Drafting Board Resolutions

The ICSI
Defects in legal language
Resolutions for board and general meetings of companies are as cumbersome to read and
burdensome to understand as any other legal document. They possess all defects of archaic
legal language, namely –
1. Verbiage: An excess of words beyond those needed to express concisely what is meant;
wordiness.
2. Legalese: the conventional language of legal forms, documents, etc., involving special
vocabulary and formulations, often thought of as abstruse and incomprehensible to the layman.
3. Long-windedness: Speaking or writing at great length (often tiresome) length; tiresomely
long.
4. Circumlocution: Use two or more words where one would be enough and a group of
words where a single word would do the job.
5. Jargon: Words or expressions that are used by a particular profession or group of people,
and are difficult for others to understand.
6. Archaism: Use of words and phrases that most people are not familiar with and words which
have no special legal meaning but have legal flavour or which are pompous and heavy.
7. Passivism: Overuse of the passive voice instead of the active voice.
8. Negativism: Putting ideas in negative language rather than positive.
9. Latinism: Needless use of non-English (mainly Latin) words and phrases.
10. Tautology: Needless repetition of an idea in a different word, phrase, or sentence.
11. Nominalisation: Use verbs instead of nouns.
Look at the following resolution
RESOLVED THAT, subject to the requisite approval of the shareholders of the Company
under section 293(1) (e) of the Companies Act, 1956 and such other provisions of that Act as
may be applicable or any statutory modifications or re-enactments thereof for the time being
in force and also such other approvals, sanctions, permissions as may be necessary, the approval
be and is hereby accorded to the company contributing to charitable and other funds not
directly relating to the business of the Company or the welfare of its employees, any amounts
the aggregate of which will, in any financial year, not exceed Rs. … (Rupees …), over and
above fifty thousand rupees, or five per cent, of its average net profits as determined pursuant
to the provisions of sections 349 and 350 of Companies Act, 1956 during the three financial
years immediately preceding, whichever is greater and an extra-ordinary general meeting of
the Company be convened to be held on ........, at .... am/pm, at ..... ..... and RESOLVED FURTHER
that the Company Secretary be and is hereby authorised to issue notice thereof to the members
of the Company in accordance with the provisions of the Companies Act, 1956.
This mammoth 196-word resolution, flouting all norms of writing in plain language, is a
classic example of cumbersome drafting of resolutions. With a few changes, we can make this
resolution a bit more readable. Now look at the following rewrite of the above resolution.
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The Board approves the proposal of the Company contributing
to charitable and other funds not directly relating to its business
or the welfare of its employees, upto Rs. … (Rupees …), over Rs.
50,000 or 5% of the Company’s average net profits (calculated
according to sections 349 and 350 of the Companies Act 1956 (‘the
Act’) during the last three financial years (…), whichever is
greater, in any financial year, subject to:-
(a) the Company sanctioning the proposal at a general
meeting by an ordinary resolution under section 293(1)(e)
of the Act ;
(b) other necessary approvals
The Board also approves the convening of an extraordinary
general meeting of the Company to be held on
........, at .... am/pm, at ..... ..... and authorizes the Company
Secretary to issue notice of the meeting to the members of
the company in accordance with the provisions of the Act
and the Articles of Association of the company.
What’s happening in the English speaking nations
Legal language is a cause of concern to almost all its readers the
world over (including lawyers and judges). The Law Reform
Commission of Victoria (Australia) voiced its concern and anguish
about the state of legal language, in its report entitled Plain
Language and the Law (1987), in these words: “The language of the
law has long been a source of concern to the community. It has
been the subject of continuous literary criticism and satire. Critics
have highlighted its technical terms, its convolution and its
prolixity. These faults have been noted by judges and by
practicing and academic lawyers as well. Calls have regularly
been made for the use of a more simple and straightforward
style. Some improvements have been made in response to those
calls. But legal language remains largely unintelligible to most
members of the community. It even causes problems for members
of the legal profession. In some cases, the obscurity may arise
from the complexity of the law and of its subject-matter. In other
cases, however, it is due to the complexity of the language in
which the law is expressed. Some lawyers do not take sufficient
care to communicate clearly with their audience. Letters, private
legal documents and legislation itself are still drafted in a style
which poses unnecessary barriers to understanding.”
