What Is A Circular Resolution In Australia?

Running a company means making decisions efficiently while staying compliant. Sometimes, calling a board or members’ meeting is impractical - everyone’s busy, directors might be in different cities, and you need an answer now.

That’s where a circular resolution (also called a circulating resolution) can help. It lets directors or members pass a resolution without physically meeting, provided you follow the rules in your company’s governing documents and the Corporations Act 2001 (Cth).

In this guide, we’ll explain what a circular resolution is, when to use one, how to pass it correctly, and the key legal traps to avoid - all from the perspective of a growing Australian small business.

What Is A Circular (Circulating) Resolution?

A circular resolution is a decision made by a company’s decision-makers (usually directors, sometimes members) without holding a formal meeting. Instead, the proposed resolution is circulated in writing (including electronically) and signed by the required people to pass it.

Two common types are:

• Directors’ circular resolutions - used for board decisions. These often require all directors entitled to vote to sign, unless your governing rules say otherwise.
• Members’ circular resolutions - used for shareholder decisions in proprietary companies in limited circumstances. These typically require the signatures of all members entitled to vote, and some matters can’t be passed this way (for example, resolutions that legally must be considered at a meeting).

Your Company Constitution (and any shareholders’ agreement) sets the ground rules - for example, whether circular resolutions are allowed, what majority is needed, and how signatures can be collected. If you don’t have a tailored constitution, the replaceable rules in the Corporations Act apply by default, but they may not offer the flexibility your business needs.

When Should You Use A Circular Resolution?

Think of circular resolutions as a fast, practical pathway for straightforward decisions where everyone is aligned. Common use cases include:

• Approving routine contracts or purchases within budget.
• Issuing shares as part of an agreed funding round.
• Appointing an additional director (if permitted by your constitution).
• Declaring dividends (subject to solvency and other legal requirements).
• Approving policies or administrative actions already discussed by the board.

They are less suitable when the topic is complex or contentious, or where directors need to actively discuss risks. In those cases, a meeting (including a virtual meeting) is often better to ensure directors can ask questions and discharge their duties properly. If the matter is urgent but complex, consider calling an ad hoc board meeting or, if necessary, an EGM for members.

How Do You Pass A Circular Resolution (Step By Step)?

Every company’s process should follow its constitution and the Corporations Act. As a practical roadmap:

1) Confirm Authority And Eligibility

• Check whether the decision belongs to the directors or the members.
• Review your constitution to confirm that circulating resolutions are allowed, what majority or unanimity is required, and any excluded matters.
• Make sure only those entitled to vote are asked to sign (e.g., directors who are not conflicted on the matter).

2) Draft The Resolution Clearly

• Use precise wording so everyone is signing the same decision.
• Include background notes if helpful, especially for more technical items.
• If you don’t have a standard format, consider using a professionally prepared Directors’ Resolution Template for consistency and compliance.

3) Choose A Valid Execution Method

• Set out how the resolution can be signed - wet-ink, electronic, or both. Australian law generally recognises electronic signatures for company documents, but ensure the method identifies the signer and shows their intention to sign.
• If the document will be signed in parts, make sure your document permits counterparts, or use a form that clearly allows it. Our guide on signing wet ink vs electronic signatures explains key differences.
• For company execution requirements, especially for documents or deeds, check the rules for Section 127 execution by companies.

4) Circulate And Track Responses

• Send the same final version to all required signers at the same time, with clear instructions.
• Set a response deadline so decisions aren’t left open indefinitely.
• Keep a version-controlled record. If you need to revise the text, withdraw the first version and re-circulate the updated document to everyone.

5) Confirm Passage And Record Keeping

• Once the required signatures are received, note the date the resolution is passed in accordance with your constitution (for example, on the day the last required signature is received).
• Store the signed resolution in your minute book and maintain a complete record of any supporting materials.
• If the decision triggers filings (e.g., a change of director details or share issue), lodge the relevant ASIC forms on time. For company detail changes, you’ll often deal with ASIC Form 484.

What Does The Corporations Act Say?

In Australia, the Corporations Act 2001 (Cth) allows proprietary companies to pass certain resolutions without holding a meeting, provided specific conditions are met. That framework works alongside your constitution and any shareholders’ agreement.

Key points for small businesses:

• Directors’ circulating resolutions are generally permitted for proprietary companies. Often, these require all directors entitled to vote to sign. Your constitution can clarify thresholds, procedures and exclusions.
• Members’ circulating resolutions in proprietary companies may be permitted for some matters, but not all. Some decisions still require a meeting by law, and special rules can apply to special resolutions or resolutions requiring notice.
• Public companies face stricter rules and generally cannot rely on circulating resolutions for members’ decisions.

Because these rules interact with your internal governance documents, a well-drafted Company Constitution and (if you have co-founders) a Shareholders Agreement are vital. They make it clear when you can use a circular resolution, who needs to sign, how conflicts are handled, and how quickly decisions can be made.

If you’re a company with a sole director and sole shareholder, the process is simpler in practice, but it’s still important to document decisions properly. Our overview of sole director resolutions explains how to keep records that meet legal requirements.

