A Guide to Circular Resolutions for Ltd. Companies + Templates

What is Circular Resolution?

Circular resolution is a decision-making process that allows shareholders of companies make legally binding decisions in writing without having to attend the general meeting in person. Widely accepted as a voting method in Germany and Austria, circular resolution can be used for casting votes for a wide variety of proposals such as approval of annual financial statements, purchase of assets, and even for decisions on special contracts. § 34 GmbHG in Austria and § 48 GmbHG in Germany address the circular resolutions and set the guidelines how it should be done. According to both, there are three important things to consider when using circular resolutions:

1. All Must Agree on the Using Circular Resolution: Before any resolution can be passed using circular resolution, all shareholders, even non-voting ones, must agree on using circular resolution as the voting method. The important thing is that their contest should be in writing. Pay attention that this contest is only about agreeing on using circular resolution as the voting method and NOT voting a particular proposal.

❗Important: In case of unanimous voting using circular resolution, the process can be blocked if only one shareholder refuses to provide the writing contest for the method being used. A vote by majority decision is then not possible.

1. Votes Must be Cast in Writing: The second important thing to consider is that voting members can only cast votes in written usually within a specific time (one week). Only voting members have the right to cast a vote on a proposal.

2. Voting Mechanisms Can be Different: Depending on what topic is being put into vote, the mechanism of voting can be different. In some cases, in addition to the article of association of the company, the law also determines how the voting mechanism works. For example, according to GmbHG in Germany, the resolution must pass unanimously for amendment to articles of association or for remedying of defects by resolution passed by shareholders.

   Here are some of the common voting mechanisms used in a company:

   3.1. Unanimous voting: Decision is approved only if all eligible voters are in complete agreement, meaning 100% of the participants must vote in favor for the resolution or decision to pass. Even one dissenting vote or abstention can block the decision. Generally, this is necessary when voting for resolutions of high importance. In unanimous voting using circular resolution, only the voting shareholders have the right to participate.

   3.2. Majority Voting: A decision is approved if it receives more than half (50% + 1) of the votes cast.

   3.3. Supermajority Voting: A higher threshold than a simple majority, often 66.7% (two-thirds) or 75% of votes.

   3.4. Weighted Voting: Votes are weighted based on specific criteria, such as the number of shares held by a shareholder. Often used in corporate contexts where voting power is proportional to ownership. For example: A shareholder owning 60% of a company’s shares has 60% of the voting power

🧠 Did you Know? According to GmbHG in Austria, in the case of a written vote, the majority required shall be calculated not by the number of votes cast but by the total number of votes to which all shareholders are entitled.

Benefits of Circular Resolutions

Saving Time: Circular resolutions save valuable time and reduce costs since there’s no need for shareholders to be personally present at the meeting. Also, there’s no need for the voting to be done simultaneously, but rather to have a set deadline.

Flexibility in Voting Methods: The rules about circular resolutions only mention that the votes should be in writing. Circular resolutions can be carried out electronically by email, text message, WhatsApp, or a platform like fynk that lets you vote and sign the documents electronically.

Quicker Decision-making: Circular resolutions usually have a deadline for the voting process. Since the matter is resolved using votes, which are done remotely, there’s little need to negotiate terms in person.

When Companies Use a Circular Resolution?

A circular resolution can be an alternative to an ordinary general meeting. To what extent it can be used depends heavily on each company’s articles of association and the relevant laws. However, circular resolutions are usually beneficial for matters that need to be handled efficiently and without much delay.

Here are some of the most common use cases of circular resolutions in a company:

Circular resolution for the approval of the annual financial statements

Circular Resolution - Annual Resolution Decision

A circular resolution for annual financial statements lets board members or managing directors pass a resolution remotely, without holding a formal meeting. Important financial decisions such as approving balance sheets and profit distribution are some of the topics that can be addressed in this type of circular resolution.