While the plain English movement has now taken deep roots in
the five English-speaking nations (US, UK, Canada, Australia
and New Zealand), in India, regrettably, we write legal language
in the same old style that the legal writing has tightly seized for
over a century. All these five nations (and all States) have their
Legislative Drafting Manuals and they all have one thing in
common, that is, emphasis on the use of plain language in
legislative drafting. For example, one of the Manuals
recommends: “The most important principle in drafting a bill is that
the finished products accurately accomplish the intent of the author. The
failure to accomplish the intent of the author is often the result of failing
to follow the essentials of good bill drafting. Those principles are: Accuracy,
brevity, clarity, and simplicity. The purpose and effect of a bill should be
evident from its language. A bill should not be written in legalese, but
should be drafted in terms a person without any special education or
qualifications should be able to comprehend. Thus, a drafter should use
words that are plain and commonly understood and convey the intended
meaning to every reader.”
Motions and resolutions
A major part of company secretarial drafting consists of
resolutions for various occasions and different subjects, to be
proposed at various types of meetings. Those who are supposed
to read, or who are likely to be affected by, the resolutions, almost
always turn away from them. Most resolutions flout all plain
language rules; they all have all the defects of cumbersome legal
language that have been mentioned above.
Resolutions are set out in two documents: (1) notices or agendas
of meetings; and (2) minutes of meetings. Motion is a proposal
formally put before a meeting for discussion; a formal proposal
to be discussed and voted on at a meeting. Usually members of a
company who attend a meeting of the company receive notice of
a motion. Generally, a motion relates to some action to be taken
or issue of policy to be decided. It is ‘moved’ or ‘proposed’, ie put
forward for consideration and discussion of the meeting. It is
then discussed and put to vote. If the motion is finally passed, it
becomes a ‘resolution’ (because the meeting so ‘resolves’ or
decides).
A resolution, then, is a motion which has been carried. Resolution
means a formal expression of opinion or intention made, usually
after voting. It is a binding decision made by the members of a
company. Resolution arises from a motion moved at a meeting.
If the motion is passed by a required majority of the members of
the company, it becomes a resolution. If the meeting decides to
amend the motion, the amended motion, known as the
substantive motion, is then discussed and voted upon. If a motion
is put before the members of a company at a general meeting
and the required majority vote in favour of it, the motion is
passed and becomes a resolution. In the Companies Act, the term
‘resolution’ is also used to denote a motion; the Act does not
make a distinction between the two terms. That is why in all
respects in relation to board or general meetings, it is customary
to use the term ‘resolution’ even at the stage prior to the moving
of a proposal, e.g., in the notice of a general meeting or agenda of
a Board meeting. Even at a general meeting, what is proposed is
a resolution and not a motion though at that stage it is in the
nature of a motion.
Style of writing minutes
The term ‘minutes’ (used in plural) denotes an official record of
what was said and done at a meeting, convention, etc; the official
record of the proceedings at a meeting; a summarized record of
the proceedings at a meeting. It denotes records of business
transacted at general meetings, board meetings, and meetings of
committees of directors. Minutes contain record of proceedings of
meetings, including decisions taken and resolutions passed at it.
Drafting Company Resolutions
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Every company is required, under section 193 of the Companies
Act, to keep minutes of all proceedings of-
􀂄 every meeting of the Board ;
􀂄 every meeting of every Committee of the Board ; and
􀂄 every general meeting.
Section 193 of the Companies Act requires the minutes of each
meeting to contain a fair and correct summary of the proceedings
thereat.
The Act does not give any guidance as to the style of drafting
minutes. Conventionally, there are two styles of minutes: (1)
minutes of resolutions; and (2) minutes of narration. It is often
useful and appropriate to combine elements of the two.
