Online Board Meetings via Video Conferencing under Companies Act, 2013

To effectively carry out day to day business of company, regular decision making and policy formation is a pre-requisite. Since a company, being an artificial person entrust this power on its Board of Directors, it is necessary for board members to meet timely, have discussions and take decisions on behalf of the company. To hold a board meeting at a common place in this age of globalisation is a cumbersome task as directors of the company are scattered over different locations. Therefore, an alternative to physical gathering of directors at a common place for conducting board meeting has been recognised in the Companies Act, 2013 which is known as Board Meetings through Video Conferencing or other Audio Visual Means. This concept of Online Board Meetings via Video Conferencing is the subject matter of present write up discussing statutory provisions, procedural requirements and issues or concerns relating to Online Board Meetings via Video Conferencing.

Work involves constant business meetings, there’s no denying it and the same leads to the problem of optimization of such meetings. Video-conferencing has led to the increased involvement of people who are able to participate in meetings and communicate via audio and video channels without being physically present at the meeting.

With the intent to promote digitization, the Companies Act, 2013 has incorporated the provisions relating to digital means for the deliverance of official notices like notices of meetings and holding of board meetings electronically via video conferencing. Section 173(2) specifies the mode of participation of directors in a meeting of the Board. Accordingly, the mode of participation may be either in person or through video conferencing or other prescribed audio visual means which are capable of recording and storing the proceedings of such meetings along with date and time.

Let’s discuss related aspects of conducting Online Board Meetings via Video Conferencing as provided in Companies Act, 2013, Companies (Meetings of Board and its Powers) Rules, 2014 (hereinafter referred to as ‘Rules’) and Secretarial Standard -1 on Meetings of The Board of Directors (hereinafter referred to as Secretarial Standard-1) ­ –

1. Frequency of Board Meetings [Section 173 and Para 2.1 of Secretarial Standard-1]

All companies – whether private limited companies or public companies are required to hold at least four meetings of its Board of Directors in every calendar year provided that the gap between two consecutive board meetings is not more than one hundred and twenty days. In case of One Person Company (OPC), if there is only one director on the Board of Director, aforesaid minimum board meetings are not required to be held. However, if the OPC has more than one director or in case of small or dormant companies, it will suffice the requirement, if they hold at least one meeting in each half of the calendar year and the gap between two meetings should not be less than ninety days. Further, vide Notification No. GSR 466 E dated 05 June 2015, the Board of Directors of Section 8 Company shall hold at least one meeting within six calendar months.

2. Notice [Section 173, Rule 3(3) of Rules and Para 1.3 of Secretarial Standard-1]

The first step of any meeting is to inform participants about the holding of meeting. Notice serves this purpose. A minimum time of 7 days has to be given to directors for their confirmation of attending the meeting. Notice in writing of every meeting shall be given to every director by hand or by speed post or by registered post or by facsimile or by e-mail or by any other electronic means.

Further, notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means. If the director intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. Alternatively, s/he can give a single declaration about such participation in all meetings at the beginning of the year which shall be valid for one year.

There is presumption clause of attending the board meeting by a director in person in case no intimation of participation in meeting through video conferencing is provided to the company.

The Act under section 173(4) has prescribed a penalty of Rs. 25,000 on every officer of the company whose duty is to give notice under this section and who has failed to do so.

3. Roll call and Quorum [Sub rules 4 and 5 of Rule 3 of Rules and Para 4.1.3 of Secretarial Standard-1]

At the start of the Board meeting, a roll call shall be taken by the Chairperson where every director participating through video conferencing or other audio visual means is required to state, for the record, the following :-

(a) Name;

(b) The location from where he is participating;

(c) That he has received the agenda and all the relevant material for the meeting; and

(d) That no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

After the roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the Chairperson and confirm that the required quorum is complete. The Chairperson shall ensure that the required quorum is present throughout the meeting.

A director participating in a meeting through video conferencing or other audio visual means shall be counted for the purpose of quorum, unless he is to be excluded for any items of business under any provisions of the Act or the Rules.

4. Conducting Board Meeting [Sub rules 8,9 and 11 of Rule 3 of Rules]

Once the required quorum is achieved, the Chairman shall proceed further for transacting businesses mentioned in agenda of the meeting. Every participant shall identify himself/herself for the record before speaking on any item of business on the agenda. If a statement made by a director attending the meeting through video conferencing or other audio-visual means is interrupted or garbled, the Chairperson or the Company Secretary shall request for a repeat or reiteration by the concerned director.

