Secretarial Standard 1-Meetings of Board of Directors

Decisions of a Company are taken by its Board of Directors at their meetings. The Companies Act, 2013 (hereinafter referred to as Act) has put in place provisions to call, convene, conduct and regulate these meetings but the law had also mandated that every Company should observe Secretarial Standards. India Inc. is the first Country in the world to mandate standards pertaining to Corporate Secretarial practices.

Section 118 (10) of the Companies Act, 2013 envisages that every Company shall observe secretarial standards pertaining to Board and General meetings issued by the Institute of Companies Secretaries of India & approved by the Central Government. The Ministry of Corporate affairs approved the specified standards on 10^th April, 2015 which were then notified by the Institute in the official gazette on 23^rd April, 2015 to come into force w.e.f. 1^st July, 2015.

The Secretarial Standard-1 (hereinafter referred to as standard) is on meeting of Board of Directors. This standard prescribes the principles for convening and conducting Meetings of the Board of Directors and its committees and other matters related thereto.

The Provisions of this standard are discussed below and an Illustrative procedure to call & conduct meeting of the Board is given later.

Applicability

This standard is applicable on all Companies except One Person Companies having only 1 Director on its Board. The standard is also applicable to Committee Meetings, unless otherwise stipulated by any other applicable Guidelines, Rules or Regulations with effect from 1^st July, 2015.

FREQUENCY OF MEETINGS

BOARD MEETINGS

• For One Person, Small or Dormant Company: – Once in every half calendar year, minimum gap between 2 meetings being 90 days.

• For other Companies: – Once in every calendar quarter, maximum gap between 2 meetings being 120 days.

• In case of an adjourned meeting, interval period shall be counted from the date of the original meeting.
  

COMMITTEE MEETINGS

• Committees shall meet as often as necessary subject to stipulation by Board or any law or authority.
  

INDEPENDENT DIRECTOR MEETINGS

• They shall meet once in a Calendar year and if they desire the meeting shall be convened & held by CS.

• Mandatory agenda of independent Directors(hereinafter referred to as ID):-

1. Performance review of Non-Independent Directors and the Board.

2. Performance review of the Chairman

3. Assessing the quality, quantity and timeliness of flow of information between the management and the Board.

Convening A Meeting

• A Board meeting may be summoned by any Director, and the Company Secretary (if no CS then person auth. by Board) shall convene a meeting on requisition of a Director in consultation with Chairman or in his absence MD, or in his absence WTD, if any. However, articles may provide otherwise.

• A meeting may be convened at any time and place on any day other than national holiday.

• Every meeting shall have a serial number.

Notice

ISSUANCE OF NOTICE

• Notice of a meeting should be issued by CS (if no CS then any Director/person auth. by Board) specifying the serial number, day, date, time and full address of the venue of the Meeting.

SENDING OF NOTICE

• Notice of a meeting shall be given to every Director (including original & alternate), irrespective of the fact that meetings are held at pre-determined dates/intervals BY hand/speed post/regd. Post/ courier/ fax/ email AT postal address or e-mail id, registered with the company.

• If a Director has specified any particular means of delivery of Notice, the Notice shall be given to him by such means only.

• Proof of Sending of Notice and its Delivery shall be maintained by the Company.

LENGTH OF NOTICE

• Notice convening a Meeting shall be given at least 7 days before the date of the Meeting, unless the Articles prescribe a longer period. If notice is served via speed post/regd. post/courier additional 2 days shall be added for the service of notice.

SHORTER NOTICE

To transact urgent business Notice may be given at shorter notice subject to following conditions:-

1. The notice of meeting shall state that it is being called at shorter notice

2. Where the Company has Independent Director: – At least 1 should be present at the meeting. However if no ID is present, then the decisions taken shall be circulated to all the Directors and shall be final only if ratified by at least 1 ID.

3. Where the Company doesn’t have Independent Director: –

If Decisions taken are:

• Approved by majority of Directors of the Company at the meeting itself..
• Not approved so, then the same shall be circulated to all the Directors and shall be final only if ratified by majority of Directors of the Company.
  

AGENDA

• The Agenda shall be sent to all the Directors and items which require approval shall be supported with a note specifying details of proposal, material facts and concern/interest of any Director.

• Where approval is required by way of a resolution, then draft resolution shall be set out in note or placed at the meeting.

• The provisions of sending & length of notice shall also apply to Agenda & Notes to Agenda.

• Supplementary notes on Agenda may be circulated at or prior to meeting, but will be taken up only with the consent of Chairperson and majority directors including at least 1 ID, if any.