A resolution included in the notice or agenda of a meeting is a
proposal (to be considered in the future) whereas a resolution
recorded in the minutes is decision taken (in the past).
Traditionally, a resolution written in both these documents is
the same though one is for the future and the other is of the past.
Both are written in the present tense. The difference is only in the
preamble. For example, in the notice of a Board meeting, it is
usually written: “The following resolution shall be (or ‘will be’)
placed before the Board.” And in the notice of a general meeting
it is written: “To consider and pass the following resolution as an
ordinary resolution.” After the meeting, the minutes usually state:
“The following resolution was passed unanimously (or ‘by
majority’).” So, the text of the resolution as stated in the notice/
agenda and as recorded in the minutes is the same.
In The Law and Practice of Meetings by Sheckleton, 8th edition, it is
stated at page 76: “The past tense should be used to record events
at the meeting, e.g. “It was reported that,” and the past perfect
tense for events prior to the meeting, e.g. “Mr. X reported that he
had completed this survey.”
On the use of the words ‘Resolved That’ in a resolution, Horsely’s
Meetings- Procedure, Law and Practice, 4th edition. At page 211 states:
“The term ‘minutes of resolution’ is self-explanatory. Such
minutes are confined to the actual words of the resolutions which
have been passed. This is often all that is necessary. The precise
words of each resolution are preceded by two opening words,
namely, ‘Resolved that’. The word ‘Resolved’ is often emphasised,
for example, it is all in capital letters, underlined or italics. This
emphasis ensures that the resolution is brought immediately to
the attention of each person who reads the minutes, including
anyone absent from the meeting, that these decisions were made,
each having a consequential effect, some of them involving action
to be taken; …”
Thus, there is no legal significance or special reason for the use of
the words ‘Resolved That’. It is merely a manner of style and the
style can be changed for the better. Therefore, the omission of
these words wouldn’t result in an illegality and or render the
resolution invalid or ineffective.
At page 216 of Horsely’s Meetings- Procedure, Law and Practice, it
is stated: “When a meeting resolves to take a certain action which
is carried into effect immediately, for example, to elect a person
to office, this needs to be made clear in the minute, which should
read, for example, ‘… be, and is hereby, elected’, or ‘… rate of
subscription be, and it is hereby, increased from … to … ‘. This
form of wording is used only when the transaction is entirely
completed upon the resolution being passed.”
The practices of recording resolutions in the minuets, as
exemplified in text books and precedents, differ. For example,
some books suggest that the resolutions should begin with the
words ‘It was resolved that’ instead of ‘Resolved that’.1 Some
books omit the word ‘Resolved’ and begin with only ‘That’.2
Some authors don’t use the phrase ‘be and is hereby’, others do
use it.
Thus while the law is silent on the style of drafting resolutions,
the practices differ and there is no single style that can be called
an ideal one. The ICSA Meetings and Minutes Handbook3 states:
“Thus, although certain conventions are normally followed, the
presentational style can be tailored. The preferences of the
chairman will usually be the most influential. What can never be
compromised, however, is the principle that the minutes should
contain an accurate record of the decisions taken.”
While minutes contain a record of a past event, the narration of
the proceedings has to be in the past tense, but the text of the
resolutions as passed ought to be in the present tense. In other
words, while the narration should be in the indirect (or reported
speech) the text of the resolutions to be recorded should be in the
direct speech. It is, therefore, justifiable to frame the resolutions
in the present tense, active voice and plain English. For example,
there is nothing wrong if the text of the resolution as placed
before the Board’s meeting states, “The Board authorizes the Secretary
to …”, instead of “The Secretary be and is hereby authorised to ….”
Likewise, if a resolution for the appointment of a director would
be perfectly in order if it written thus: “The Board/Company appoints
Mr. … as a director of the Company” instead of “RESOLVED THAT
Mr. … be and is hereby appointed as a director of the Company.”
