Provisions: Secretarial Standards (SS-1) on Meetings of Board of Directors

PARTICULARS

PROVISIONS

To whom the powers can be delegated?

The Board may, by a Resolution passed at a Meeting, delegate certain powers to any Committee of Directors, the Managing Director, the Manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, on such conditions as it may specify.

SS-1 is thus applicable to all companies incorporated under the Companies Act, 2013, including private and small companies, except One Person Companies having only one Director on its Board and such other class or classes of companies which are exempted by the Central Government (MCA) through Notification.

The whole SS-1 is also not applicable to Specified IFSC Public and Private Companies: An unlisted public companies and private companies which are licensed to operate by the RBI or the SEBI or the IRDAI from the IFSC located in an approved multi services SEZ set-up under the SEZ Act, 2005 read with the SEZ Rules, 2006.

However, if the provisions of these Special Acts such as the Banking Regulation Act, 1949, the Insurance Act, 1938, etc. applicable to these companies are inconsistent with SS-1, then the provisions of such Special Acts shall prevail.

Moreover, if any stipulation contained in SS-1 is derived from any provision of law or rule and if such provision is declared inapplicable to any class of companies, such stipulation shall not apply to such class of companies.

As a best practice and a measure of good governance, the Director desirous of summoning a Meeting for any purpose should send his requisition in writing to convene such Meeting, along with the agenda proposed by him for discussion at the Meeting, either to–

i. The Chairman or in his absence, by the Managing Director or in his absence, by the Wholetime Director then upon receipt of such requisition, he may either proceed himself or direct the Company Secretary or in his absence, any other person authorised by the Board to proceed for convening the meeting; or

ii. Company Secretary or in his absence, by any other person authorised by the Board in this behalf, then upon receipt of such requisition, he should forthwith place such requisition for the consideration of the Chairman or in his absence, the Managing Director or in his absence, the Whole time Director and upon receipt of approval from the Chairman / Managing Director / Wholetime Director as the case may be, he should proceed for convening the meeting.

Where the company has neither a Chairman nor a Managing Director nor a Wholetime Director, the Company Secretary or the person authorised by the Board in this behalf, should directly proceed to convene the Meeting as requisitioned by the Director.

In case the Articles are silent, the Company Secretary or the person authorised by the Board in this behalf cannot convene a Meeting as requisitioned by the Director and he should communicate the same to the Director concerned. In any case, the Director may on his own, convene a Meeting.

But, if in case any Meeting is required to be held under the Act or any other Statute and the Chairman or any of the Directors do not proceed to summon such Meeting, the Company Secretary should write to the Chairman and the Directors about such statutory requirement, bringing to their notice the need to summon such Meeting and requesting them to comply with the same.

[Sanjiv Kothari vs. Vasant Kumar Chordia (2005) 66 CLA 45 (CLB)]

Here, a company may choose any of the given below options: Count and give continuous numbering from its incorporation viz. 150^th Meeting, 151^st Meeting and so on or give continuous numbering from Meetings held on or after 1^st July, 2015, this being the date from which SS-1 became effective viz. 120^th Meeting, 121^st Meeting and so on or give a numbering on a yearly basis viz. 01/2019-20, 02/2019-20, 03/2019-20 and so on. But here one thing is to be kept in mind that in any case, the company should follow a uniform and consistent system.

Serial number of the original Meeting and the adjourned Meeting should be the same. For example: In case the serial number of the original Meeting is 12^th Meeting, the serial number of the adjourned Meeting should be 12^th Meeting (Adjourned).

A Meeting may be convened at any time. But it is advisable to have Meetings during working hours, though the Meeting may continue beyond working hours.

Notice of a meeting should clearly mention the venue of the meeting and all the recordings of the proceedings of the meeting, if conducted through e-mode, shall deemed to be made at such place.

There are some restricted items of business of a meeting like approval of the annual financial statement, Board’s report, prospectus, matters relating to amalgamation, merger, de-merger, acquisition and takeover and consideration and recommendation of the annual financial statements by the Audit Committee of the Board of Director, in which a director shall not participate through electronic mode except where the requisite quorum in person is present at the meeting.

