Insight of a Board Meeting

CS Dharmesh Vankar | 04-Jan-2017

Vision and mission statement!!! The most important concept (inspiration) for the organisation.

Vision realistic credible and attractive future of an organisation. Vision basically refers to the mental perception of the kind of environment that an organisation aspires to create a broad time frame. Vision in the context of individual refers to what one want to become. E.g. Dhirubhai Ambani had set the vision of making Reliance Industries the biggest private sector company in India.

The mission is a general statement of what distinguish the organisation from all other of its types. The mission is the answer to the basic question, ?What is our business? E.g. Mission of ICSI refers to continuously develop high calibre professionals ensuring good corporate governance and effective management and to carry out proactive research and development activities for the protection of the interest of all stakeholders thus contributing to the public good.

One might think that how one (Company or organisation) can accomplish its vision and mission statement? The answer is through discussion and thinking, i.e., through Board Meeting.

Insight of a Board Meeting

Image courtesy- www.lepetitjuriste.fr

Here the journey of Board meeting begins
In general, Meeting means two or more people come together to discuss one or more topics, often in a formal setting. However, Board meeting is nowhere defined in the Companies Act, 2013, but as per Secretarial Standard-1 on Meeting of the Board of Directors, “Meeting” means a duly convened, held and conducted Meeting of the Board or any Committee thereof. (Committee means a Committee of Directors constituted by the Board.) Therefore, Board meeting means meeting or gathering of Directors, CFO, CEO and invitees, if any, of the Company for discussing various aspects pertaining to the Company. Someone will think that I have missed out Company Secretary, but there is no need to highlight that because Company Secretary is an integral part of the Meeting, without him, Board meeting can’t be held.

Applicability of Secretarial Standard - I
Secretarial standard - I apply to the Meetings of the Board and its Committees of all companies incorporated under the Act* except One Person Company (OPC) in which only one director on its Board, in respect of which Notices are issued on or after 1st July 2015.

(* Act means the Companies Act, 2013 / 1956 and other earlier Companies Act)

The question may arise in the mind of an individual that whether SS-1 applies to Companies incorporated outside India or not? As per the definition of ‘Company’ given in Sec.2 (20) of the Companies Act, 2013, it means that Company incorporated under this Act or under any previous company law. So, as per my understanding, SS-1 will not apply to Company incorporated outside India.

Applicability to companies governed under Special Acts
SS-1 is also applicable to Banking Companies, Insurance Companies, Companies engaged in generation or supply of electricity, Companies governed by any Special Acts, bodies corporate notified by the Central Government, if incorporated under the Act. However, if the provisions of these Special Acts such as The Banking Regulation Act, 1949, The Insurance Act, 1938, etc. applicable to these companies are inconsistent with the Secretarial Standards, then the provisions of such Special Act shall prevail.

Who can convene a meeting?
Any director of a company may at any time, summon a Meeting of the Board and the Company Secretary or where there is no Company Secretary, any person authorised by the Board in this behalf, on the requisition of a Director, shall convene a meeting of the Board.

Time, place, day of meeting
A meeting may be convened at any time and place, on any day, excluding a National holiday (26th January, 15th August & 02nd October). Notice of the meeting, wherein the facility of participation through electronic mode is provided, shall clearly mention a venue, whether registered office or otherwise, to be the venue of the meeting and it shall be the place where all the recordings of the proceedings at the meeting would be made.

A meeting adjourned for want of quorum shall also not be held on a National holiday.

Notice
Notice of not less than seven days’ in writing of every meeting shall be given to every director at his regd. Address with the Company, by hand or by speed post or by regd. Post or by courier or by facsimile or by e-mail or by any other electronic means. It will not be given by ordinary post. The notice shall specify the serial number, day, date, time and full address of the venue of the meeting.

The notice shall also contain the contact number or e-mail address of the chairman or the Company Secretary or any other person authorised by the Board, to whom the Director shall confirm in this regard. In the absence of an advance communication or confirmation from the Director as above, it shall be assumed that he will attend the meeting physically.