Using our annual financial statements template designed to be used as a circular resolution, you can quickly distribute the resolution proposal, collect signatures, and record votes efficiently.

other Use template

Resolution on the appropriation of annual surplus

Circular Resolution - Use of the Annual Surplus

A resolution on the use of the annual surplus is a decision made by a company's board or shareholders about how the company’s profits from the year should be distributed. This could involve decisions about creating reserves, paying dividends to shareholders, or reinvesting in the company. Using a circular resolution for this decision makes the process faster, more efficient, and legally compliant, all without needing to schedule a formal annual meeting.

Our circular resolution template for the use of profits is a great way to simplify this process. It includes sections for acknowledging the annual financial statement, determining the distribution of profits among shareholders, carrying forward any remaining surplus, and optionally allocating funds to reserves.

other Use template

Circular resolution for the appointment or dismissal of managing directors

Circular Resolution - Appointment or Dismissal of Managing Directors

A circular resolution for appointing or removing managing directors lets you make leadership changes without needing to hold a general meeting. Instead, shareholders can decide remotely, making the process quicker.
By using our circular resolution template for the appointment or removal of managing directors, you can easily handle these changes in a compliant and smooth way. The template is structured to cover all essential aspects, from the nomination of a new managing director to the removal of an existing one. You can add details like names, appointment periods, and voting options as well.

other Use template

Circular resolution for the conclusion of a contract

Circular Resolution - Approval of the Conclusion of a Contract

It comes the times at which the board members of a company may need to pass a resolution about a special contract. A circular resolution for the conclusion of a contract is a great way to reach a decision quickly and effectively.

Our concise circular resolution template for conclusion of a contract helps you quickly and easily approve important contracts without needing a meeting. It covers all the essentials, from contract details to voting procedures, ensuring everything is organized, compliant, and straightforward. Use our platform to streamline the process, save time, and keep the stakeholders on the same page, even remotely.

other Use template

Circular resolution for the dissolution of a Ltd.

Circular Resolution - Dissolution of Ltd.

An employment contract is a legally binding agreement between an employer and an employee that outlines the terms of their working relationship. It typically includes details such as job title, duties, compensation, benefits, work hours, and duration of employment.

Our comprehensive and customizable employment contract includes essential clauses on job responsibilities, compensation, benefits, and confidentiality, ensuring clarity on both parties' rights and obligations. Use this template as a reliable source for creating legally binding contracts that promote transparent working relationships.

other Use template

Circular resolution for the appointment of liquidators

Circular Resolution - Appointment of Liquidators

A circular resolution for the appointment of liquidators allows shareholders to decide who will manage the liquidation process of a company without the need for an in-person meeting. This method is ideal when swift decisions are required, and it complies with legal provisions such as § 48 GmbHG for passing resolutions remotely. The liquidators are responsible for overseeing the dissolution process, including the liquidation of assets and settling liabilities, ensuring everything is handled according to company law.

fynk’s circular resolution template for the appointment of liquidators simplifies the process by providing a clear and organized structure for passing the resolution. It includes all essential details like the names of appointed liquidators, their responsibilities, and the legal framework for their appointment.

other Use template

Circular resolution for the denial of information or inspection rights

Circular Resolution - Deny Information or Inspection Rights

A circular resolution for denying rights enables shareholders to make quick, legal decisions on refusing access to sensitive company information. This type of resolution allows you to handle these matters efficiently without convening a physical meeting. You might use it when sharing specific information that could harm the company’s interests, ensuring that sensitive data remains protected.

By using this template, you can easily draft, share, and sign the resolution electronically, saving time and ensuring compliance with the law.

other Use template

Circular resolution for the rectification of deficiencies in the corporate purpose

Circular Resolution - Remedy of Deficiencies in the Company’s Purpose

A resolution to address defects in your company’s purpose is essential when there are inconsistencies or errors in your company’s objectives as stated in the articles of association. These defects can create legal complications if not addressed promptly. By using a circular resolution, you can efficiently correct these issues without needing a formal meeting, ensuring your company stays compliant with its legal framework.

