Government of India [GOI], Ministry of Corporate Affairs [MCA] has clarified its position on the Corporate Governance procedures under Companies Act, 1956 [the Act]. MCA has, on 20 May 2011, issued the General Circular No. 28/2011 [No. 17/95/2011/CL.V] dated 20 May 2011 relating to participation by directors in the meeting of Board / Committee of Directors [Board Meeting] through electronic mode. The Act provides that minimum 4 Board meetings be held every year and at least 1 Board meeting must be held every 3 months. The Act does not specify participation in the Board Meeting through electronic mode.The Circular is based on the growing demand by the industry bodies and other stake holders to recognize participation by directors in Board Meeting through electronic mode. The Circular relies on the provisions of the Information Technology Act 2000 [the IT Act] which is enacted inter alia to provide for legal recognition of electronic records. The Circular provides legal validity of compliances under the Act and is expected to ease procedure and facilitate wider participation by the directors in the management of companies under the Act.

Salient features of the compliance requirements

The Circular defines “electronic mode” to mean video conferencing facility i.e. audio-visual electronic communication facility (VCF) employed which enables all persons participating in that meeting to communicate concurrently with each other without intermediary and to participate effectively in the meeting.

The Circular clarifies that directors of a company may participate in a Board Meeting under the provisions of the Act through electronic mode and such participation will be counted towards quorum requirements.

For holding Board Meeting through electronic mode, a company shall comply with the following in addition to compliance required under the Act:

1. Every director must attend at least 1 Board Meeting personally in a financial year of the company.
2. Chairman of the Board Meeting and Secretary shall assume the following responsibilities i.e.:
a. Safeguarding the integrity of the meeting via video conferencing;
b. Ensuring proper video conference equipment / facilities;
c. Preparing minutes of the Board Meeting;
d. Ensuring that only directors and authorised participants are participating attending the Board Meeting through electronic mode;

e. If a statement of a participant in the meeting via VCF is interrupted or garbled, the Chairman or Secretary shall request for a repeat or reiteration, and if need be, the Chairman or Secretary shall repeat what he heard the participant was saying for confirmation or correction.

3. Notice of the Board Meeting should inform directors regarding availability of participation through VCF and details for accessing VCF. In absence of any confirmation from a Director to join through VCF, it shall be presumed that the Director shall be physically attending the Board Meeting.
4. Every director and authorized participant shall state his full name, location, a confirmation that he can completely and clearly see and communicate with each of other participant and that no un-authorized person is attending the meeting.
a. At the start of the scheduled Board Meeting through VCF, a roll call shall be made by the Chairman/ Secretary.

    b.  After the roll call, the Chairman / Secretary may certify the presence of quorum.

    c. Roll call should also be made at the conclusion of the meeting or at re-commencement of the meeting after every break to ensure presence of quorum throughout the meeting.

    5. Subject to Articles of Association of the company, a Board Meeting which cannot be held for lack of quorum automatically stands adjourned to the next week on the same day, time and place. The Circular provides that in case of such automatic adjournment of a Board Meeting through VCF for the purpose determining place of meeting, place where the Chairman or Secretary is sitting during the Board Meeting shall be taken as the place of the meeting.

    6. The statutory registers which are required to be placed before the Board in the Board Meeting as per the provisions of the Act shall be placed before the Chairman for compliance of the Act. The statutory register required to be signed by the other directors shall be deemed to have been signed by the directors participating through VCF, if they have given their consent to this effect in that meeting.

    7. If a motion is objected to and there is a need to vote, the Chairman/ Secretary should call the roll and note the vote of each director who should identify himself.

    8. At the end of the Board Meeting, the Chairman of the meeting shall announce the summary of the decisions taken at the meeting in respect of each agenda item and names of the directors who have consented to or dissented to those decisions. Video recording of that part of the meeting shall be preserved for 1 year from the conclusion of that meeting.

    9. The draft minutes of the Board Meeting shall be circulated in soft copy within 7 days of the meeting for comments / confirmation to directors who attended the meeting. Thereafter, the minutes shall be entered into the minute books as prescribed under section 193 of the Act. The minutes shall also contain details relating to:

    a. Mode of attendance of each director during the last 3 Board Meetings, whether personally or through VCF;

    b. Particulars of directors who attended the Board meeting through VCF.

      Conclusion – Legal recognition to participation at the Board Meeting through VCF will allow directors of multinational companies, Joint venture companies and other companies who may be at different locations to participate in Board Meetings. The Circular provides safeguards to be taken and procedures to be followed by the company for conducting Board Meeting through VCF. This is a change that will increase transparency and orderly compliance.

      To take benefit of this Circular a company may require to review their Articles of Association which may contain specific procedure with regard to holding of Board Meetings.

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