What is the significance of Board Meeting?
With reference to Companies registered in India, conducting a Board Meeting is mere compliance of law by word and not by the spirit of it especially where family members are on the Board. From a business point of view taking decisions is very important for running the business as it creates a major impact on the Company. The Board of Directors being the collective and united brain of the Company should take prompt decisions for the benefit of the company.
Board Meeting is not an easy thing to just put in paper. Further no single person can take any decision which has an impact on the business be it good or bad. For making decision making and to discuss such things for the benefit of the company the Directors should meet in a formal or official forum where study/strategic decisions are to be taken.
Generally the actions taken by the company is backed by the Board. However there are certain situations where the Board of Directors can make decisions as they are involved in day to day activities of the company. Certain decision making power can also be given to committees and subcommittees.
The Meeting of the Board must be held frequently at regular intervals for periodic performance assessment or valuation of the company and to figure out the strategies for making managerial decisions for future endeavors and achievements. The directors may meet in casual manner regularly for the discussion and transaction of business.
Advance planning is very important for conducting Board Meeting. Practically in a big sized company where Directors availability is tough, planning for a Board Meeting is very tedious and crucial. Those Companies should plan the Meeting well in advance. Being the brain of the company a proper mechanism is required to be followed for conducting Board Meeting.
It is believed that the main work of Boards takes place officially through their formal Meetings. However the real fact is that most of important Board work or key decisions are taking place before and after the Meetings i.e., during the course of business. Yet, the quality of formal Board Meetings makes a considerable difference to the Board’s success. Number of poorly run Meetings can suppress the commitment of even the dedicated people who contribute to the success of the organization. Meetings that are weakly organized, prolonged unnecessarily, deviating from the point, personal conflicts or overassertive individuals will affect people which can cause serious damage by leading to inadequately or weak decisions. The Board Meetings should be productive and beneficial as possible and reap the benefits.
Following are the practical challenges faced while conducting Board Meeting:
Scenario 1:
Notice for the Board Meeting is served to the directors. But one of them could not attend the Meeting due to preoccupation of work and he knowing about this inability to attend the Meeting in advance did not give any intimation to the Board. In this regard how granting leave of absence be given to him and how to record the same in minutes?
Inference:
However in practical scenario, even though no proper intimation is given it is recorded in minutes as grant of leave of absence is given to such director.
Is intimation giving a mandatory requirement is also another question which arise. Yes. As per SS1 4.2 Leave of absence can be granted to a Director only when a request for such leave has been communicated to the Company secretary or to the Chairman or any other person authorized by the Board to issue Notice of the Meeting.
However apart by abiding with the law there should be some ethics where the director should give a prior intimation of his inability to attend the Meeting. Further after giving such intimation, if he wants to attend the Board Meeting he has all the rights to attend the Meeting
Scenario 2:
In a private Company where there are only two directors (fulfilling the minimum requirement of law). The Board Meeting is scheduled on 1st March, 2020 and Notice and Agenda are served for both of them on 21st February, 2020 through email. One of the directors gives intimation of his inability to attend the Meeting on 28th February, 2020. Hence the Meeting is called back or cancelled by giving intimation to the Directors. However he comes on the date of Meeting to the venue as mentioned in notice. Can the Meeting happen?
Inference:
No the Meeting cannot be conducted. However another Meeting of the Board can be conducted by serving fresh notice and agenda. In this case the Meeting was cancelled and not adjourned as intimation of cancellation was made to the Directors. Had the Meeting was not cancelled then the Meeting shall be adjourned.
When the items of business for which Board Meeting was convened have been altered or become non-existent than Board Meeting convened may be cancelled by serving notice to directors. The Articles of Association of the company may provide provisions regarding cancellation or postponement of Board Meetings.
Scenario 3:
Same scenario as above but the director who gave prior intimation about his ability to attend comes on back on 26th February, 2020 and asks for conducting the Meeting which was cancelled. Can the Meeting be conducted?
Inference:
No the same Meeting cannot be conducted. However another Meeting of the Board can be conducted at a later date by serving fresh notice or can by giving a shorter notice schedule a fresh Meeting on the same day. However in this case the Meeting was cancelled and not adjourned. Subsequent Meeting with same agenda items shall be considered as a new Meeting.
Scenario 4:
Notice for the Meeting is served on 21st February, 2020 for the Board Meeting scheduled on 1st March, 2020.The facility for Video Conferencing was not provided and hence the same was mentioned in the notice. After serving the Notice the Board wants to give the facility of Video Conferencing to directors. How can it be done?
Inference:
No because intimation for the participation through Video conferencing should be given in prior by the Directors. Suppose after sending Notice if the Board wants to given Video Conferencing facility can a separate note be sent to all the Directors is also a question.
Scenario 5:
In a private Company where there are 3 directors. Notice is served on 21st February, 2020 for the Board Meeting scheduled on 1st March, 2020.The facility for Video Conferencing was provided and hence the same was mentioned in the notice. One of the directors gives intimation to the Board about his participation to Meeting via Video Conferencing. Subsequently on the day of Meeting due to technical issue the facility of Video Conferencing couldn’t be provided. How can that director participate? Will he be considered as absent or will the Meeting be cancelled or adjourned?
Inference:
The Director holds all the rights to participate in the Meeting. Just because there is a technical issue in providing Video Conferencing his right can’t be denied. So in this case will the Meeting be adjourned or the Director considered absent? It is up to the Director who is participating through Video Conferencing. If he wants to absent himself or all the Directors unanimously can adjourn the Meeting.
Scenario 6:
In the above mentioned scenario, say there are only 2 directors instead of 3. Does the Meeting be adjourned or cancelled?