Using our circular resolution template for rectification of defects in the company’s purpose, you can easily and quickly draw a resolution proposal, send it to all shareholders, and collect their votes and signatures electronically.

other Use template

Circular resolution for the company’s borrowing of funds

Circular Resolution - Loan Agreement by the Company

A circular resolution for a loan agreement allows your company to finalize a loan or secure financing without the need for a formal shareholder meeting. Instead, you can circulate the resolution to shareholders who can review, approve, and sign it remotely, making the process faster and smoother. This approach helps you respond to financial needs quickly and ensures you comply with legal requirements.

This template for circular resolution for a loan agreement is designed to make it easier for you to prepare your proposal. It’s clear and ready to use and includes the necessary sections that you may need for the resolution. Simply fill it with your data and share it with shareholders to collect the votes and electronic signatures.

other Use template

Circular resolution for the disposal of assets

Circular Resolution - Disposal of Assets

When it comes to making decisions like selling assets, a circular resolution offers you a streamlined, efficient way to handle the process without needing a formal meeting. It allows shareholders to make decisions remotely, saving time and ensuring smooth operations.

Having a ready-to-use circular resolution template can make the sale of assets much easier. You don’t need to start from scratch – simply fill in the necessary details, share the template with your shareholders, and collect their votes and signatures. The template ensures you cover all the important aspects, like the asset details, sale conditions, and necessary approvals while keeping the process legally sound and hassle-free.

other Use template

Circular resolution for the acquisition of assets

Circular Resolution - Acquisition of Assets

When you need to acquire assets, a circular resolution offers a quick and efficient way to get things done without the need for an in-person meeting. This method allows shareholders to make decisions remotely, saving time and ensuring a smooth process. Whether you’re purchasing real estate or valuable intellectual property, the process can be completed swiftly while ensuring all necessary parties are involved.

Having a pre-made circular resolution template simplifies the acquisition process. You won’t have to start from scratch; just fill in the required details, send it to your shareholders, and collect their votes and signatures. The template covers all key aspects such as asset details, purchase conditions, and necessary approvals, while ensuring the process remains legally compliant and straightforward.

other Use template

Who Can Start a Circular Resolution?

It’s only possible for shareholders or their representatives to initiate a circular resolution, even if they have a voting limit on certain subjects. However, other people could also propose a circular resolution motion if it’s expressed in the company’s articles of association. In that case, for example, a managing director can propose a motion for a circular resolution.

As mentioned above, you can only have a circular resolution if:

1. The articles of association allow such resolutions to be passed in written form.
2. All shareholders, even those without voting rights, agree to shareholders’ resolutions outside a shareholders’ meeting.

How Many Resolutions Can You Reach in One Circular Resolution?

As long as the following criteria are met, you can include multiple resolutions in a single circular resolution setting:

1. The topics are closely related to each other: For example, decisions regarding financial approvals, project funding, or director appointments that interconnect logically can be grouped.
2. Clarity and Distinctness: Each topic must be clearly defined and distinguishable, and there must be no ambiguity in each individual topic.

How to Propose a Circular Resolution?

Step 1: Write a Motion (Proposal)

The motions for circular resolutions are often one-page written documents that are short, direct, and clear in language. First, consult the company’s articles of association and bylaws to check any limitations, special conditions, or procedures that might exist regarding reaching a resolution outside of meetings. For example, some articles of association may dictate that a set of resolutions can only be reached in general meetings.

Here’s how you can write a proposal for a circular resolution:

1. Start with the introductory section

Write the company name, address, and date on top of the page. Give a brief introduction of the matter and the laws and regulations that apply. For example: “Pursuant to [Article X of the Articles of Association] of company [XY] and the § 48 GmbHG, the following resolution is proposed for adoption by way of a circular resolution.”

2. Write the resolution text

Use clear, concise language to describe the action being approved. Begin with “It is hereby resolved that:” followed by the decision. The proposal can be a negative or positive statement that enables the shareholders to express their votes simply by a “yes” or “no.”