But if a Director has specifically required for sending a Notice to a particular postal address, facsimile number or e-mail, then it should be sent accordingly.

If a Director is residing outside India, it should be sent to him by facsimile or by e-mail or by any other electronic means. But, if a Director concerned has instructed for sending the notice to him by speed post or registered post, then it should be sent accordingly as well.

However, in case of a Meeting conducted at a shorter Notice, the Company may choose an expedient mode of sending Notice irrespective of mode of delivery of Notice specified by a particular Director.

Where there is an Alternate Director on the Board of the Company, Notice should also be given to the Original Director at the same time when Notice is given to such Alternate Director.

Notice of a Meeting shall be given even if the Meetings are gonna be held on a pre-determined dates or at pre-determined intervals.

• Information about the option available to the Directors to participate the meeting through Electronic Mode.

If any Director intends to participate the meeting through Electronic Mode, then he shall give sufficient prior intimation to the Chairman or the Company Secretary to enable them to make suitable arrangements in this behalf. (Such prior intimation to be given in how much time-period may also be mentioned in the notice.)

The Director may intimate his intention of participation through Electronic Mode at the beginning of the Calendar Year also, which shall be valid for such Calendar Year. However, a mere non- intimation of intention to participate through Electronic mode in the beginning of the calendar year does not disqualify a director to avail such facility during the year.

• In the case of a requisitioned Meeting, the fact that the Meeting is being convened on the requisition of a Director.

• The fact that the Meeting is being held at a shorter Notice along with the reasons or convening the Meeting at shorter Notice.

If the meeting is adjourned sine-die or for a period of 30 days or more than a fresh notice of atleast seven days before the date of the meeting so adjourned (excluding the day of such adjourned meeting) should be given to all the Directors (including Directors who did not attend the Original Meeting). But, in any other cases there is no need of sending a fresh notice.

Meeting adjourned otherwise than for want of Quorum-

If the date of the meeting so adjourned is decided at the meeting itself, than the Notice should be given forthwith, to all the Directors (including Directors who did not attend the Original Meeting).

If the date of meeting so adjourned is not decided at the meeting itself, than the Notice should be given not less than seven days before the date of the meeting so adjourned (excluding the day of such adjourned meeting) to all the Directors (including Directors who did not attend the Original Meeting).

Where the Notice of a Meeting is not sent to all the Directors, Resolutions passed at such a Meeting are not valid.

The Notes on Agenda should explain each item of the Agenda in an endeavor to provide an understanding of points for discussion by the Board.

However, it can be sent alongwith the Notice. But, if in case the Notice of the meeting being already sent before the prescribed period and if circumstances do not permit the sending of the Agenda and Notes on Agenda alongwith the Notice, the same should be sent at least seven days before the Meeting (excluding the day of the Board Meeting), unless the Articles of the Company prescribe a longer period.

Although there is no prohibition on sending the Agenda and Notes on Agenda separately, these should be sent at least seven days prior to the Meeting, unless exempted under this Standard.

Each item of business to be taken up at the Meeting shall be serially numbered.

But if a Director has specifically required for sending the Agenda and Notes on Agenda to a particular postal address, facsimile number or e-mail, then it should be sent accordingly.

If a Director is residing outside India, it should be sent to him by facsimile or by e-mail or by any other electronic means. But, if a Director concerned has instructed for sending the agenda and notes on agenda to him by speed post or registered post, then it should be sent accordingly as well.

Where there is an Alternate Director on the Board of the Company, Agenda and Notes on Agenda should also be given to the Original Director at the same time when Agenda and Notes on Agenda are given to such Alternate Director.

The above exemption with respect to sending of Notes related to UPSI at a shorter period of time is applicable to listed companies.

However, general consent for giving Notes related to UPSI at a shorter Notice may be taken in the first meeting of the Board held in each financial year and also whenever there is any change in Directors.

Consent to circulate Notes related to UPSI at a shorter Notice from the new Directors appointed during a financial year may be obtained on an individual basis.

But one thing should be kept in mind that if this consent or dissent, obtained from the new Directors affect the consent taken earlier from majority of directors, fresh consent should be taken from the Board.

