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Companies Act, 2013- A Tour on Board Meeting

Board Meetings are considered to be important part of every organisation in building Strong Financial Position, Qualitative Management Decisions, Customer Relationship Management (CRM), Employee Relationship, Future Prospects of the Company and many more in the bucket.

N. Vimal Kumar Jain

Introduction

Board Meetings are considered to be important part of every organisation in building Strong Financial Position, Qualitative Management Decisions, Customer Relationship Management (CRM), Employee Relationship, Future Prospects of the Company and many more in the bucket.

To keep it simple, the Board Meetings are considered to be an exchange of ideas, information’s and decisions among the top level management personnel for formulating and implementing the working plan for running the Company. In light of above, to safeguard the interest of the Stakeholders and Companies business, several statutory prescriptions are incorporated in the Companies Act, 2013, which mandates every company to compulsorily conduct meeting in order to ensure the actions approved by the Board are in the interest of the company and reflect the fiduciary nature of the duties of directors.

To understand this, lets us go on a tour of Companies Act, 2013 to explore the provisions of Board Meeting and find out the important aspects relating to it in the legal terminology.

A. Meeting of the Board

1. The Phrases from the Act  

As per the provisions of the Companies Act, 2013 “Every Company (private or public), shall hold the first meeting of the board of directors within 30 days of the date of its incorporation and thereafter hold a minimum number of four meeting of its board of directors every year in such a manner that not more than 120 days shall intervene between two consecutive meetings of the Board”.

2. Statutory Requirements

♣ The Board Meeting can even be attended either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognizing the participation of the directors and of recording and storing the proceedings of such meeting along with date and time;

Provided that the following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means:

a.      The approval of the annual financial statements;

b.      The approval of the Board’s report;

c.       The approval of the prospectus;

d.      The Audit Committee Meetings for consideration of accounts; and

e.      The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

♣ The meeting of the board shall be called by giving not less than 7 days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic media;

♣ Meeting of the Board may be called at shorter notice to transact urgent business of the company.

B. Quorum of the Board Meeting

1. Directors Presence

As per the provisions of the companies act, 2013, the quorum for a board meeting shall be one-third of its total strength of directors who are in office or two directors whichever is higher and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purpose of quorum. If the above criteria are not met for the want of quorum then the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place. If there is no quorum at the adjourned meeting also, the meeting shall stand cancelled.

2. Leave of Absence:

Leave of Absence shall be granted to a director only when a request for such leave has been received by the Chairman and the same shall be tabled before the board in the meeting for the record.

3. Interested Director

Interested director to a contract or arrangement can attend the meeting but will not be counted for the want of quorum.

C. For the Directors

1. Disclosure of Interest by Director

  • Every Director shall at the first Board Meeting of the Board in which he participates as a Director and thereafter at the first Meeting of the Board in every financial year or whenever there is any change in the disclosure already made, then at the first Board Meeting held after such change, the director need to disclose his concern or interest in any Company or Companies or Bodies Corporates, Firms, or Other Association of Individuals which shall include the shareholding, in the Form MBP 1 which need to be laid before the board for record as per the requirement of the Act.
  • Every director of the Company shall disclose the nature of his concern or interest at the Board Meeting in which the contract or arrangement is discussed and may participate in such meeting.

2. Vacation of Office of Director

  • The office of the director shall become vacant in case the director absents himself from all the meetings of the board held during a period of twelve months with or without seeking leave of absence of the board. Thus, leaving him disqualified from being appointed as director of the company.
  • The office of the director shall become vacant if he acts in contravention of the provisions of Disclosure of Interest by Director relating to entering into the contract or arrangements in which he is directly or indirectly interested,
  • The office of the director shall become vacant if he fails to disclose his interest in any contract or arrangement in which he is directly or indirectly interested, in contravention of the provisions of Disclosure of Interest by Director.