The notice of a meeting shall be given even if meetings are held on predetermined dates or at pre-determined intervals.

A notice convening a meeting shall be given at least seven days before the date of the meeting unless the articles prescribe a longer period. Notes on items of business which are in the nature of unpublished price sensitive information may be given at a shorter period of time than stated above, with the consent of a majority of the Directors, which shall include at least one Independent Director, if any. If no independent director is present, decisions taken at such a Meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one Independent Director, if any. In case the Company does not have an Independent director or it is not required to appoint Independent director, the decision shall be final only on ratification thereof by a majority of the Directors of the Company. The fact that the meeting is being held at a shorter notice shall be stated in the notice.

A serving of notice of the meeting is also mandatory. If there’s conflict occurs and if respondents fail to prove due service of notice then the meeting cannot be held lawful, valid and proper. (KishorMohanlal shah Haraniya v. Dura Home Builders &Develpoers (P) Ltd.)

“Unpublished price sensitive information” means any information, relating to a company or its securities, directly or indirectly, that is not generally available, which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:-

  1. Approval Financial results;
  2. Dividends;
  3. Change in capital structure;
  4. Mergers, demergers, acquisitions, delistings, disposals and expansion of business and such other transactions;
  5. Changes in key managerial personnel; and
  6. Material events in accordance with listing agreement / SEBI (LODR) Regulations, 2015

If notice of the meeting is not given to one of the directors, meetings of the board of directors is invalid and the resolution passed at such meeting are inoperative. However, where the notice is not given as required but all directors attend the meeting and do not object to the absence of notice, the proceedings at the meeting will not be invalid, if it is ratified at subsequent Board meeting. Ratification generally relates back to the date of the act ratified. (Parmeshwari Prasad Gupta v. The Union of India)

Frequency of Board Meeting
The Board shall meet at least once in every calendar quarter, with a maximum interval of one hundred and twenty days (120) between any two consecutive meetings of the Board, such that at least four meetings are held in each calendar year. Every company shall hold the first meeting of the Board of directors within 30 days of the date of its incorporation.

Relief has been granted to Section 8 Companies in the form that Board of such companies shall hold a meeting within every six calendar months.2

Further, it shall be sufficient if a One Person Company (OPC), Small Company or Dormant Company holds one meeting of the Board in each half of a calendar year and the gap between two Meetings of the Board is not less than 90 days. However, this will not apply to a one person company (OPC) in which there is only one director on its Board.

Meeting of Committees: Committees (CSR committee, Nomination & remuneration committee, etc.) shall meet as often as necessary subject to the minimum number and frequently stipulated by the Board or as prescribed by any law or authority.

Meeting of Independent Directors: where a Company is required to appoint independent directors, such independent directors shall meet at least once in a calendar year. The Company secretary shall facilitate convening and holding of such meeting if so desired by the independent directors.

Quorum of Board Meeting
Q
uorum means the minimum number of Directors whose presence is necessary for holding a meeting. The quorum for board meeting shall be one-third of its total strength (total strength shall not include directors whose place are vacant) or two directors, whichever is higher. Any fraction contained in the above one-third shall be rounded off to the next one. Where the quorum requirement provided in the Articles is higher than one-third of the total strength, the Company shall conform to such higher requirement.(Articles can increase but cannot reduce quorum) However, in the case of conflict between the provisions of the Act and the memorandum and articles, the statute prevails upon the bye-laws. (Babaji Kondaji Garad v. Nasik Merchants Co-op. Bank Ltd.)

A quorum shall be present throughout the meeting. A quorum shall be present not only at the time of commencement of the meeting but also while transacting business. A Director shall not be reckoned for a quorum in respect of an item in which he is interested and he shall not be present, whether physically or through electronic mode, during discussions and voting on such item.However, interested director [Sec.184 (2)] will be counted for quorum but he will not entitle to present for discussion on a business item in which he has interest. Interested director in a private company can now participate in board meetings after disclosure of his interest1.Directors participating through electronic mode in a meeting shall be counted for the purpose of a quorum unless they are to be excluded for any items of business under the provisions of the Act or any other law.