• Notes on Agenda for a business which pertains to unpublished price sensitive information (as defined under SEBI (Insider Trading Regulations, 2015) may be sent at shorter notice subject to following:-
  • Consent of majority directors including at least 1 ID shall be taken at 1^st Board Meeting of every financial year and whenever there is change in Directors.
  • Alternatively, consent may be taken before concerned items are considered at the meeting & fact that consent is taken shall be recorded in minutes.

TAKING UP OF ITEM NOT IN AGENDA

• Where the Company has Independent Director: – With the permission of the Chairperson and with the consent of a majority of the Directors present in the meeting, including at least 1 ID.

However, In case if no ID is present at such meeting then the minutes shall be final only when at least 1 ID ratifies the decision.

• Where the Company doesn’t have Independent Director: – With the permission of the Chairperson and with the consent of a majority of the Directors present in the Meeting.

However, the minutes shall be final only if Decisions taken are:

• Approved by majority of Directors of the Company at the meeting itself.
• Not approved so, then the same shall be circulated to all the Directors and shall be final only if ratified by majority of Directors of the Company.

Attendance REGISTER

MAINTENANCE & ENTRIES

• Separate attendance registers for the Meetings of the Board and Meetings of the Committee shall be maintained at the Registered Office or such other place as approved by the Board.
• The Register shall be page numbered and shall contain serial no., date, time place of meeting, name of Directors, CS and invitees along with their Signatures.
• The CS (if no CS then the Chairperson) shall authenticate the entries in attendance register by appending his signature to each page.

CUSTODY, PRESERVATION & INSPECTION

• The attendance register shall be in the custody of CS (if no CS then any Director authorized by Board).

• The attendance register shall be preserved for a period of at least 8 financial years and may be destroyed thereafter with the approval of the Board.

• The Register shall be open for inspection by Directors. Further the Secretarial Auditor, Statutory Auditor or the Practicing Company Secretary appointed by the Company can also inspect the same for performance of their duties.

QUORUM

• Quorum shall be present throughout the meeting and a Director shall not be reckoned for Quorum in respect of an item in which he is interested and he shall not be present during discussions and voting on such item.

• For this purpose, a Director shall be treated as interested in a contract or arrangement entered or proposed to be entered:-

1. With the Director himself or his relative.

2. With any Body Corporate, if such Director (along with other Directors holds more than 2 percent of its paid-up share capital), or he is a promoter/manager/CEO of that body corporate.

3. With a firm or other entity, if such Director or his relative is a partner, owner or Member, as the case may be, of that firm or other entity.

NOTE: – After applicability of SS-1, the scope of interested director has widened. Companies Act, 2013 only covered circumstances under section 174 read with 184(2) and section 188 read with rule 15(2) of chapter 12, where a Director would neither participate nor be counted in quorum. But the widened definition covers cases where a contract or arrangement is proposed with a Director himself/his relative/firm or entity in which relative is a partner, owner or Member, the Director.

BOARD MEETINGS

• Unless Articles provide for a higher number, Quorum shall be 1/3^rd of total strength (Vacant positions in Board shall be excluded) or 2, whichever is higher.

• If in respect of any item, 2/3^rd or more number of Directors are interested the remaining Directors present at the Meeting, being not less than two, shall be the Quorum.

• If a meeting could not be held for want of quorum then it shall be adjourned to next week same day, time and place provided that day shouldn’t be a national holiday and if quorum is not present at the adjourned meeting also it shall stand cancelled.
• Where the number of Director falls below:-
  1. Minimum required by the Articles: – Only appointment of Directors can be done to Comply with the requirement by remaining Directors or through a general meeting and until then no business shall be transacted.
  2. Quorum as required by the Act for a meeting of the Board: – The continuing Directors 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.

COMMITTEE MEETINGS

• The quorum for any Committee is presence of all the members, unless otherwise stipulated by articles or Board or any law.
  

CHAIRPERSON

BOARD MEETINGS

• The Chairperson of the company to be Chairperson of the Board. If no Chairperson of Company is there, the Directors may elect one of themselves to be the Chairperson of the Board.

• If no Chairperson of Board is elected or if he is unable to attend the meeting then unless otherwise provided in the articles, Directors present at the meeting shall elect one of themselves to chair and conduct the Meeting.

COMMITTEE MEETINGS

• The Chairperson of a committee shall be appointed by the Board or elected by the committee, subject to articles or Companies, Act 2013 or any other law.

• If no Chairperson of committee is elected or if he is unable to attend the meeting then unless otherwise provided in the articles, members present at the meeting shall elect one of themselves to chair and conduct the Meeting.

RIGHTS & DUTIES OF CHAIRPERSON

RIGHTS

• Chairperson shall be consulted at the time of convening of a meeting.

• The Chairperson has right to adjourn a meeting at any stage for any reason.

• His Consent is required for taking up items not included in agenda.

