authority to act: who is authorised to sign documents or take steps to implement the decision
• Date: or a mechanism for determining when it takes effect

In many situations, it’s also helpful to attach schedules (for example, the final form contract, lease, or term sheet) so there’s no doubt about what was approved.

If you need a starting point, a Directors resolution template can help you structure the document properly - but you’ll still want to tailor it to the decision you’re making.

Step 3: Circulate It To Everyone Who Must Agree

This is where the Corporations Act requirements really matter.

For a directors’ circulating resolution, you generally need agreement from all directors entitled to vote. For a members’ circulating resolution, proprietary companies generally need agreement from all members entitled to vote if using the written/circulating method.

Practically, that means:

• send the resolution to each relevant person
• give them a reasonable chance to review it (particularly if it’s a significant decision)
• ensure the final signed copies are returned and stored properly

Step 4: Get It Signed Correctly (Including E-Signing)

The signing process should match:

• the Corporations Act requirements
• your constitution
• any third-party requirements (banks often have strict preferences)

It’s important not to confuse a circulating resolution with informal “approval by email”. In most cases, you want a written resolution document that each required person signs (including via a compliant electronic signature method), so you can clearly prove the company passed the resolution.

If the resolution involves the company executing documents, you’ll also want to consider signing rules under the Corporations Act - especially if you plan to rely on the assumptions available when documents are signed correctly by the company.

It’s worth understanding signing documents under section 127, because it can affect whether the other party can rely on the execution being valid (and whether your company is properly bound).

More broadly, if you’re ever unsure whether an electronic signature, witness, or signing method is acceptable for a particular document, the legal requirements for signing documents depend on the type of document and the context.

Step 5: Record And Store It In Your Company Records

Once signed, your circulating resolution should be kept with your company records (often in a “minute book” or digital governance folder).

Good record-keeping isn’t just a compliance exercise - it can make your life easier when:

• your accountant asks for evidence of decisions
• you apply for finance
• you bring in investors or sell the business
• there’s a dispute between founders

As a general rule, treat each circulating resolution as something you may need to produce years later to prove what the company decided and when.

Common Mistakes With Circulating Resolutions (And How To Avoid Them)

Circulating resolutions are meant to simplify decision-making - but only if they’re done correctly. Here are some common traps small businesses run into.

Mistake 1: Not Getting Unanimous Approval (When Unanimity Is Required)

Many directors assume a majority is enough, because that’s how meetings often work. But for a circulating resolution, the default position under the Corporations Act is typically unanimous agreement of those entitled to vote (unless your constitution provides otherwise).

If one director doesn’t sign (or wasn’t properly included), the circulating resolution may be invalid - which can create real problems if you relied on it to enter a contract or approve a major transaction.

Mistake 2: Using A Circulating Resolution For The Wrong Decision-Maker

If a matter requires a shareholder resolution (for example, certain constitutional changes), a directors’ circulating resolution won’t fix it.

Likewise, if the decision is within directors’ powers, pushing it to shareholders can create confusion (and sometimes unintended consequences).

When in doubt, check the constitution and any shareholder arrangements to confirm who has the power to approve what.

Mistake 3: Vague Wording (Or No Supporting Documents)

A resolution that says “approve the lease” without attaching the final lease (or clearly identifying it) can lead to uncertainty later.

A good test is: if a new director joined your company in 12 months, would they understand exactly what was approved from the resolution alone?

Mistake 4: Forgetting To Authorise Someone To Sign And Implement The Decision

Even when the decision is valid, you can still get stuck operationally if no one is authorised to sign the next documents or take the next steps.

Common examples include:

• approving finance, but not authorising a director to sign the facility documents
• approving a contract, but not authorising anyone to negotiate minor amendments
• approving a hire, but not authorising someone to issue the employment documents

If the decision involves hiring or onboarding employees, getting the paperwork right early matters - including having an Employment Contract that fits the role and your business.

Mistake 5: Updating Arrangements Without Proper Documentation

Small businesses often evolve quickly. You might approve a contract, then later agree to “just tweak a few clauses” over email.

Depending on what’s changing, you may need a formal amendment document (and in some cases, a fresh approval via another circulating resolution). A Deed of Variation is commonly used to vary an existing agreement cleanly, especially when you want certainty about what changed and when.

What Records Should You Keep After Passing A Circulating Resolution?

Once your circulating resolution is signed, your next job is to keep your governance records complete and easy to access.

At minimum, consider keeping:

• The signed circulating resolution (PDF and/or original, depending on how it was signed)
• Any attachments (final versions of contracts, lease documents, term sheets, share issue documents)
• Evidence of consent (if approvals were given through an e-signing platform or email in a way that creates a clear written record, keep the email chain or audit trail)
• A register of resolutions (optional, but helpful as the company grows)

If the resolution relates to ASIC-notifiable changes (like changes to directors or share structure), you’ll also need to ensure the relevant ASIC forms are lodged on time. The circulating resolution itself doesn’t lodge anything - it’s the internal decision record that supports the action you take next.

And if you have multiple shareholders (or plan to bring in investors), it’s worth making sure your governance documents stay aligned as you grow - your constitution, share records and shareholder arrangements should tell a consistent story about decision-making and control.

Key Takeaways

• A circulating resolution lets directors or shareholders pass a decision without holding a meeting, while still creating a clear legal record.
• For a directors’ circulating resolution, the Corporations Act generally requires all directors entitled to vote to agree/sign (unless your constitution allows otherwise).
• For shareholder decisions, many proprietary companies can use a members’ circulating resolution, but it’s important to confirm the right type of resolution and the right approval threshold.
• Clear drafting matters - include the company details, the exact decision, who is authorised to implement it, and attach the final documents being approved.
• Common mistakes include missing signatures, approving the wrong way (directors vs members), vague wording, and failing to keep proper records.
• Strong governance isn’t just compliance - it helps with finance, growth, investor confidence, and reducing disputes later.

This article is general information only and does not constitute legal advice. If you’d like advice for your specific situation, reach out to a lawyer.

If you’d like help preparing a circulating resolution (or checking whether you should use a circulating resolution or hold a meeting), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.