Where general consent as above has not been taken, the requisite consent shall be taken before the concerned items are taken up for consideration at the Meeting.

The fact of consent having been taken shall be recorded in the Minutes.

Resolutions drafted and circulated to Directors in advance, along with the Agenda saves time at the Meeting, clarifies the subject matter, facilitates discussion, simplifies preparation of Minutes of the Meeting and enables issuance of certified copies of Resolution, wherever required, after the Meeting and before the Minutes thereof are finalised.

Permission of the Chairman and consent of majority of directors present in the meeting is required.

For approval of such supplementary item –

The consent of majority of Directors of the Company otherwise the decision taken in respect of such item shall be final only on its ratification by the majority of Directors of the Company.

Supplementary Notes may be circulated either at or before the Meeting, without obtaining any consent. However, requisite consent is required for taking up the said Supplementary Notes for discussion at the Meeting.

But, if no Independent Director is present, decisions taken at such a Meeting shall be circulated to all the Directors and shall be final only on ratification thereof by at least one Independent Director, if any.

In case the company does not have an Independent Director, the decisions shall be final only on ratification thereof by a majority of the Directors of the company, unless such decisions were approved at the Meeting itself by a majority of Directors of the company.

It shall be sufficient if subsequent Meetings are held with a maximum interval of one hundred and twenty days between any two consecutive Meetings.

As a good governance practice, the Board may approve in advance, a calendar of the dates for Meetings to be held in a year.

Further, it shall be sufficient if an OPC, Small Company or Dormant Company holds one Meeting of the Board in each half of a calendar year and the gap between the two Meetings of the Board is not less than ninety days. If more than two Meetings are held in a year where the gap between the first and the last Meeting in a year exceeds 90 days then it would be sufficient compliance of the requirement.

It may be noted that the flexibility granted under the provisions of the Companies Act, 1956 regarding adjournment of a Board Meeting for want of Quorum not amounting to violation as to the requirement of the periodicity of holding Board Meetings, is not available under the Companies Act, 2013.

However, the MCA vide Notification dated 5^th July, 2017 has clarified that the Independent Directors are required to meet at least once in a Financial Year.

Accordingly, the term “Calendar Year” stated in the above paragraph should be read as “Financial Year”.

A Meeting of Independent Directors is not a Meeting of the Board or of a Committee of the Board. Therefore, provisions of this Standards shall not be applicable to such Meetings. However, a record of the proceedings of such a Meeting may be kept.

For Example: Adjournment of a Meeting otherwise than for want of Quorum may be necessitated for paucity of time to complete the Agenda or for any other reason viz. curfew, earthquakes, lockdowns etc.

If there is no Quorum at the adjourned Meeting also, the Meeting shall stand cancelled.

It shall be present not only at the time of commencement of the Meeting but also while transacting business.

However, such Director may be present in the Meeting during discussions on such item.

In case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest under section 184 of the Companies Act, 2013.

But, If the item of business is a related party transaction, then the interested director shall not be present at the Meeting, whether physically or through Electronic Mode, during discussions and voting on such item.

But, if the number of Interested Directors exceeds or is equal to two-thirds of the total strength of the Board, then the remaining Directors present at the Meeting, being not less than two, shall be the Quorum during such item. (This provision is not applicable on a Private Company).

In a situation where the Quorum excluding the Interested Directors is less than two, the item may be considered in the General Meeting of the members.

So it is advisable for the Company that in the absence of law, the Articles or the Board should specify the Quorum, being not less than two for Meetings of the Committees.

A Meeting can be adjourned only once for want of Quorum. If at the adjourned Meeting also Quorum is not present, the Meeting shall stand cancelled and a fresh Meeting should then be convened in order to transact the business, within the time frame prescribed above.

Disclosure of interest, should be made by him, even if he himself, or he along with other Directors holds less than two percent of the paid-up share capital of that body corporate. As this is required for the purpose of reckoning the limit of two percent shareholding by all the Directors.