Inference:
The Meeting shall stand adjourned because one person cannot be considered quorum in this situation.
Scenario 7:
Is the notice calling for the Board Meeting required to state that the Meeting is being convened at a short notice?
Inference:
Yes, as per Secretarial Standards-1 effective from 1 July 2015, a company is required to state the fact that the Board Meeting is convened at a short notice in the notice calling the Meeting. However, the Companies Act, 2013 is silent in this regard.
Scenario 8:
In the above scenario, the notice served at short notice calling for the Board Meeting does not specify the same. Does the Meeting held invalid?
Inference:
No practically the Meeting cannot be held invalid. However the penal provision if any for any defect in notice shall apply.
Scenario 9:
A private Company where there are 2 Directors. They decide to have a Board Meeting through Video Conferencing from their respective places. Can the Board Meeting be conducted through Video Conferencing and no venue to be specified in the Notice? If yes then while recording in minutes, will it be recorded as the Board Meeting was held through Video Conferencing and no venue required to be specified?
Inference:
As per the Law, Notice should specify the venue of the Meeting. However the Directors can participate through Video Conferencing. In this case, place of either of the Directors shall be mentioned in the minutes as the venue of the Meeting. In Notice a venue should compulsorily specified be it registered office or either of the Director’s places or any other place.
Scenario 10:
Can a Company restrict a director from participating in a Meeting through video conferencing if he has not given an intimation of participating in the video conference Meetings at the beginning of the year?
Inference:
No, a company cannot restrict a director from participating in a Meeting through video conference if he has not given intimation at the beginning of the year. An intimation given to the company or chairman on receipt of the notice calling the Board Meeting would suffice the requirement for attending the Meeting through Video Conferencing.
Scenario 11:
Can a Director attend Board Meeting through telephone or other audio means?
Inference:
If the director participates in the Board Meeting through videoconferencing or through audio-visual means which cannot be recorded, recognized or stored, then the director has not attended such Meeting. Further a director is attending a Meeting of the Board through teleconference then the director has not attended such Meeting.
Scenario 12:
A private Company where there are 2 Directors. A Meeting of the Board is scheduled for 3rd March, 2020 and Notice was served on 23rd February, 2020. A Director is appointed with effect from 1st March by way of Circular Resolution dated 1st March, 2020. Can he attend the Board Meeting?
Inference:
Yes. He can attend the Meeting as the Director of the Company.
Scenario 13:
A private Company where there are 2 Directors. A Meeting of the Board is scheduled for 3rd March, 2020 and Notice was served on 23rd February, 2020. A Director gives his resignation letter on 1st March. However the effective date of resignation is 5th march, 2020. Can he participate in the Meeting?
Inference:
Yes. His directorship stands valid as on the date of Meeting. Hence he hold all the rights to attend the Meeting.
Scenario 14:
What will be recorded as the scheduled venue of the Board Meeting if the Meeting is entirely conducted through video conferencing?
Inference:
According to Rule 3(3)(6) of the Rules, the scheduled venue of the Meeting as mentioned in the notice convening the Meeting shall be deemed as the place of the Meeting and all recordings of the proceedings of Meeting shall be deemed to be made at such place only.
Scenario 15:
Whether a Director should attend at least one Board Meeting physically in 12 months from the date of his appointment? If yes then his seat stands to be vacated if he does not attend any meeting physically. Attending Meeting through video conference is not counted as attending physically?
Inference:
According to Section 167 (1) (b) of Companies Act, 2013, the office of a Director shall become vacant if he absents himself from all the Meetings of the Board of Directors held during period of 12 months. The director shall vacate if he does not attend at least one Meeting in the calendar year. This provision does not specify that the Director should attend Meeting in person; therefore it is suggested to have at least one Meeting of Board by way of Video Conferencing.
Scenario 16:
Practically there are various difficulties faced by the Board with regard to quorum. Says a private company where there are 2 directors and 1 stays abroad. How can an accounts approval Meeting can happen?
Inference:
Appoint a director as Additional Director or Alternative Director in India or that director in abroad should come to India.
Scenario 17:
When an original director attends the Meeting through VIDEO CONFERENCING and alternative director attends physically. Who shall be counted for the quorum?
Inference:
A Meeting where Video Conferencing facility is provided, the Original Director holds all the rights to attend the Meeting through Video Conferencing as Notice is also served to him. On the other side the Alterative Director also holds all the rights to attend the Meeting. He cannot be considered as an invitee to the Meeting just because the Original Director participates in the Meeting through Video Conferencing. There is an ambiguity in this regard.
Scenario 18:
What if the Meeting has only one director while another one sends an email that mentions their stand in several agenda items instead?
Inference:
It can’t be considered as Meeting a quorum. Concept of appointing a proxy is not present in Board Meeting because the main objective of having a requisite quorum to conduct a Board Meeting is to have enough authority present to take key decisions while keeping personal agendas from overtaking the organization’s interest and well-being. The requisite quorum should be present.
Scenario 19:
Practically there are various difficulties faced by the Board with regard to quorum. Says a private company where there are 2 directors and 1 stays abroad. How can an accounts approval Meeting can happen?
Inference:
Appoint a director as Additional Director or Alternative Director in India or that director in abroad should come to India.
Scenario 20:
Sitting fees payable to Director who attends the Meeting through Video Conferencing?
Inference:
Yes. Sitting fees shall be paid to such Directors for attending the Meeting, be it physical or through Video Conferencing.
Author Bio
Really awesome . Thank you 👍👍
Very well written article, covering all aspects of Board meeting.