The Board of Directors of Company is primarily an oversight board. It oversees the management of the company to ensure that the interest of non-controlling shareholders are protected, it also functions as advisory board.
Meetings of the Board:
-Section 173 of the Act deals with Meetings of the Board and Section 174 deals with quorum.
-The Act provides that the first Board meeting should be held within thirty days of the date of incorporation.
-In addition to the first meeting to be held within thirty days of the date of incorporation, there shall be minimum of four Board meetings every year and not more one hundred and twenty days shall intervene between two consecutive Board meetings.
-In case of One Person Company (OPC), small company and dormant company, at least one Board meeting should be conducted in each half of the calendar year and the gap between two meetings should not be less than Ninety days.
Important Points to be noted for holding Board Meeting :
Notice of calling of Board Meeting:
As per Section 173(4) “ A meeting of the board shall be called by giving notice of not less than seven days notice in writing to every director at his residence address and such notice shall be send by hand delivery or by the post or by the electronic means to the director.
Notice of the meeting should be delivered to the right participants; all should be timely informed of the meeting.
All important details of the meeting i.e. Date, Venue, Time of the meeting should be clearly stated in the Notice to avoid any confusion.
A meeting in order to be valid must be convened by a proper notice issued by the proper authority. It means that the notice convening the meeting be properly drafted according to the Act and the rules, and must be served on all members who are entitled to attend and vote at the meeting. For general meeting of any kind at least 21days notice must be given to members. A shorter notice for Annual General Meeting will be valid, if all members entitled to vote give their consent. The number of days in each case shall be clear days, i.e. the days must be calculated excluding the day on which the notice is issued, a day or so for postal transit, and the day on which the meeting is to be held. Every notice of meeting of a company must specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted t
In case of shorter notice of board meeting:
Make sure that at least one independent director is present at the meeting, and in absence of such independent director, decisions taken at such meeting shall be circulated to all the directors and shall be final only on the rectification thereof by at least one independent director, if any.
Quorum of Meetings:
Quorum means, the minimum number of members who must be present at a meeting as required by the rules. Any business transacted at any meeting without quorum is invalid. The purpose of having a quorum is to avoid decisions being taken at a meeting by a small minority which may be found unacceptable to vast majority of members.
According to Section 174 of the Companies Act, 2013, the minimum number of members of the board required for a meeting is 1/3rd of the total number of Directors or two directors whichever is higher.
However please note Section 174 doesn’t apply to One Person Company.
Preparation of the Agenda (Make sure to be clear and specific)
It’s important to prepare a clear and specific agenda for the discussing in the Board Meeting, ensure that important topics are covered, every board meeting has a set agenda that must be followed, and agenda is the topic of discussion of the Board Meeting.
A clear agenda received will help in keeping on track and allows preparing for the same. And make sure that if there are some changes that can’t be avoided, make sure to send notifications to participants, and make necessary communication to tell them the changes before the meeting. For the safer side always make sure to send reminders, preferably a day before the scheduled board meeting , so the participants don’t forget about the same.
Proper Authority to Convene Meeting:
A meeting must be convened or called by a proper authority. Otherwise it will not be a valid meeting. The proper authority to convene general meetings of a company is the Board of Directors. The decision to convene a general meeting and issue notice for the same must be taken by a resolution passed at a validly held Board meeting.
Chairman of the Meeting:
Chairman is the person who has been designated or elected to preside over and conduct the proceedings of the meeting. That person is the chief authority in the conduct and control of the meeting.
Recording of Important points and action to be taken (or other requirements):
All the relevant materials about the meeting such as signed contracts, amendments to policies, documented decisions, must be filed or achieved in a secure storage facility, whether they are electronic/digital files or physical papers documents.
Minutes of the Meeting of the Board of Meeting:
All minutes of the meeting of the Board should be signed and dated by the chairperson of the Meeting. Such Minutes may be signed by the chairperson of the meeting at any time before the next meeting is held.
Minutes of any meeting are a fair and correct summary of the proceedings of that meeting. Minutes must be prepared and signed within 30days of the conclusion of the meeting, and should be kept at the registered office of the company or at such place as may be approved by the Board.
Duty of Directors:
Directors have a duty to attend meetings where they are reasonably able to do so on receiving the notice and should confirm their Presence at the Meeting.
The term Proxy is used to refer to the person who is nominated by a shareholder to represent him at a general meeting of the Company, also through which such a nominee is named and authorized to attend the meeting.
Penalty for failure to give notice
As per Companies Act, 2013, Section 173(4)
Every officer of the company whose duty is to give notice under this section and who fails to do shall be liable to a penalty of Rs. 25,000.
Some requisites of Meeting
Powers of the Board that are required to be exercised at a duly convened Board Meeting
As per Section 179 of Companies Act, 2013 read with Rule 8 the Companies (Meeting of Board and its Powers) Rules 2014, followings powers of the Board can be exercised by means of a resolution passed at a duly convened Board Meeting:
1. To make calls on shareholders in respect of money unpaid.
2. To authorise buy back of securities.
3. To issue securities, including debentures, whether in or outside India.
4. To borrow monies.
5. To invest the funds of the company.
6. To grant loans or give guarantee or provide security in respect of loans.
7. To approve financial statements and Board Report.
8. To diversify the business of the Company.
9. To approve amalgamation, merger or reconstruction.
10. To take over a company or acquire a controlling or substantial stake in another company.
11. To make political contributions.
12. To appoint internal auditors and Secretarial auditor.
13. To appoint or remove KMP.
As per the notification dated 5 June 2015, in case of a Section 8 Company, matters referred in point no. (4, 5, 6) may be decided by Board by Circulation instead of at a meeting.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
Author- CS Aakansha Negi and can be contacted at [email protected]