Conducting a Board Meeting in India

A company is essentially a collective of several individuals working towards delivering certain products or services. As it comprises a group of different individuals, it is imperative to gather together periodically to resolve issues and review efforts made for the betterment of the business.

What is a Board Meeting?

• A formal meeting of the Directors of a company organized to discuss topics such as performance review, strategies/initiatives, problems encountered and the plans for future to ensure smooth functioning of the company .
• The meetings are organized at definite places and times and aim to achieve certain goals and predetermined objectives.
• Board meetings are held to tackle complicated issues, review progress, make new policies, take vital decisions, assess compliances and address other highly important matters.
• Considering its importance, unlike general meetings and events, one need to prepare extensively for convening a board meeting, as it will be attended by all the Directors and possibly even experts, who have been called in for specific issues.

Provisions of Companies Act 2013 to Conduct Board Meetings in India

Provisions under section 118, 173 and 174 of the Companies Act, 2013 and  Companies (Meetings of Boards and its Powers) Rules, 2014 act as guidelines for conducting board meetings in India.

Schedule for Board Meetings

• As per Section 173 of the Act, all public and private companies are required to hold a minimum of  four board meetings in a calendar year. Any contravention of the section may result imposition of penalties by the ROC.
• A company registered under section 8 of the Company is required to hold alteast one Board Meetinh within six calendar months.

In a recent case of Etsystore Private Limited vs ROC, ROC Delhi imposed penalty of INR 45,000 for the non-convening of four Board Meetings in the calendar year 2020.

In another case of CFS Netralaya Private Limited vs ROC, ROC Mumbai imposed penalty of INR 1,25,000 for each year on the company and its officers in default for not convening four Board Meetings in the calendar year 2021 and 2022.

Gap Between Two Board Meetings

• As per Section 173(1), every company is required to hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board.
• If it is a one-person company, or a dormant one, the interval between two consecutive meetings cannot be less than 90 days.

Board Meeting Notice

As per Section 173 of the Companies Act, a board meeting must only be held after giving a notice for the same. Board members shall be called by sending a written notice to each director 7 days before the meeting date at their address registered with the company, handing them in person, by post or through electronic mediums.

Note: A meeting of the board may be called on a shorter notice to deal with some urgent issues, on the condition that at least one, if not more, independent director shall be attending the meeting.

Adequate Day for Board Meetings

Board meetings may be held on any working day or on a day that is not a public holiday.

Adequate Time for Board Meetings

Board meetings can be organized both during business hours and non-business hours. There is no restriction on holding board meetings only during business hours.

Board Meeting Location

• The registered office of the company, the head office or any other property that can be used for the meeting, irrespective of whether it lies within the same city, town, village, or state of the company’s registered office or not.
• Meetings may also be held in another country, during which participation of the Directors through video conferencing or other audio-visual means shall be allowed.

Board Meeting Quorum

• The quorum is to have at least two directors or one-third of the total number of directors present at office at the time – whichever is higher of the two numbers.
• In case the one-third of the number of directors present results in a fraction, it shall be rounded off to one.
• For companies registered under Section 8, the quorum should constitute eight directors or 25% of the total strength – whichever is less.

Day, Time and Place to Hold Adjourned Board Meetings

As per Section 174, if a board meeting is adjourned and does not take place due to some reason, it shall be postponed to the same day, time and place for the next week.

If that day falls on a public holiday, it shall be postponed to the next day that is not a public holiday and be held at the same place and time.
 

Proxy for Directors in Board Meetings

• If the standard quorum of a board meeting as stated in the Act is not being met, the present director or directors may act upon increasing the number of directors present to have the meeting. If they are unable to reach the required number, they may choose to postpone the meeting for the next week.
• No director is allowed to send a proxy in place of them for a board meeting, as such meetings demand the exclusive presence of such senior authorities to discuss matters of utmost importance.

