Now first question which must to your mind that why there is requirement of quorum at all

Purpose of Quorum in board meeting is to prevent mala fide intention of one director or two directors suppose there had not been requirement of quorum then even one director or two directors could have held board meeting without having other directors’ presence.

Quorum means the minimum number of Directors whose presence is necessary for holding a meeting.

ANALYSIS OF SECTION 174 OF THE COMPANIES ACT, 2013

Marginal heading or marginal note of section 174 is quorum for meetings of Board

Quorum requirement is for every company whether public, private or OPC (however section 174 has no application on OPC having sole director (refer section 173(5) of the Companies Act, 2013) and quorum shall be 1/3rd of its total strength or 2 directors whichever is higher

Example 1 – Suppose a company in its AOA has provided for 15 directors but at this there are only 6 so in this case quorum shall be 2 (1/3rd of its total strength (6/3=2) or 2 directors whichever is higher. Now you must have analysed that quorum requirement will apply for (total directors – vacant place) occupied places of directors only.

Example 2 – Suppose a company has total director 8 now quorum will be 1/3rd of 8 (3) or 2 directors whichever is higher i.e. 3 director shall constitute quorum and explanation (i) attached to section 174 says that any fraction of a number shall rounded of as one that I have rounded off to 3 because when you will divide 8 by 3 then you will get 2.67 but I have mentioned 3 because of explanation (i).

Object of explanation (i) is to make it clear any fraction will be rounded off to one to give clarity in case of confusion while calculation number of directors for the purpose of quorum and its logical because how fraction will be there in case of human beings.

Object of sub-section (2) is give relief to those companies where number of directors reduced below the quorum (e.g. resignation of directors or director, some directors got died because of accident or natural calamity etc.) because of extra-ordinary or exceptional situation and this section provides that continuing directors or director (remaining director can be one or more than 1) fell below quorum now such directors or director can act only for two purpose, first one is for the purpose of increasing the number of directors required for quorum or summon a general meeting of the company and such director or directors cannot act for other purposes.

Object of sub-section (3) covers the situation where number of interested directors more than or equal to 2/3rd of total strength of the BOD, now at least 2 directors of disinterested director shall be quorum

Rationale of sub-section (4) is to provide relief where BOD meeting could not be held due to non-presence of quorum then look for articles whether it provides anything in this kind of situation if not then this meeting will get automatically adjourned on same day (e.g. Monday, Tuesday etc.), at the same time (e.g. if original meeting’s time was 1 p.m. then this adjourned meeting will also be held at 1 p.m.) and at the same place in the next week or if that day is national holiday then next hold which is not a national holiday.

When all the directors vacate their office or resign from their office under section 168 then promoters or Central Government in the absence of promoters can appoint the required number of directors (refer section 167(3) and 168(3) of the Companies Act, 2013). Now you can clearly understand that section 174(2) comes into picture only when there are still one or few directors but they are below quorum.

Section 174 of the companies Act, 2013 – quorum for meetings of board

(1) The quorum for a meeting of the Board of Directors of a company shall be one third of its total strength 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 purposes of quorum under this sub-section.

(2) The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.

(3) Where at any time the number of interested directors exceeds or is equal to two thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.

Explanation.—For the purposes of this sub-section, “interested director” means a director within the meaning of sub-section (2) of section 184.

(4) Where a meeting of the Board could not be held for want of quorum, then, unless the articles of the company otherwise provide, 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.

Explanation – For the purposes of this section,-

(i) any fraction of a number shall be rounded off as one;

(ii) “total strength” shall not include directors whose places are vacant.

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Disclaimer – Author has exercised utmost care while writing this article, but still this article may contain some error or mistake and no part of this article/writing should be construed or considered as any advice or consultancy whether professional or otherwise.

Author may be reached at [email protected]

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