Meetings of board: Procedures, Notice, Agenda, Requirement

Meetings of board: Procedures, Notice, Agenda, Requirement

INTRODUCTION:

The stakeholders in general meetings and the directors working co jointly as a Board manage the proceedings of a company. As a result, the directors often meet to deliberate various matters regarding the management and administration of the affairs of the company in the interest of the stakeholders, the entity itself and the public at large along with the society and economy and more precisely, the environment. The contemporary practice is to bestow upon the directors the right to exercise all powers of the company in which they are appointed as directors except for those matters, which by code are mandated to be exercised by the company in general meetings through the shareholders. The Board of Directors foreign management of the company to ensure that the interests of the shareholders are protected and the aim and agenda of profit maximization is achieved.

The provisions related to meetings of Board and its powers are discussed with under Sections 173 to 193 of the Companies Act, 2013 and the relevant Rules. Here we shall discuss provisions of section 173 along with its sub sections 1TO 5

MEETINGS OF BOARD [SECTION 173]

Section 173 of the Act contains outlines which deal with Meetings of the Board. This section mandates the directors on whose shoulders the obligation of management of the company rests, to meet and collaborate regularly. The purpose is to ensure that the powers granted to the directors should be exerted co jointly and each director should have the insight of the decisions taken for the smooth conduct of the business operations. The provisions of Section 173 are discussed hereunder:

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Frequency of Board Meetings [Section 173 (1)]

FIRST MEETING: All companies ought to hold the first meeting of the Board of Directors within 30 days of the date of its Incorporation.

SUBSEQUENT BORAD MEETINGS: All companies shall hold minimum of 4 meetings every year but the gap between two consecutive board meetings shall not be more than 120 days.

Example 1: In case a company conducted its Board meeting on 2ND April, 2019, then the next meeting must be held within 120 days of this date i.e. ideally before 31st July, 2019; and, by 31st December, 2019, the company must conduct minimum four such meetings (including the meetings which have already been conducted in the year 2019). The Board meetings may go beyond four also in a calendar year depending upon the urgency and importance of any business.

Participation by Directors in Board Meetings [Section 173(2)]:

Ways and means to allow Directors to participate in a board meeting spelled out in Section 173(2) of the Act allows the directors of a company to attend Board meetings in the following manner:

  • In person, through video conferencing, other audio-visual means as prescribed under Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014
  • Thus, the directors besides meeting in person, are also permitted to meet through electronic mode i.e. video conferencing or other prescribed audio-visual means.

Meaning of the term “video conferencing or other audio-visual means”: It refers to audio-visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting

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Essentials of audio-visual means: According to Section 173 (2), the audio-visual means should be capable of-

  • Recording and recognizing the participation of the directors; and
  • Recording and storing the proceedings of such meetings along with date and time.

Matters which cannot be dealt with in a meeting through electronic mode: The Central Government may, by notification, specify matters which shall not be dealt with in a meeting through video conferencing and other audio-visual means. In this respect, Rule 4 specifies the following matters which shall not be considered in any meeting held through video conferencing or other audio-visual means:

  • The approval of the annual financial statements;
  • The approval of the Board’s report;
  • The approval of the prospectus;
  • The Audit Committee Meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board under sub-section (1) of Section 134 of the Act, and
  • The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

It is 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 in such meeting on those matters also which are not permitted to be dealt with in a meeting through video conferencing or other audio- visual means. Such matters are enlisted above.

NOTICE UNDER Section 173(4):  

Under section 173(3) of the Companies Act, 2013 a meeting of the Board shall be called by giving not less than seven days’ notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means. A notice is to be mandatorily served even in case any of the directors express inability to attend the meeting.

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In terms of the proviso to section 173(3) of the Companies Act, 2013 a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting. No exception is made for any class or classes of companies

PENALTY UNDER Section 173(4):  

Section 173(4) further provides that every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of 25,000.

Exemptions to Certain Companies [Section 173(5)]:

In case of a One Person Company (OPC), small company and dormant company, the provision regarding conducting of four Board meetings every year is not applicable. These entities are required to conduct one or no (as the case may be) Board meeting in each half of a calendar year and the gap between the two meetings must not be less than 90 days. This is the minimum requirement and if so done, they shall be deemed to have complied with the provisions of Section 173

Author: Nirrmiti Somaani,
DES Shri Navalmal Firodia College / First year BBA LLB

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