Relaxation for conducting of board meeting through VC or OAVM

Relaxation for conducting of board meeting through video conferencing (VC)  or other audio-visual means (OAVM) till 30th September, 2020

[MCA Notification No. G.S.R. 395(E) dated 23th June, 2020]

No doubt, there are lots of matters in any company which required board decisions immediately or frequently. However, Due to COVID-19 outbreak and lockdown situation prevailing in India, it is not possible to hold any Board Meeting with the physical presence of the directors.

To make it as far as possible, various provisions of the Companies Act, 2013 (‘Act’) and rules made there under have already been relaxed by the Ministry of Corporate Affairs (‘MCA’) vide Notification dated 19^th March, 2020 and 24^th March, 2020, for ease of compliance by the stakeholders and the Company.

The Securities and Exchange Board of India (SEBI) vide its Circular dated 19^th March, 2020 extends due date for filing quarterly, annual results in light of Coronavirus Pandemic. Further the Institute of Company Secretaries of India has also issued its Guidance dated April 4, 2020 on the applicability of Secretarial Standards on board and general meetings.

Provision of Section 173 of the Companies Act, 2013 and Rule thereto

Section 173 of the Act mandates that a minimum of 4 board meetings have to be held in a year with a gap of not more than 120 days between any two meetings. Such meetings may be attended by the directors either in person or through video conferencing or other audio-visual means which are capable of recording and recognising the participation of the directors and recording and storing the proceedings of such meetings along with date and time.

Please read the provision of Section 173 of the Act as under:-

173(1): every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.

Provided that the Central Government may, by way of notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be prescribed in the notification.

(2) the participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meeting along with date and time.

Provided 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.

Provided further 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.

(3) XXXXX

(4) XXXXX

(5) XXXXX…..”

By the above, it is clear by first proviso to sub-section (2) of Section 173 of the Act that Central Government may notify the matters which shall not be dealt with a meeting through video conferencing or other audio-visual means. So, there are certain matters which cannot be dealt with in any meeting held through video conferencing. Rule 4 of the Companies (Meeting of Board and its Powers) Rules, 2014 provides that

“The following matters cannot 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 Meeting for consideration of financial statement

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

Provided 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.

Relaxation by MCA through Notifications

To deal with the precarious situation due to outbreak of Covid-19 and the Ministry of Corporate Affairs have given major relaxations with respect to holding of Board meeting through physical presence of Directors by amending Rule 4 of Companies (Meeting of Board and its Powers) Rule, 2014.

MCA vide its Notification dated 19th March, 2020 has come up with Companies (Meetings of Board and its Powers) Amendment Rules, 2020 and the said rules will be effective on the date of its publication in the Official Gazette i.e. 19 March, 2020.

Rule 4 of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 has renumbered existing Rule 4 with Sub-rule (1) thereof and after sub-rule (1) as so renumbered, the following sub-rule has been inserted, namely:-

“For the period beginning from the commencement of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 and ending on the 30 June, 2020, the meeting on matters referred to in sub-rule (1) may be held through video conferencing or other audio visual means in accordance with Rule 3”.

With the amendment existing Rule 4 as Rule 4(1) states that

“The following matters which 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 Meeting for consideration of financial statement

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

Provided 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.

With the above amendment, the Companies, till 30^th June, 2020, may now take the above matters (as mentioned in Rule 4(1) now) on a Board Meeting conducted through video conferencing or other audio-visual means in accordance with Rule 3 of the Companies (Meeting of Board and its Powers) Rules, 2014.

However, MCA further relax the requirement of holding Board meetings with physical presence of directors under section 173 (2) read with rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 for approval of the annual financial statements, Board’s report, etc. Such meetings may till 30th September, 2020 be held through video conferencing or other audio-visual means by duly ensuring compliance of rule 3 of the said rules.

In exercise of the powers conferred by sections 173, 177, 178 and section 186 read with section 469 of the Act, the Central Government has further amended the Companies (Meetings of Board and its Powers) Rules, 2014, namely:

“In the Companies (Meetings of Board and its Powers) Rules, 2014, in rule 4 in sub-rule (2), for the figures, letters and word “30th June, 2020”, the figures, letters and word “30th September, 2020”shall be substituted.”

In view of the further amendment in Companies (Meetings of Board and its Powers) Rules, 2014, the Companies, till 30^th September, 2020, may now take the above matters (as mentioned in Rule 4(1) now) on a Board Meeting conducted through video conferencing or other audio-visual means in accordance with Rule 3 of the Companies (Meeting of Board and its Powers) Rules, 2014.

Relaxation by MCA through Circular

Further, MCA has taken special measures under Companies Act, 2013 and Limited Liability Partnership Act, 2008 in view of the COVID -19 outbreak vide General Circular No. 11/ 2020 dated 24^th March, 2020.

In order to support and enable Companies and Limited Liability Partnerships (LLPs) in India to focus on taking necessary measures to address the COVID-19 threat, including the economic disruptions caused by it, the some measures have been implemented by the Ministry of Corporate Affairs to reduce their compliance burden and other risks. In Para II of the said Circular-

“The mandatory requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (CA13) (120 days) stands extended by a period of 60 days till next two quarters i.e., till 30th September. Accordingly, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters, instead of 120 days as required in the CA-13.”

Now, it can be said that the period of 120 days shall be counted as 180 days till the next two quarters i.e. 30^th September 2020. More clarity, if any Board Meeting is going to be held in between 24^th March 2020 to 30^th September 2020, the period of 120 days mentioned in Section 173 of the Act shall be read as 180 days.

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.