• He has right to allow/refuse recording of views/opinion of any Director verbatim (in exact same words).

• He has absolute discretion to exclude from the Minutes, matters which in his opinion are defamatory, irrelevant or immaterial to the proceedings or which are detrimental to the interests of the company (even if they are views/opinion of Directors).

• He has discretion whether to consider comments of a director on draft minutes, if received after expiry of 7 days from date of circulation of the draft.

• He may give his Consent along with majority directors, including at least 1 Independent Director, if any for taking up supplementary notes on any agenda.

• He may expressly permit any Director participating through electronic mode to take part in discussion of restricted items (items in which participation through electronic mode is not allowed by Act or any other law) but such Director shall neither be counted for Quorum nor cast his vote.

DUTIES

• The Chairman shall with the assistance of CS, check that the Meeting is duly convened and constituted before proceeding to transact business.

• The Chairman shall confirm the attendance of Directors participating through electronic mode by taking a roll call at commencement of the Meeting.

• The Chairman shall encourage deliberations and debate in a meeting and ensure that proceedings of the meeting are correctly recorded.

• He shall with the consent of the members, entrust the chair to any dis-interested Director in respect of any item in which he is interested, also not be present at the meeting during discussion of such items and resume the chair after that item has been transacted.

• The Chairman shall initial each page of minutes, sign the last page and append date & place to such signatures.

Minutes

MAINTENANCE

• The minutes may be maintained in physical or in electronic form in manner prescribed by the Act along with a timestamp (defined in the standard, basic intention is to keep a record on which date the minutes were digitally signed). However, a uniform and consistent form should be followed and any deviation thereto shall be approved by the Board.

• A distinct Minutes Book shall be maintained for Meetings of the Board and each of its Committees.

• The pages of Minutes Book shall be consecutively numbered and if maintained in loose-leaf form be bounded periodically depending upon size and volume.

• The Place of maintenance of minutes of Board Meeting shall be the registered office of the Company or such other place as may be approved by the Board.

RECORDING OF MINUTES

• The CS (if no CS then any person authorized by Board/Chairman) shall record the proceedings of the meetings.

• Minutes should be in clear and plain language & in third person and past tense, however the resolution should be in present tense.

• The decisions shall be recorded in the form of resolutions where it is statutorily or otherwise required. In other cases, the decisions can be recorded in a narrative form.

• Apart from the Resolution or the decision, Minutes shall mention the brief background of all proposals and summarise the deliberations thereof. In case of major decisions, the rationale thereof shall also be mentioned.

• Reference should be given in minutes of papers on basis which board has accorded its approval and the papers shall be initialled by CS or Chairperson for proper identification.

CONTENTS OF MINUTES

♥ The minutes shall contain the following:-

• serial number and type of the Meeting
• name of the company
• day, date, venue
• time of commencement and conclusion of the Meeting
• Names of Directors (starting with the Chairperson, in alphabetical order or in any other logical manner), CS & Invitees.
• Capacity in which invitee attended the meeting (including name of entity which the invitee represented & relation of such entity with the Company).
• fact that a Resolution was passed by exercising of casting vote by Chairman.
• Reference of earlier Resolution or decision, if the same is superseded or modified

♥  As per the standard minutes shall also contain certain specific contents, some of the crucial and non-routine items are listed below:-

• The text of the Resolution(s) passed by circulation since the last Meeting, including dissent or abstention, if any.
• The Agenda items in which a Director did not participate.
• Ratification by ID or majority of Directors, as the case may be, in case of Meetings held at a shorter Notice or transacting any item not included in the Agenda.
• Views of Director particularly ID.
• Taking note of appointment of person one level below KMP (Appointment not mandatory after amendment in rule 8 of chapter 7).
• Taking note of minutes of previous Board meeting and Committee meetings.

DRAFT MINUTES

• The Draft Minutes shall be circulated within 15 days from conclusion of meeting to all the members of the Board/Committee. The provisions of sending of notice shall also apply to draft minutes.

• Comments on draft minutes shall be given by Directors/members of committee within 7 days from circulation of draft and if comments are received after 7 days it shall be upon discretion of chairperson to consider such comments.

ENTRY, DATING & SIGNING OF MINUTES

• The Minutes shall be entered in minute book within 30 days from conclusion of meeting and the CS (If no CS then person authorized by Board/Chairperson) shall record the date of entry of minutes.

• Each page minutes of a meeting shall be initialed and last page shall be signed appending date & place of signing by the chairperson of the meeting at any time before the next meeting or chairperson of the next meeting at the meeting itself.

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

FINAL MINUTES & ALTERATION

• Copy of signed minutes certified by CS (If no CS then person authorized by Board) shall be circulated to all Directors within 15 days of signing.
  