It is a formal evidence of the presence of the persons signing such register. Maintenance of attendance register is a good secretarial practice which helps in keeping proper record of the attendance in the Meeting, enables cross-verification and also protects the interest of individual Directors.

Signing of the attendance register would not only be an evidence of the particular Director being present at the Meeting but would also facilitate payment of sitting fees and accounting thereof by the company.

The Secretarial Auditor or the Statutory Auditor of the company can also inspect the attendance register as he may consider necessary for the performance of his duties.

The Minutes of the Meeting should clearly mention the names of the Directors present at the Meeting and those who have been granted leave of absence.

A Board Resolution need not be passed to show that office of Director has been vacated by a particular Director. As a matter of good governance, due intimation of such vacation should be sent to such Director forthwith and the Board may take note of such vacation at its next Meeting.

The Act does not provide for appointment of a Chairman of the Meeting but the Model Articles provide that the Board may elect a Chairman of its Meetings and determine the period for which he is to hold office. At the end of such period, the Board may either re-appoint the person or appoint any other Director as the Chairman of the Board.

It is considered a good practice for every company to have a Chairman who would be the Chairman for Meetings of the Board of Directors as well as general meetings of the company. Normally, the Directors elect one amongst themselves to be the Chairman of the Board and he continues to act as such until he ceases to be a Director or until another Director is appointed as the Chairman.

Companies may provide, in their Articles, for the appointment of a Vice – Chairman to act as Chairman in the absence of the Chairman. In absence of such provision in the Articles and in the absence of the Chairman, the Directors may elect one of themselves as the Chairman for the meeting.

The main function of the Chairman is to preside over and conduct the Meeting in an orderly manner.

The Articles of the company may thus expressly prohibit exercise of second or casting vote by the Chairman, in which case, the Chairman shall not have a second or casting vote. In case the Articles are silent, the Chairman may have a second or casting vote at his discretion.

The discretion whether or not to use his second or casting vote vests entirely with the Chairman.

However in case of a private company, an Interested Director may also decide, before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business should be obtained by means of a Resolution by circulation.

Each business proposed to be passed by way of Resolution by circulation shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond.

But, not more than seven days from the date of circulation of the draft of the Resolution shall be given to the Directors to respond and the last date shall be computed accordingly. Depending upon the necessity and urgency, the company may give seven days or less time for responding to the proposal.

Each Resolution should be serially numbered and if any special majority or the affirmative vote of any particular Director or Directors is specified in the Articles, the Resolution shall be passed only with the assent of such special majority or such affirmative vote.

The aforesaid period of three years or such higher period as decided by the Board, shall be counted from the date of subsequent Meeting at which such resolution was noted by the Board.

a) last date specified for signifying assent or dissent; or

b) the date on which assent has been received from the required majority, provided that on that date the number of Directors, who have not yet responded, along with the Directors who have expressed their desire that the resolution under circulation be decided at a Meeting of the Board, shall not be one third or more of the total number of Directors; and shall be effective from that date, if no other effective date is specified in such Resolution.

Directors shall append the date on which they have signed the Resolution. In case a Director does not append a date, the date of receipt by the company of the signed Resolution shall be taken as the date of signing.

In cases where the interest of a Director is yet to be communicated to the company, the concerned Director shall disclose his interest before the last date specified for the response and abstain from voting.

In case the Director does not respond on or before the last date specified for signifying assent or dissent, it shall be presumed that the Director has abstained from voting.

But as a matter of good governance, if a Resolution by circulation is not passed due to lack of majority, or if it has to be taken up at a Meeting of the Board due to one-third of the directors requiring the same, this fact should be appropriately recorded in the Minutes of the next Meeting.

Minutes kept in accordance with the provisions of the Act evidence the proceedings recorded therein. Minutes help in understanding the deliberations and decisions taken at the Meeting.

A company may maintain its Minutes in physical or in electronic form (having the facility of time stamping).

In terms of the provisions of Rule 27 of the Companies (Management and Administration) Rules, 2014, every listed company or a company having not less than one thousand shareholders, debenture holders and other security holders, may maintain its records in electronic form. Here ‘records’ means any register, index, agreement, memorandum, Minutes or any other document required by the Act or the rules made thereunder to be kept by a company.