Where directors entitled to hold a meeting to appoint directors for the purpose of constitution quorum, such a meeting should be called only for that purpose. A new meeting should be called thereafter for transacting other business.

The quorum for Sec.8 Companies shall be either eight members or 25% of its total strength whichever less is provided the quorum shall not be less than 2 members in any case2.

[1 - Exemption granted to Private Companies Vide MCA notification dated 05th June 2015

2- Exemption granted to Sec.8 Companies Vide MCA notification dated 05th June 2015]

Meeting of Committees: The presence of all the members of any Committee constituted by the Board is necessary to form the Quorum for Meetings of such Committee unless otherwise stipulated in the Act or any other law or the Articles or by the Board.

Listing Regulations have mandated a quorum for the Audit Committee meetings, which shall be either two (2) members or 1/3rd of the members of the Committee, whichever is greater with at least 2 independent directors. In other words, if the Audit Committee has 3 members of whom 2 are an independent director, both the independent director should be present to constitute a quorum for an Audit Committee meeting. The Companies Act, 2013, however, does not contain such a stipulation.

Board Meeting through video conferencing
A company can convene and hold a meeting of its Board through video conferencing or audio-visual means only if the directors of the company either inform the chairperson or the Company Secretary of the company at the beginning of a calendar year (not financial year) that they intend to participate in the meeting of the Board through electronic mode. However, it is not said anywhere that if an intimation to participate in a meeting through video conferencing or any audio-visual mode is not given at the beginning of the year, the directors are not entitled to participate in the said meeting through video conferencing. If the director wishes to participate through video conferencing, he shall give prior sufficient intimation so that Company can make suitable arrangements in this behalf. (MR. RUPAK GUPTA AND ANR.Versus M/s. U.P. HOTELS LIMITED AND ORS.)

However, following matters shall not be dealt through video conferencing:

  1. The approval of financial statements
  2. The approval of the Board’s report
  3. The approval of the prospectus
  4. The audit committee meetings for consideration of financial statements including consolidated financial statements
  5. The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.

Attendance at Meetings
If any director wants to attend the meeting through video conferencing, then a roll call shall be taken by the Chairperson before the Commencement of the meeting.Every company shall maintain separate attendance registers for the meetings of the Board and the Meetings of the Committee.

The pages of the respective attendance registers shall be serially numbered. If an attendance register is maintained in loose-leaf form, it shall be bound periodically depending on the size and volume.

Every Director, Company Secretary and every invitee who attends a Meeting of the Board or Committee shall sign the attendance register at that Meeting. The attendance register shall be maintained at the Regd. Office of the company or such other place as may be approved by the Board. The attendance register is open for inspection by the members.As per SS-1 counter signature of Chairman or Company Secretary is also required mention if you think it is to be included in this article

Leave of absence
Leave of absence shall be granted to a director only when a request for such leave has been received by the company secretary or by the Chairman. The office of a director shall become vacant in case the director absents himself from all the meetings of the Board during a period of 12* months with or without seeking leave of absence of the Board. (Sec.167)

(* 12 Months will be counted from the first Meeting from which the director absents himself)

Insight of a Board Meeting
Image courtesy- www.colourbox.dk

Chairman of the meetings of the Board/committee

The chairman of the company shall be the Chairman of the Board. If the Company does not have a Chairman, the Directors may elect one of themselves to be the Chairman of the Board.

The chairman of the Board shall conduct the Meetings of the Board. If no chairman is elected or if the Chairman is unable to attend the meeting, the directors present at the Meeting shall elect one of themselves to a chair and conduct the meeting, unless otherwise provided in the articles.

It would be the duty of the Chairman to check, with the assistance of Company Secretary, that the meeting is duly convened and constituted in accordance with the Act or any other applicable guidelines, Rules or Regulations before proceeding to transact business.The chairman shall encourage deliberations and debate and assess the sense of the meeting.