• Once entered in minute book the minutes shall not be altered except with express Board approval in a subsequent Board meeting.

CUSTODY, PRESERVATION OF MINUTES & OTHER RECORDS

• The Minutes Book shall be in the custody of CS (if no CS then any Director authorized by Board).

• Minutes of all Meetings shall be preserved permanently (including minutes of Transferor Company merged/amalgamated with the Company).

• Office copies of Notices, Agenda, Notes on Agenda and other related papers (including those of Transferor Company merged/amalgamated with the Company) 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.

INSPECTION & EXTRACTS OF MINUTES

♥ Inspection by :-

• Directors: can inspect/obtain signed copies of Minutes of Meetings of the Board and any Committee, including minutes of a meeting held before period of his Directorship.
• Past Director: can inspect/obtain signed copies of Minutes of Meetings of the Board and any Committee held during his tenure.
• Professionals: Secretarial Auditor, Statutory Auditor or the Practicing Company Secretary appointed by the Company can also inspect the same (not obtain copies) for performance of their duties.

♥  Mode of Inspection:- Either in physical or in electronic form, and while providing for inspection the CS or an official authorized by the him shall take all precautions to ensure that the Minutes Book is not mutilated or tampered in any way.

♥  Extracts of the Minutes (physical or electronic form) can only be given after the minutes have been duly entered in the Minutes Book and duly signed.

♥  However, certified copies of Resolution may be issued before entering of minutes in minutes book, if the text of that Resolution had been placed at the meeting.

ADJOURNED MEETINGS

Apart from provisions mentioned above following specific provisions needs to be followed for Adjourned meetings of Board or its Committees:-

• Adjourned meetings shall also not be held on a national holiday.

• Notice of Adjourned meetings shall also be given to all Director (whether he attended originally convened meeting or not).

• The length of notice of Adjourned meetings shall also be of 7 days (2 days additional in case of speed post/regd. Post/courier) unless date of adjourned meeting is decided at the originally convened meeting itself.

• Minutes shall be prepared for adjourned meeting separately & in case a meeting was adjourned due to want of quorum, then a statement to this effect shall also recorded in minutes by Chairperson/any Director who was present in the meeting.

• Minutes shall be entered in minute book within 30 days from date of adjourned meeting.

ILLUSTRATIVE PROCEDURE

1. Any Director to summon a meeting and CS will convene a meeting on requisition, after consulting with Chairman, in his absence MD, in his absence.

2. Sending of Notice, Agenda & Notes to Agenda: – at least 7 days before meeting by hand/speed post/regd. Post/ courier/ fax/ email (additional 2 days in case of dispatch by speed post/regd. Post/ courier). If shorter notice then conditions mentioned in standard to be complied with.

Shorter notice may be given subject to requirement of the standard. Proof of Sending of Notice and its Delivery shall be maintained by the Company.

3. At Board Meeting:-

a) Chairperson to chair the meeting

b) Taking note of leave of absence

c) Ascertaining presence of quorum

d) Signing of attendance register, register of Related Party Transaction

e) Taking note of minutes of last Board Meeting & committee meetings held after date of last Board Meeting

f) Taking note of any Resolution passed by circulation

g) For each agenda following things should be done:-

• Quorum should be present
• Interested Director not to participate in discussions and voting, if Chairperson interested then he leaves the Chair for that item.
• Proper Deliberations to be done considering agenda notes
• If supplementary notes are to be considered, approval of Chairperson and majority Directors(including at least 1 Independent Director) is required
• After discussions, decision/resolution should be put to vote and in case of equality of votes chairperson shall exercise his casting vote.
• Taking up of items not included in agenda shall be done only with approval of Chairperson and majority Directors (including at least 1 Independent Director)

4. Circulation of draft minutes to all Directors within 15 days of conclusion of meeting.

5. To take into consideration comments on draft minutes received within 7 days of circulation. In case comments received after 7 days then chairperson’s decision regarding considering the same shall be final.

6. Entry of minutes in minute book along with date of entry within 30 days of conclusion of meeting.

7. Minutes shall be signed by Chairperson of the meeting or chairman of next meeting.

8. Circulation of signed minutes, duly certified by CS within 15 days of signing.

Disclaimer: The entire contents of this article have been prepared on the basis of relevant provisions and information existing at the time of preparation. Though utmost effort has been made to provide authentic information, it is suggested to kindly cross check the relevant provisions for better understanding. The observations of the author are personal view and the author does not take any responsibility of the same and this cannot be quoted without the written consent of the author. 

(Author may be contacted on csgurminderdhami@gmail.com for Suggestions, comments and queries )

Click Here to Read Other Articles written by Gurminder Dhami