D. Minutes of the meeting

Minutes of the meeting can be maintained either in electronic or physical form. The minutes shall be prepared by the chairman of the meeting after briefing about the back ground of all proposals and summarise the deliberations thereof. The minutes shall contain a fair and correct summary of the proceedings of the meeting. The minutes should be entered in the minute’s book within 30 days from the date of conclusion of the meeting. Minutes shall be signed by the chairman of the meeting and the signed minutes shall be circulated to all the directors within 15 days after these minutes are signed.

If minutes are once entered in minutes books and signed by the chairman shall not be altered at any cause. Any alteration in the minutes shall be made only by way of express approval of the board at its subsequent meeting in which such minutes are sought to be altered.

E. Penal Provisions

  • Every officer of the Company whose duty is to give notice under this provisions and who fails to do so shall be liable to a penalty of Rs.25, 000.
  • If any default is made in complying with the provisions of the act In respect of Board Meeting, the Company shall be liable to a penalty of Rs.25, 000 and every officer of the company who is in default shall be liable to a penalty of Rs.5, 000.
  • If a person is found guilty of tampering the minutes of the proceedings of the meeting, he shall be punishable with imprisonment for a term which may exceed to 2 years and with fine which shall not be less than Rs.25, 000 but which may extend to Rs.1, 00,000.
  • If a director of the Company contravenes the provisions of Disclosure of Interest by director then he shall be punishable with imprisonment for a term may extend 1 year or fine which shall not be less than Rs.50, 000 but may extend to Rs.1, 00,000 or both.

The End…

It has been well noted from the above requirements of the Act that, any default made in complying with the provisions of the Act, it may cause serious liabilities to the Companies and its Officers and upon continuing these defaults, the directors may trigger the vacation of directorship and disqualification of director’s clause which may be detrimental to the interest of the Company. Apart from directors and officers the onuses also rest on the professionals to guide the Company and its qualified team to follow the law and also suggest some paths for adopting policies of good Cooperate Governance in the order to safeguard the interest of the stakeholders.

Well it is understood that the new company law is not so conversant, yet this should not become a reason for the law makers to clean their hands in the holy water of Ganga and catch Corporates. Thus, Corporates should take up these provisions of the Board Meetings in a positive way and look forward to comply with the requirements of the act, in order to stay complaint in the eyes of law makers.

(Author is a CA FInal Student from Nungambakkam, Chennai)

Categories: Company Law

View Comments (5)

  • Good Article.

    I am having a query,

    1. incase of a private limited company, if the director is interested in a resolution and discloses his interest, he may participate in such meeting but does participation mean that he can vote on that resolution?

    2. What if incase of public unlisted limited company there are 3 directors and 2 are interested?

    Requesting assistance and guidance for the same.

    • Dear Parth,

      Query 1. Although director may participate in such meeting, he may not be counted for the want of quorum as per section 174 (3). In this case, he may not be able to vote on the resolution and will be excluded from participating in the resolution. However, a clarification in this behalf from MCA might clear the fog.

      Query 2. For public unlisted companies the interested director shall disclose his interest in the meeting, but cannot participate in the meeting as per section 184(2)read with section 174 (3).

      Hope this resolves your query.

  • Is it compulsory to have one Board Meeting in one Calendar Quarter. When I read the Section 173(1), it says the holding of four meeting in one financial year and difference of not exceeding 120 day in two meeting. Then Can the Company hold all four meeting in one month? Is it compliance of law? Please explain.

    • How can you hold four meetings in a month and comply with requirement of having a gap of not more than 120 days between two meetings. The maximum time interval of 120 days has to be ensured in respect of all the meetings of the board and not necessarily meetings held during the year. So the gap beween first meeting of the year should no go beyond 120 days from the last meeting of the previous year. Likewise the gap between last meeting of the year and first meeting of the next year also should not exceed 120 days.

    • Dear Shivhari,

      The provision says that, minimum of 4 meetings should be held in a year, provided not more than 120 days shall intervene between two consecutive meetings of the Board. As far as the provision is concerned it does not mandate to keep one board meeting in every calendar quarter, it only requires to have 4(minimum) meetings and those meeting should be planned and held in such a manner that it should not exceed 120 days. And you cannot keep all the four meetings in a month. The provision does not claim to provide this.

      Hope the above explains your query!

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