Here’s a good and bad example of motions:

✅ Good example:

“It is hereby resolved that the purchase of 100 units of office chairs from Supplier XYZ for a total amount of $5,000 is approved. [Name], [Title], is authorized to sign the purchase agreement on behalf of [Company Name].”

❌ Bad example:

“It is hereby resolved that the necessary purchase for the office is approved. [Name], [Title], is authorized to proceed with the agreement.”

3. Include voting and signing blocks

Add the voting options, shareholders’ names, their share amount, signature, and date.

Example:

“Approved Not Approved

Name: ____________________________ Signature: _______________________ Date: ____________________________”

🧠 Did you know? You can manage a circular resolution with the fynk contract management platform without needing to pass the document to each party individually or get the votes one by one?

Step 2: Set a Deadline

Include a deadline for the voting process. Normally, it’s set to at least one week after initiating the process. A clear deadline helps prevent situations where the resolution becomes invalid due to delays, misunderstandings, or disputes over the circulation process. To avoid such issues, it’s recommended to include a deadline either in the shareholder agreement or within the resolution itself, stating that the resolution will only be valid if signed and returned by a specific date. This ensures clarity, prevents extended disputes, and maintains legal validity.

Step 3: Send the Motion to Shareholders

Once the motion is ready, circulate it to the shareholders. Generally, there are two ways to do this:

1. Pass the resolution sequentially from one shareholder to another for voting and signing.
2. Collect the votes simultaneously from all shareholders (a more convenient option).

Step 4: Announce the Result and Store the Documents

After the voting process is complete, share the final results with all shareholders and provide a receipt copy to each. Ensure the resolution documents are securely stored in a centralized repository for future reference.

Digital Circular Resolutions with fynk + Templates

Circular resolutions are an excellent way to save time, and the process can be even faster when done digitally. While using email and text messages may seem easy, managing replies and storing votes can be cumbersome. A dedicated document management platform like fynk simplifies the process of managing circular resolutions by offering features such as:

• Access limitations for sensitive resolutions.
• Integrated vote and signature blocks.
• Detailed access and activity logs.
• Deadline settings for resolution finalization.
• Automatic notifications and reminders for pending votes.
• Secure external sharing of documents with shareholders.
• Customizable templates for various resolution types.
• A centralized, secure repository for storing resolutions.
• Qualified Electronic Signatures (QES) for enhanced security and compliance.

With fynk, you can draft your resolution motion from scratch or use pre-designed templates. Shareholders can digitally vote and sign, and you’ll receive notifications for every submission. This not only speeds up the process but also ensures compliance and efficient record-keeping.

FAQs

What Happens if Someone Does Not Cast a Vote?

If someone does not cast a vote, it typically means they abstain from the decision. Depending on the company’s rules or the resolution’s specifics, this may either count as a non-approval or be ignored in the final tally.

Are Circular Resolutions Legally Binding?

Yes, circular resolutions are legally binding as long as they follow the proper procedures outlined in the company’s bylaws and applicable laws. They carry the same weight as resolutions passed at a formal meeting.

Can a Circular Resolution Be Amended Once Sent Out?

Yes, a circular resolution can be amended, but this typically requires the consent of all parties involved. If amendments are made after the document is circulated, the updated resolution should be re-sent for signatures.

What Happens if the Deadline for Voting is Missed?

If the voting deadline is missed, the resolution may be considered invalid unless all shareholders agree to extend the deadline. It’s crucial to set a clear deadline to avoid this situation.

Can Circular Resolutions Be Used for Any Type of Decision?

No, circular resolutions are typically limited to matters that can be resolved without the need for a meeting, such as routine decisions or urgent matters that require quick approval. Some company bylaws may restrict their use.

Can Electronic Signatures Be Used for Circular Resolutions?

Yes, electronic signaturesare generally acceptable for circular resolutions, provided they comply with applicable laws and the company’s internal policies or bylaws.

Author:

Rezvan Golestaneh