Elaborating Provisions relating to Meeting of Board and its Power (Part-1)
Introduction: Under companies act there are certain provisions which entity is required to comply by conducting minimum number of board meeting and by ensuring the required legal compliance. It is important to know that what are the number of meetings that entity is required to conducted, what will be the quorum of meeting, what are the power that are vested to board of directors; in this article we will cover all the provisions relating to meeting of board and its power.
Whether company is required to hold meeting of Board of Directors?
Every company is required to hold meeting of board of directors, company shall hold minimum of 4 meetings every year but the gap between two consecutive board meetings shall not be more than 120 days.
Illustration: D & Co. is had hold its first board meeting on 5th May, 2021; within what time he is required to conduct the remaining board meeting
The second meeting is required to be held within 120 days of first board meeting, therefore before 2nd September, 2021; the third meeting is required to be conducted before 31st December, 2021 and the fourth meeting is required to conducted before 31st March, 2022; as it has been state under section 173 of companies act that every company is required to conduct four board meetings in a financial year and the gap between two board meeting cannot be exceeded 120 days.
Whether company can conduct a greater number of meetings than above stated?
There is no restriction on conducting more than four meetings in a year. There is no restriction provided by the law.
What is the time limit within which first board meeting is required to be conducted by board of directors?
As per provisions any newly incorporated company is required to conduct first meeting of the Board of Directors within 30 days of the date of its Incorporation.
Illustration: S & co. got incorporated on 31st March, 2021; within what time they are required to conduct their first board meeting?
It has been stated that company is required to conduct first meeting of its board of directors, within 30 days from date of incorporation. It is not necessary that 30 days fall within the same financial year. Therefore, in above case first meeting is required to be conducted before 30th April, 2022.
Whether there is any exemption for conducting less than four meetings in a year?
If in case company is One-person company, Small company and Dormant company, the provision regarding conducting of four board meetings every year will not applicable. In such case entities are required to conduct one board meeting in each 6 months and time gap between two meeting shall be minimum of 90 days.
Here it shall be noted that the gap period is minimum unlike above were such period was of maximum 120 days.
Another special exemption is given to One Person Company (OPC) having only one director on board, i.e., they are not required to hold even single board meeting.
Further government vide amendment clarified that companies being Private Company or company which is formed under section 8 (i.e., Non-profit organization) who has not defaulted in filling financial statements or annual return as required under companies act, 2013; than above exemption (i.e., of conducting one board meeting in each 6 months and time gap between two meeting shall be minimum of 90 days) will be applicable to them also.
Through which means board of director can participate in meeting?
Board of directors can participate in meeting of board by attending the meeting physically, through video conferencing, through other audio-visual means.
Here, meaning assigned to other audio-visual means and video conferencing is that any person participating in meeting is able to communicate to each other and is been able to participate in meeting effectively.
Whether there is any special requirement when meeting is been conducted through video or other audio-visual means?
In case if meeting is been conducted through video or other audio-visual means than entity is required to ensure that 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.
Is there any restriction if meeting is been conducted through video or other audio-visual means?
In case if meeting is been conducted through video or other audio-visual means than in that case following matters are not allowed to be discussed at such meeting, i.e., for discussion of said matter meeting is required to be conducted by being physically present.
Another matter which is not allowed to be discussed if meeting conducted is through other than physical mode, is in case were Audit committee meeting is conducted for consideration of financial statement including consolidated financial statement to be approved by the board.
Question: Rahul & Co. has 7 directors on board. The company’s 3rd Board Meeting is schedule on 12th December, 2022; five of the directors attended the meeting through physical presence, two directors were not able to attend the said meeting through physical mode therefore they decided to join such meeting through virtual mode. During the said meeting company decided to approve prospectus for funds to be raised in future. State the validity of act.
Answer: It has been provided in provisions that directors of company may join the meeting through physical presence or through virtual mode. In case if company is any of the director is attending the virtual meeting, company is required to ensure that the said director is able to freely communicate with other directors and the meeting is capable of being recorded with date and time. It has also been stated that some matters are not allowed to be discussed at meeting if such meeting is conducted through virtual mode and approval of prospectus is one the said specified matter. However, it shall be noted that if minimum quorum is presented through physical mode and other members are present through virtual mode than in said case company is allowed to discuss all the matters at meeting without any restriction.
In the question case as in meeting company has 5 directors which present through physical mode which is exceeding the number of directors required to constitute quorum, therefore company is allowed to discuss all the matter in meeting without any restrictions.