Minutes shall not be pasted or attached to the Minutes Book, or tampered with in any manner.

Minutes Books, if maintained in loose-leaf form, shall be bound periodically depending on the size and volume and coinciding with one or more financial years of the company.

The pages of the Minutes Books shall be consecutively numbered. Thus where a Minutes Book is full and a new Minutes Book is prepared, the numbering should continue from the number appearing on the last page of the previous Minutes Book.

In other words, companies should not maintain Minutes of a few Meetings in physical form and of a few Meetings in electronic form.

As per Rule 28(1) of the Companies (Management and Administration) Rules, 2014, the Managing Director, Company Secretary or any other Director or officer of the company as the Board may decide, should be responsible for the maintenance and security of Minutes in electronic form.

Minutes should be open for inspection during business hours by any Director at the registered office of the company or at such other place in India where Minutes are maintained.

Additionally, by virtue of any agreement or the Articles, any other person may be permitted to seek and obtain such information or such inspection rights.

A newly appointed director on the Board of a company also have a right to inspect or receive copies of the Minutes of the Meetings held before the period of his Directorship since the decisions taken earlier may have implications on the current decisions to be taken. Furthermore, it would help him to understand the company better and to shape his thoughts so as to take part in the Meetings constructively and effectively.

A Member of the company is not entitled to inspect the Minutes of Meetings of the Board. Unless a Member is or was a Director of the company, he is not entitled to inspect Minutes of Meetings of the Board.

Minutes of all Meetings shall be preserved permanently in physical or in electronic form with Timestamp.

Although Office copies of Notices, Agenda, Notes on Agenda and other related papers shall be preserved in good order in physical or in electronic form for as long as they remain current or for eight financial years, whichever is later and may be destroyed thereafter with the approval of the Board.

Minutes Books shall be in the custody of the Company Secretary.

For the purpose of recording the time of conclusion of the Meeting which has been adjourned, the time at which such Meeting was adjourned should be recorded.

In respect of a Meeting adjourned for want of Quorum, a statement to that effect by the Chairman or in his absence, by any other Director present at the Meeting shall be recorded in the Minutes.

• At the beginning, the serial number and type of the Meeting, name of the company, day, date, venue and time of commencement and conclusion of the Meeting;

• Names of the Directors present physically, the Company Secretary who is in attendance at the Meeting and Invitees, if any, including Invitees for specific items;

• Name(s) of Directors present and their mode of attendance, if through Electronic Mode along with his/their particulars, the location from where he/they participated and wherever required, his/their consent to sign the statutory registers placed at the Meeting;

• Record of election, if any, of the Chairman of the Meeting;

• Record of presence of Quorum;

• The names of Directors who sought and were granted leave of absence;

• Noting of the Minutes of the preceding Meeting;

• Noting the Minutes of the Meetings of the Committees;

• The text of the Resolution(s) passed by circulation since the last Meeting, including dissent or abstention, if any;

• The fact that an Interested Director did not participate in the discussions and did not vote on item of business in which he was interested and in case of a related party transaction such director was not present in the meeting during discussions and voting on such item;

• A record of all appointments approved by the Board. For example: Appointment of Directors, KMPs, etc.;

• If any Director has participated only for a part of the Meeting, the Agenda items in which he did not participate;

• In the event, a particular Director leaves the Meeting early, the fact of his so leaving should be incorporated in the Minutes. Likewise, if a particular Director joins the Meeting after its commencement, this fact should also be recorded in the Minutes;

• The fact of the dissent and the name of the Director who dissented from the Resolution or abstained from voting thereon;

• The views of the Directors particularly the Independent Director, if specifically insisted upon by such Directors, provided these, in the opinion of the Chairman, are not defamatory of any person, not irrelevant or immaterial to the proceedings or not detrimental to the interests of the company;

• Ratification by Independent Director or majority of Directors, as the case may be, in case of Meetings held at a shorter Notice;

• Consideration of any item other than those included in the Agenda with the consent of majority of the Directors present at the Meeting and ratification of the decision taken in respect of such item by a majority of Directors of the company;