Execution And Record-Keeping Essentials

Even straightforward decisions deserve careful execution. Here are practical tips to keep your circular resolutions compliant and useful:

Set The Right Threshold

Confirm whether unanimity or a particular majority is required. For directors, many constitutions require all directors entitled to vote to sign a circulating resolution. For members, circulating resolutions often require all members entitled to vote to sign, unless the law or your constitution says otherwise.

Deal With Conflicts Of Interest

If a director has a material personal interest in the subject matter, check your constitution and the Act for voting restrictions and disclosure requirements. Where a director can’t vote, ensure the remaining threshold can still be met.

Use Clear, Compliant Signature Methods

Electronic signatures can streamline the process if they clearly identify each signer and show their intent. When executing deeds or more formal documents, verify whether company execution under Section 127 is appropriate, or if signatures in counterparts are permitted. You can also clarify “counterparts” within your document to avoid uncertainty.

Date, Store And Cross-Reference

Record the date the resolution is passed (often the date of the last required signature) and file the signed version in your minute book. If the resolution approves an annexed agreement or policy, attach it and label it clearly so future readers know exactly what was adopted.

Follow-Up Actions And ASIC Filings

Some resolutions trigger legal steps - issuing shares, appointing or resigning directors, changing the registered office, and so on. Add a short “action list” to your resolution or board pack so nothing is missed, including any ASIC filings and deadlines.

Common Pitfalls And How To Avoid Them

Circular resolutions are popular because they’re fast - but speed shouldn’t come at the cost of compliance. Watch out for the following traps:

• Using a circular resolution for the wrong type of decision. Some matters must be considered at a meeting (for example, where law requires discussion or special notice). If in doubt, schedule a meeting (virtual or in person) so directors or members can properly consider the issue.
• Not meeting the correct voting threshold. If your constitution requires unanimous director signatures, a majority won’t do. Confirm the threshold before circulating the document.
• Ambiguous drafting. Vague or compound resolutions cause confusion later. Keep each resolution to a single, clear decision or use numbered sub-resolutions.
• Signature method uncertainty. If you’re collecting signatures electronically, specify accepted methods and ensure the platform captures the signer’s identity and intention. If needed, allow signatures in counterparts or rely on company execution under the Corporations Act’s rules for electronic vs wet-ink signatures.
• Poor record keeping. A resolution that isn’t stored in your minute book may as well not exist. File decisively, cross-reference attachments, and retain a complete audit trail.
• Forgetting follow-up compliance. If your decision changes company details or shareholdings, map out what needs to be lodged with ASIC (e.g. via Form 484) and by when.
• Skipping a meeting when discussion is needed. Directors must act with care and diligence. If the topic is complex or high-risk, a properly convened meeting allows questions, debate and better decision-making - your constitution can support fast online meetings when a written resolution isn’t suitable.

Tip: Align your internal governance documents with how you actually operate. If your company relies heavily on circulating resolutions, make sure your constitution and board practices support secure electronic signatures, counterparts, and clear thresholds. If you frequently enter into contracts via management rather than formal company execution, consider how authority works alongside Section 126 (agents’ authority) and your internal delegations.

FAQs About Circular Resolutions (For Busy Teams)

Do circular resolutions need to be unanimous?

For directors of proprietary companies, many constitutions require unanimity for a circulating resolution, though your constitution may set a different threshold. For members, circulating resolutions in proprietary companies commonly require all eligible members to sign, and they can’t be used for every type of decision. Check your constitution and the Act first.

Can we sign a circular resolution electronically?

Yes, in many cases. Ensure the method clearly identifies the signer and their intention to sign. If you’re executing deeds or more formal documents, double-check whether company execution under Section 127 or signing in counterparts is appropriate.

What if we have a sole director and sole shareholder?

The process is easier to administer, but you still need to document decisions clearly and store them in your minute book. See our guide on sole director resolutions for practical tips.

What if one director won’t sign?

If unanimity is required but not achieved, the resolution won’t pass. In that case, convene a board meeting so a decision can be made by the required voting majority at a meeting instead. This also gives directors the chance to discuss the matter.

Is a circular resolution “less valid” than a meeting?

No - if it’s properly passed under your constitution and the Act, it’s just as binding. The difference is procedural: there was no physical or virtual meeting, but the decision meets the required thresholds and is recorded in writing.

Key Takeaways

• A circular (circulating) resolution lets directors or members pass a decision without a meeting - fast and convenient for straightforward, uncontroversial matters.
• Your Company Constitution and the Corporations Act set the rules on when circular resolutions are allowed, who must sign, and any excluded matters.
• Follow a clear process: confirm authority, draft precisely, use valid signature methods, track responses, record the date of passage, and file the resolution in your minute book.
• Use electronic signatures confidently where appropriate, and consider company execution rules under Section 127 for formal documents or deeds.
• Beware of pitfalls: unmet thresholds, ambiguous drafting, poor record keeping, or using a circular resolution where a meeting is necessary.
• Well-drafted governance documents - like a tailored Company Constitution and a clear Shareholders Agreement - make decision-making faster and safer.

If you’d like a consultation on using circular resolutions in your company, or you’d like help tailoring your constitution and board processes, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.