Procedure to Conduct Board Meetings

Calling the Board Meeting

• Notice, agenda and notes to agenda shall be issued to every Director seven days in advance in writing. It shall be delivered to the address registered with the company, given in hand, or sent through speed post or registered post, in which case an additional two days must be considered for the time taken by the postal service.
• Notice, agenda and notes to agenda are issued by the Company Secretary or if there is no Company Secretary, any Director or individual authorized to take over the job by the Board.
• Notice must inform Directors about the availability of the option to attend the meeting through video conferencing or other audio-visual means along with all the details required to attend the meeting through video conferencing or other audio-visual means.
• Directors choosing to attend the Board Meeting through video conferencing or other audio-visual means must inform the Company Secretary or Chairperson well in advance, so that necessary arrangements can be made for the same.
• Notes related to Unpublished Price Sensitive Information may be shared with the Directors at a shorter period than mentioned above after receiving consent from the majority of the Directors, including one independent Director, if there are any.
• Each item of business to be discussed in the Board Meeting shall be serially numbered. The numbering shall be done in a way that it is easy to reference or cross-reference.

Holding the Board Meeting

• Check if the quorum is present to hold the meeting. The quorum must not only be present at the beginning of the meeting but also during the proceedings.
• Check if anyone is on a leave of absence, which is only granted to a Director if they have communicated the same to the Company Secretary, Chairman or any individual authorized by the Board to issue the Notice for the meeting.
• The Chairman of the company shall be the Chairman of the Board. If there is no Chairman of the company, the Directors may choose a Chairman from amongst themselves to conduct the meeting.
• An attendance register must be maintained by all companies for Board Meetings. At the beginning of the meeting, the Chairman shall take a Roll Call of Directors and confirm the presence of all those available, including those joining via video conferencing or other audio-visual means.
• The Chairman may request the Directors joining via video conferencing or other audio-visual means to state their full name and location from where they are attending the meeting. These details are to be included in the Minutes of the Meeting as well. The entire procedure of such meetings must be recorded, and the details of the venue, date and time must be mentioned.
• Directors joining through electronic means will be deemed to have signed the attendance register and verified by the Company Secretary, or in their absence the Chairman or any other Director present in the meeting. This shall be mentioned in the minutes of the meeting as well.
• All contracts and plans must be placed in the meeting and signed by all the Directors of the Board present for the meeting.
• In case the Chairman is interested in a certain matter, they shall ask any non-interested Director, after getting consent from the majority of Directors, to head the meeting for that specific item. They may continue heading the meeting once that specific business has been conducted. If it is a private company, the Chairman may continue to head and participate in the meeting after disclosing their interests.
• In case there are an equal number of votes on any topic, the Chairman shall use their second vote or casting vote to decide on the matter.
• Any topic not included in the agenda shall only be covered after getting permission from the Chairman with the consent of a majority of Directors present for the meeting. Decisions on such topics are only finalized after the consent of a majority of the Directors unless approved at the meeting itself by a majority of the Directors present. Conclude with a vote of thanks to the Chair.

Penalties

Provisions for Violation of Section 173

No specific offences have been specified for the violation of Section 173 of the Companies Act, 2013. In cases of violation, the defaulting individual shall be penalized under Section 450 of the Act.

Provisions As Per Section 450 of Companies Act, 2013

As per Section 450 of the Companies Act, 2013, if a company or any officer of a company or any other person breaches any provisions of this Act or the rules made in accordance with it, or any condition, imitation or restriction subject to which any approval, condition, consent, confirmation, recognition, direction or exemption in relation to any matter has been accorded, given or granted, and for which no penalty or punishment is provided elsewhere under the Companies Act, 2013, the company and each individual who is in default shall be penalized INR 10,000.

If the violation continues, a further penalty of INR 1000 for each day after the first for the period when the violation continues, shall be imposed. This is subject to a maximum of INR 2 lakh in case of a company and INR 50,000 in case of an officer who is in default.

In the matter of Indira IVF Hospital Private Limited vs ROC, ROC Jaipur imposed penalty of INR 1,60,000 on the Company and its directors, CS, CEO & CFO (officers in default) for violation of section 173(1) of the Companies Act, 2013.

The above case serves as a reminder of the significance of abiding by legal regulations, such as the Companies Act of 2013's necessity for mandatory board meetings. It emphasises how important it is for businesses to ensure that all regulatory requirements are strictly followed in order to prevent potentially expensive consequences.

Conclusion

Board meetings are crucial gatherings of the top authorities of a company, making it imperative to ensure everything is up to the highest standards and in accordance with the regulations mentioned in the Act. This not only helps avoid any legal complications for defaulting while conducting a meeting but also ensures all important topics and issues that need to be discussed during the meeting are systematically addressed.