The words ‘be and is/are hereby’ seem to be employed to indicate
that resolution is in the nature of both proposal and decision; the
words “be …” (e.g. ‘be … hereby appointed’) indicate that there
is a proposal to be moved at the meeting and the words “is …”
(eg ‘is appointed’) indicate that it is decision taken at the meeting.
It is thus a short-cut. Absurdly, however, the wording indicating
both proposal and decision remains unchanged in both versionsone
written in the notice or agenda and the other written in the
minutes. To be precise, it should be different- ‘be appointed’ in
the notice or agenda (the future action) and ‘is appointed’ in the
minutes (the past action). On the contrary, if the resolution is
1. Sheckleton on The Law and Practice of Meetings, 8th edition, page 77;
One Stop Meetings by David Martin, a publication of the Institute of
Chartered Secretaries and Administrators, UK.
2. For example, see The Encyclopaedia of Forms and Precedents, 5th
edition.
3. A publication of the Institute of Chartered Secretaries and
Administrators, UK, 2001, page 337.
Drafting Company Resolutions
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worded like The Board/Company appoints Mr. … as a director of the
Company, in the notice/agenda it will be preceded by the words
The following resolution will be considered at the meeting and in the
minutes they will be preceded by the words The following resolution
was passed at the meeting.
The word ‘hereby’ makes no contribution in any writing,
including resolutions. It only adds to wordiness. Hereby means
at this moment, with these means, as a result of this statement. In
the context of resolutions, it means nothing more than ‘at this
meeting’ or ‘by this resolution’. There is no need to say that.
When you include a resolution in the notice or agenda and record
it in the minutes of a specific meeting, it goes without saying that
the resolution was passed at that meeting and not at any other
meeting.
There is no justification in writing resolutions in the traditional
complicated language. If one wishes to make resolutions readable
without causing any harm to the essence or substance of the
resolution, one should follow the plain language guidelines
besides the specific guidelines mentioned below.
If you follow the general guidelines of plain English, your
resolution will become a readable, intelligible and digestible piece
of writing and people will appreciate it; that will enhance your
image in the organization as Company Secretary, or as Practising
Company Secretary, and will have a positive impact on your
position and career. Try it! And get rid of the notion that resolutions
ought to be written in a complicated way and that a resolution
written in plain and simple English is invalid or ineffective.
Finally it is desirable that the Institute of Company Secretaries
of India initiates action for changing the style of drafting
resolutions, and consider bringing out either a Secretarial
Standard or a Guidance Note on “Drafting Resolutions and
Minutes in Plain Language.”
General guidelines for drafting in plain language
1. Use plain words and phrases that most people are familiar
with.
2. Keep sentences short, not more than 15-20 words.
3. Avoid verbiage. Eliminate words which are superfluous.
4. Prefer single word instead of a group of words.
5. Replace legalese (words which have no special legal meaning
but have legal flavour) by simple, familiar words.
6. Prefer active voice unless passive voice is more effective.
7. Avoid non-English (mainly Latin) words and phrases.
8. Avoid archaic, outdated, old-fashioned words and phrases.
9. Do not use two or more words where one would be enough.
10. Use verbs instead of nouns.
Specific guidelines for drafting resolutions in plain
language
(1) Don’t use the phrase be and is/are hereby. Instead, use just is/
are.
(2) Don’t use legalese, such as hereby, herewith, hereof, thereof,
notwithstanding, whereas, the said, aforesaid, accorded, etc.
(3) Use plain alternatives for trite words and phrases.
(4) Prefer active voice, unless passive voice is desirable or
necessary; eg instead of approval be and is hereby accorded, say
the Board approves.
(5) Keep sentence length limited to 20-25 words. Use lists with
numbers or bullets to break long sentences.