• The fact of unanimity of decisions of dis-interested Directors as contemplated by Sections 203 (Passing of resolution for the appointment of Managing Director if he is already a Managing Director or Manager of any other Company) and 186 of the Act;

• The fact that the register of contracts with related parties and contracts and bodies etc. in which Directors are interested was placed before the Meeting and was signed by all the Directors present thereat (Section 189 of the Act);

• In case a Resolution placed before the Board is rejected or withdrawn, the fact of it so having been rejected or withdrawn;

• Brief description of the discussions which took place, as evidence of the fact that the Board has considered and deliberated the matter before taking any decision on the same;

• Apart from the Resolution or the decision, the brief background of all proposals and summarise the deliberations thereof and in case of major decisions, the rationale thereof.

The Chairman has absolute discretion to exclude from the Minutes, matters which in his opinion are or could reasonably be regarded as defamatory of any person, irrelevant or immaterial to the proceedings or which are detrimental to the interests of the company.

Minutes shall be written in clear, concise and plain language.

Minutes shall be written in third person and past tense. Resolutions shall however be written in present tense.

Minutes need not be an exact transcript of the proceedings at the Meeting.

Wherever the decision of the Board is based on any unsigned documents including reports or notes or presentations tabled or presented at the Meeting, which were not part of the Notes on Agenda and are referred to in the Minutes, shall be identified by initialing of such documents by the Company Secretary or the Chairman.

Where any earlier Resolution(s) or decision is superseded or modified, Minutes shall contain a specific reference to such earlier Resolution(s) or decision or state that the Resolution is in supersession of all earlier Resolutions passed in that regard.

Proof of sending draft Minutes and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting.

The Directors, whether present at the Meeting or not, shall communicate their comments, if any, in writing on the draft Minutes within seven days from the date of circulation thereof, so that the Minutes are finalised and entered in the Minutes Book within the specified time limit of thirty days.

If any Director communicates his comments after the expiry of the said period of seven days, the Chairman, if so authorised by the Board, shall have the discretion to consider such comments.

In the event a Director does not comment on the draft Minutes, the draft Minutes shall be deemed to have been approved by such Director. However, where an Independent Director is required to ratify a decision taken at a Meeting held at shorter Notice and such Director abstains from ratifying or does not ratify the decision, then, in such a case, the decision taken / draft Minutes shall not be presumed to be approved by such Director.

A Director, who ceases to be a Director after a Meeting of the Board is entitled to receive the draft Minutes of that particular Meeting and to offer comments thereon, irrespective of whether he attended such Meeting or not.

As a good governance practice, the draft Minutes of a Meeting in which a particular person has been appointed as Director should be sent to such newly appointed Director, irrespective of whether he attended such Meeting or not, since he is also responsible for the decisions of the Board from the date of his appointment as a Director.

The date of entry of the Minutes in the Minutes Book shall be recorded by the Company Secretary or any other person authorised by the Board or the Chairman.

Minutes, once entered in the Minutes Book, shall not be altered. Any alteration in the Minutes as entered shall be made only by way of express approval of the Board at its subsequent Meeting at which the Minutes are noted by the Board and the fact of such alteration shall be recorded in the Minutes of such subsequent Meeting.

The Chairman shall initial each page of the Minutes, sign the last page and append to such signature the date on which and the place where he has signed the Minutes.

Any blank space in a page between the conclusion of the Minutes and signature of the Chairman shall be scored out.

If the Minutes are maintained in electronic form, the Chairman shall sign the Minutes digitally.

Minutes, once signed by the Chairman, shall not be altered, save as mentioned in this Standard.

Within fifteen days of signing of the Minutes, a copy of the said signed Minutes, certified by the Company Secretary or where there is no Company Secretary by any Director authorised by the Board, shall be circulated to all the Directors, as on the date of the Meeting and appointed thereafter, except to those Directors who have waived their right to receive the same either in writing or such waiver is recorded in the Minutes.

Proof of sending signed Minutes and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting.

However, certified copies of any Resolution passed at a Meeting may be issued even earlier, if the text of that Resolution had been placed at the Meeting.