What Are Circular Motions?
When the board of directors of an organization signs a document with wording implicating that they are in favor of the proposed resolution, it’s called a circular motion.
Companies with established procedures will utilize circular motions instead of passing a resolution at a convened board meeting. Circular motions are appropriate for routine resolutions that rouse no contention or controversy and must be passed between board meetings.
A circular motion might also be passed if an issue is pressing, requires immediate action, and can’t wait until the next board meeting.
Let’s take a closer look at the ins-and-outs of circular motions:
Some Basic Ground-Rules
Issuing a circular resolution falls in the lap of the board’s Chair. If the Chair is unavailable, these motions are then undertaken by a Secretary acting on their behalf.
Regardless of who’s charged with the above duty, they must clearly establish the timeframe and format for voting. Then, when the Chair (or Secretary) is aware of the outcome of the circular resolution, they’re responsible for communicating the result to board members.
It’s suggested practice to record the minutes of the outcome and issue it with the next available resolution number. Experts on board functionality emphasize the importance of taking these actions within 30 days of the resolution’s approval – or before the next meeting (depending on what takes less time).
Use Circular Resolutions Sparingly
The only way a circular motion should be reached is if absolutely zero discussion is required for all board members to be on the same page.
Yes, circular motions provide brevity and time-efficiency. But, by definition, these resolutions eliminate conversation from the entire equation.
So, even if an issue arises that merits minimal conversation, the board should call for an emergency meeting. Also, it’s good practice for the committee to unanimously agree on the next form of action once a member opposes the use of a circular resolution.
Now, there’s no questioning the overall usefulness of a circular motion. Boards should just avoid being too flagrant with the implementation of this tactic.
Other Considerations for Circular Motions
It’s integral to define what kind of decisions can be reached using a circular motion or resolution.
From there, boards should decide on the minimum votes required to necessitate the passing of a recommendation. Many boards of directors adhere to a majority vote system of 51%.
Lastly, there’s the matter of the correct form of response expected from a committee member. Some boards of directors use receipts of a signed consent form via mail or email. Others deliver consent through email, voting buttons via email, or verbally.
Though, a way to deliver consent through a circular motion that’s becoming increasingly popular is the use of an electronic board portal.
Boards of Directors Will Save Time and Money with Circular Motions
The time of company directors is incredibly valuable and shouldn’t be wasted on issues that could have already been handled.
As such, properly implementing circular motions will trim some of the proverbial fat from board meetings, so its members can focus on what matters most to the company.