The Board of directors has a right to remove the chairman appointed by it if he has lost its confidence. (kashinathtapuria V. in cab industries Ltd)

If the chairman is interested in any item of business, he shall, with the consent of the members present, entrust the conduct of the proceedings in respect of such item to any disinterested director (this is the loophole in the case of private limited company and closely held public limited company)and resume the chair after that item of business has been transacted. The chairman shall also not be present at the meeting during discussions on such items.

Unless otherwise provided in the Articles, in the case of an equality of votes, the Chairman shall have a second or casting vote(deciding vote). One thing to be kept in mind while using casting vote by chairman is that uses it with great care as it’s a two-way sword.

Passing of resolution by circulation
There are certain urgent businesses which can be approved by means resolutions passed by circulation. Resolutions passed by circulation are deemed to be passed at a duly convened Meeting of the Board and have equal authority.

The chairman of the Board or in his absence, the Managing Director or in his absence, the Whole-time Director and where there is none of the above, any Director other than Interested Director, shall decide, before the draft resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of resolution by a circulation.

The draft of the resolution and the necessary papers shall be sent to the postal address or e-mail address registered by the Director with the company or in the absence of such details or any change thereto, any of the addresses appearing in the Director Identification Number (DIN) registration of the Director.

Proof of sending and delivery of the draft of the Resolution and the necessary papers shall be maintained by the company.

Each resolution shall be separately explained. The decisions of the Directors shall be sought for each resolution separately. Not more than seven days from the date of circulation of the draft of the Resolution shall be given to the Directors to respond and the last date shall be computed accordingly.

If any special majority or the affirmative vote of any particular Director or Directors is specified in the Articles, the Resolution shall be passed only with the assent of such special majority or such affirmative vote. Any interested director shall not be entitled to vote.

Directors shall signify their assent or dissent by signing the Resolution to be passed by circulation or by e-mail or any other electronic means. Directors shall append the date on which they have signed the resolution. In case a Director does not append a date, the date of receipt by the Company of the signed resolution shall be taken as the date of signing.

In the case where the interest of director is yet to be communicated to the company, the concerned director shall disclose his interest before the last date specified for the response and abstain from voting.

In case the director does not respond on or before the last date specified for signifying assent or dissent, it shall be presumed that the Director has abstained from voting.

If the approval of the majority of Directors entitled to vote is not received by the last date specified for receipt of such approval, the Resolution shall be considered as not passed.

The resolution passed by circulation shall be noted at the next meeting of the Board along with the final result.

Certain transactions which can’t be passed by circulation, some of them as follows:

  1. Appointment or removal of KMP
  2. Authorise Buyback of securities
  3. To make political contributions
  4. Approving amalgamation, merger or reconstruction

[Note: Passing of resolution by circulation is given for benefit only, not for undue advantage. No Company can use Circular Resolution to escape the holding of Board meetings as per specification provided under the act.]

To sum up, there’s one proposition that for a wife that if she wants to win the heart of her husband, then she should be expert in making delicious food stuff. Same as if Company wants to achieve its vision and mission statement in time then it can only be attainable through Board Meeting. In short, Board Meeting is the first step of hierarchy to achieve its goals and objectives.

Disclaimer: The entire content of this document is author’s own interpretation & personal view. Though utmost efforts have made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules, etc. under the Companies Act, 2013.

References:

  • The Companies Act, 2013
  • Companies (Meeting of Board and its Powers) Rules, 2014
  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
  • Secretarial Standard – I issued by the ICSI
  • ICSI Professional Programme Study material – Strategic Magt., Alliance & International Trade.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Fagnum.com. The writers are solely responsible for any claims arising out of the contents of this article.
About the Author
CS Dharmesh Vankar
I am a sanguine Company Secretary (A-42284) with open nature who easily associates with new people and is always ready to grasp new things regardless of time and place, hails from "Sanskari Nagri" - Vadodara. You can reach me @ 9558930408 or write me on dharmeshvankar22@gmail.com