(6) Don’t use the phrase For the purpose of considering, and if
thought fit, passing, with or without modification(s), the following
resolution as an Ordinary Resolution (or its twin To consider,
and, if thought fit, to pass, with or without modification(s), the
following resolution as an Ordinary Resolution. This wordy
phrase is a needless appendage without meaningful
contribution and not legally required. Firstly, the words for
the purpose of considering, and if thought fit have no useful
purpose to serve because it goes without saying that a
resolution proposed at a meeting is for the purpose of
considering before it is passed. The act of passing inevitably
contemplates consideration of the resolution; so there is no
need to say all that. Secondly, it has been a well settled
principle about company meetings (or any other formal
meetings) that those who are entitled to pass a resolution
also have the right to modify it (subject to certain limitations
with regard to special resolutions); so, there is no need to
say that.
(7) Don’t use “RESOLVED THAT”. This archaic phrase is
misleading when used in the agenda or notice because the
word “resolved” is the past tense of ‘resolve’; when you
include a resolution in the agenda or notice, it is in a draft
stage yet to be considered by the board/committee/general
meeting. Just start with the main verb and write the whole
sentence in the active voice. This makes it possible to avoid
the passive construction which is a common (but evil) feature
of resolutions.
(8) Don’t use phrases like FURTHER RESOLVED THAT, ALSO
RESOLVED THAT. Instead, divide the text in sub-paragraphs
and number them after IT IS RESOLVED THAT at top.
(9) Don’t use such archaic phrases as Subject to the approval of the
Company by a special resolution at a general meeting and
confirmation of the Company Law Board under section 17 of the
Companies Act, 1956, Subject to necessary approvals, permissions,
consents, ... etc. This is unnecessary as it is axiomatic that
every decision of the board, a committee or the company in
general meeting is subject to (conditional on) the necessary
compliances or approvals, permissions, etc., that may be
required under the Companies Act, other Act, Rules,
Regulations, Listing Agreement, agreements with other
parties (eg financial institutions, etc.), articles of association,
etc. It need not be a part of the resolution. It is absurd to say
that a resolution is invalid if the above (and similar other)
phrase is used.
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(10) Omit all unnecessary words, phrases and sentences which
contribute nothing to the substance of the resolution. For
example, after “the Companies Act, 1956” the words
(including any statutory modification(s) or re-enactment thereof
for the time being in force) contributes nothing. At the most
say the Companies Act, 1956 or the new Act, if enacted in its
place.
(11) Avoid the phrase “The Board of Directors be and is hereby
authorised to do and perform all such other acts, deeds and things
as may be necessary or desirable to give effect to this resolution.”
This is unnecessary as when you authorize the Board or any
other person, other acts, deeds and things are incidental or
ancillary and are implied in the general authority conferred.
At the most, write “The Board is also authorised to do everything
that may be necessary to implement this resolution.”
(12) Prefer plain words and phrases to the conventional heavy
words.
(13) Avoid separating the parts of a sentence, clause or phrase,
or the parts of a compound verb, by inserting another verb,
clause or phrase.
(14) Use minimum capital letters; don’t use capital letters for
general words, such as annual general meeting, extraordinary
general meeting, ordinary resolution, director,
chairman, etc., used in the text of the resolution.
(15) Prefer is/are to be, unless be is necessary where it is used for
an action that would take place in future, e.g., It is resolved
that an agreement be entered into; or It is resolved that Equity
Shares of the Company be de-listed.
(16) Use one-word alternatives rather than a group of words,
such as directorship for office of director.
(17) Give details which are nothing but formal appendages,
which contribute nothing to the substance of the
resolution, separately, even below the resolution with
asterisk or note, or in the preamble or explanatory
statement such as the agreement a copy of which duly initialed
by the chairman was placed on the table; in respect of whom the
company has received a notice under section 257 of the
Companies Act, etc.
(18) Use acronyms and abbreviations, for the words and phrases
which occur repeatedly in the resolution, such as the
Companies Act, 1956, annual general meeting, memorandum
and articles of association, etc.
(19) Get rid of the notion that a short resolution is a crime or
that it is invalid and that a resolution has always to be
clumsy, involved and unintelligible piece of writing.
For sample resolutions in plain English, [refer pages 581 and 891
of Volume XXXVI of (January to December 2006) of Chartered
Secretary]. 􀂉
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