If a motion is objected to and there is a requirement to put it to vote, the Chairperson shall record the votes of each participating director including such director(s) who is attending the meeting via video-conferencing. The Chairperson shall make a note of each director’s vote and the motion shall be passed on the basis of a majority decision. At the end of discussion on each agenda item, the Chairperson shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

5. Minutes of Board Meeting [Section 118, Sub rules 11 and 12 of Rule 3 of Rules and Para 7 of Secretarial Standard-1]

According to Section 118, every company is required to keep minutes of all Board Meetings in a Minutes Book. Minutes may be maintained in electronic form in such manner as prescribed under the Act and as may be decided by the Board. Minutes in electronic form shall be maintained with Timestamp.

The minutes shall disclose the particulars of the directors who attended the board meeting through video conferencing or other audio visual means.

Within 15 days of conclusion of board meeting, the draft minutes of the board meeting shall be circulated among all the directors either in writing or in electronic mode as may be decided by the Board. After receipt of draft minutes, every director who attended the board meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes within seven days or some reasonable time as decided by the Board, failing which his approval shall be presumed. Thereafter, the minutes shall be entered in minute book and signed by Chairperson.

6. Duties of Chairman and Company Secretary [Rule 3(2) of Rules]

The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care –

(a) To safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;

(b) To ensure availability of proper video conferencing or other audio visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;

(c) To record proceedings and prepare the minutes of the meeting;

(d) To store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.

(e) To ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and

(f) To ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting.

7. Issues or Concerns relating to Online Board Meeting via Video Conferencing

(a) Participation of all directors in Board Meeting via Video Conferencing

Section 173(2) does not put any limitation on the number of directors who are required to mandatorily present during the meeting physically. Therefore, all directors can attend the meeting via video conferencing. Further, as per para 1.2.3 of the Guidance Note on Meeting of Board of Directors issued by the Institute of Company Secretaries of India, all the Directors may participate in a meeting through Electronic Mode. In such a case, at least one person, who may either be the Chairman or the Company Secretary or in the absence of the Company Secretary, any other person duly authorised in this behalf by the Chairman, should be physically present at the scheduled venue of the meeting given in the notice to enable proper recording, to safeguard the integrity of the Meeting and to fulfil other requirements of law in this regard.

It is pertinent to mention here that a board meeting where any of the restricted matters listed in Rule 4 of the Rules and discussed in item (c) below, such a board meeting would mandatorily require at least such number of directors as required to constitute quorum, to be present physically at the venue of the board meeting.

(b) Online adjourned Board Meeting – Allowablility

Adjourned board meeting is continuation of original board meeting, Therefore, adjourned board meeting may also be conducted online through electronic mode subject to compliance of the provisions of section 173, Rule 3 of the Rules and Secretarial Standard -1.

Even if the original Board Meeting was conducted physically, the adjourned Board meeting may be conducted through electronic mode as long as the provisions relating to meetings conducted through electronic mode are complied with.

(c) Restricted Matters for Online Board Meeting

First Proviso to section 173(2) specifies that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means. Rule 4 of the Rules provides that following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means.-

(i) The approval of the annual financial statements;

(ii) The approval of the Board’s report;

(iii) The approval of the prospectus;

(iv) The Audit Committee Meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board under sub-section (1) of section 134 of the Act; and

(v) The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover

Second proviso to section 173(2) provides an exception of the above rule. It says that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter specified under the first proviso to section 173(2).

If the Chairman of the Meeting is participating through electronic mode, he should vacate the chair while transacting any restricted items of business and entrust the conduct of the proceedings in respect of such items to any other non – interested director attending the meeting physically and should not participate in the meeting in respect of such items.

(d) Power of company to restrict a director from participating in a board meeting through video conferencing

Section 173(2) gives an option to a director for participation in Board Meeting through video conferencing. For availing this facility, s/he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf. Recently, the NCLAT has held in Achintya Kumar Barua vs. Ranjit Barthkur (2018) 143CLA 233, (2018) 91 taxmann.com 123 (NCLAT) that if any director desires to attend board meetings by video conferencing, the company is bound to allow attendance in this manner. In other words, it is not up to the company or at the discretion of the Chairman/Company Secretary whether or not to allow attendance by video conferencing. The right and option is with any director who so desires.

Presence of digitization has changed the way of doing business and shaping it in a new a way to achieve desired results. Video conferencing is one such method of communication by which many people are gathered over geographical locations using real-time video. This method of communication has enabled businesses to hold face to face meetings with people without any need to go to a particular place. The advantages of participation by video-conferencing are saving of costs, more productivity and time of reaching the venue of meeting, particularly when the concerned person is located in another city or even another country, etc.

The Company law has recognised video conferencing as a faster and time saving mode of convening board meetings and has incorporated relevant provisions which needs to be complied with while conducting online board meetings via video conferencing. Many multinational companies are using the technology of video conferencing for conducting its board meetings and coming out with more collective and objective decision making with wider participation. Thus, the concept of enabling participation of directors in the meetings of the Board through video conferencing has facilitated corporates to meet the statutory compliances in adherence to good corporate governance.

(The author can be reached at jyotijain101@gmail.com)