What is a Board Meeting?
The board meeting is a formal meeting of top executives or directors of the company called to debate certain issues and problems and to make decisions. The meetings are held at definite times, at definite places. A Board meeting is organized to solve some special issues, taking important decisions or to make new policies.
Board meetings require more planning and detailed preparation than the usual corporate events as attended by the top corporate executives and leaders of the company.
Section 173 of Companies Act, 2013 – Meetings of Board
Following are the rules and conditions laid down by companies act 2013 which must be followed and fulfilled by the company and board of director of a company:
Minimum Number of Board Meetings
As per companies Act section 173(1) “Every company shall hold the first meeting of the Board of Directors within thirty days from the date of company incorporation and thereafter hold board meetings in such a manner that not more than 120 shall intervene between two consecutive meetings and should be minimum number of four meetings every year .”
Analysis of Section 173(1):
The manner of Participation by Directors
As per Companies Act Section 173(2) “The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audiovisual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time: Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audiovisual means.”
Analysis of Section 173(2):
Notice for Board Meeting
As per Companies Act Section 173(4) “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: Provided that 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: Provided further that in case of absence of independent directors from such a meeting of the Board, 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.”
Analysis of Section 173(4):
The penalty for failure to give notice
As per Companies Act Section 173(4) “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 twenty-five thousand rupees.”
Board Meetings in One Person Company, Small Company, and Dormant Company
As per Companies Act Section 173(4) “A one-person company, small company, and the dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days: Provided that nothing contained in this subsection and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.”
Analysis of Section 173(4):
Key points for an effective board meeting:
1. Prepare a clear and specific agenda.
Arrange all the aspects needed for a successful Board meeting. Settle or prepare for all uncertainties before sending initial notifications about the meeting. As problems come after sending invitations may cause a bad impact on the minds of the top Executives. If you are prepared in advance for future uncertainties, then it helps you to not change the details of the meeting at the main time. But if changes cannot be avoided, immediately send notifications to participants, or call them directly to tell them the changes. Make sure that all the participants or executives or directors and staff must receive the notification of the changes in the board meeting.
Always send reminders at least once, preferably a day before the board meeting is scheduled. As sometimes it happens that participants forget about the meeting because of busy schedules.
2. Prepare meeting documents, board packs, and other references.
Prepare all concerned documents and reports that must be needed in the board meeting. After preparing, cross-check that documents and reports are related to concerned agenda. Note the title of each document, especially the main meeting document; then assign clear reference numbers to them. List the reference numbers of the documents along with their titles in the meeting agenda and then cite them as they will be used in the meeting.
Send the board pack to each participant at least 3 days in advance. This will give the participants ample time to review the documents and reference materials. If possible, send the meeting documents at the same time you send the notice of the meeting, or a few days before the meeting.
3. Stick to the agenda.
The Chairman should have control over this; always being aware that the discussion is not diverted from the agenda. The Chairman should take charge of the flow of the discussion, sticking to the most important aspects of the agenda, but be noted that other points will be discussed in the next meeting. This also ensures that participants don’t waste time on trivial topics, such as minor line items in the financial report, which take more time to settle than the critical strategic items on the agenda. In such cases, the Chairman should be ready to take the floor to keep the meeting in order or express the finality of points or decisions, even if other participants or members are presenting.
4. Ensure that facilities and tools are in order.
Aside from a well-organized venue with good lighting, ventilation, and furniture, other facilities, such as projectors, computers (laptops), microphones, must be in operational condition. An internet connection can be useful for quickly looking up references during the meeting. Traditional, paper-based board meetings should have an ample supply of paper, pens, and markers available to participants, who may have to mark or highlight meeting documents, aside from taking down notes. Faulty equipment and tools can be embarrassing and time-consuming, and should be avoided; but incidents such as these are common, so administrators must be ready with spare equipment and tools to replace defective ones. In addition, with the use of electrical and electronic facilities, technical personnel should be on standby to immediately respond to and repair or replace failed equipment.
5. Record important points and action items and have a secure filing / archiving scheme
All relevant materials about the meeting such as signed contracts, amendments to policies, documented decisions, must be filed or archived in a secure storage facility, whether they are electronic/digital files or physical paper documents. Electronic/digital files should be filed with proper security measures like encryption or password-enabled folders and access control; on the other hand, paper documents should be filed in cabinets and in a room secured by good lock and key.
Who can call a board meeting Companies Act 2013?
Calling a Board Meeting.
A Board meeting is called by the directors of the committee. The company directors exercise their powers collectively at a Board Meeting.
As per the old Companies Act, 1956, a board meeting had to be held once in three months with at least four meetings in a year.
How many board meetings required per year as per Companies Act 2013?
There shall be minimum of 4 Board Meeting every year and not more than 120 days shall intervene between two consecutive Board Meeting
Can board meeting be held on Sunday under Companies Act 2013?
There are no restrictive or directive provision under Companies Act, 2013 that restricts or elaborates on day or time when Board Meeting can be held. Irrespective of any day or time Board Meeting can be called.
Who can call for a board meeting?
The board does much of the planning work, and there is a lot that the directors can do to make that job easier. The bye laws typically state who can call a board meeting; this is usually the board chair or board Chairman.
What is the time gap between 2 board meetings?
120 days of maximum gap between 2 consecutive board meetings. Regulation 17(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: The meeting of the board of directors - at least 4 times a year; a maximum gap of 120 days between any two consecutive meetings.
What do you mean by quorum?
Quorum Definition: The minimum number of voting members that must be in attendance at a meeting of an organization for that meeting to be regularly constituted. A quorum is the number or proportion of the members of an organization that must be present in order to transact any business.
How board meetings are conducted?
Keeping meetings on time demonstrates respect for everyone in the room. Stick to the agenda and do not present surprises during the meeting. Give board members ample time to review the agenda and research any items open for discussion by sending the agenda, reports and talking points to members ahead of time.
How many times should a board of directors meet?
The law varies from state to state as to how often a board of directors meeting should be held; however, most are held at least once a year. A board of directors meeting may also be called when momentous decisions are necessary.
Is AGM held on Sunday?
A General Meeting can be held on any day, including a public holiday or on a Sunday, unless such day is a National Holiday. Sub-section (2) of Section 96 of the Act requires the Annual General Meetings to be held during business hours on a day that is not a National Holiday.
Who can sign the minutes of board meeting?
Minutes of the Meeting of the Board should be signed and dated by the Chairperson of the Meeting or the Chairperson of next Meeting.
Such Minutes may be signed by the Chairperson of the Meeting at any time before the next Meeting is held.
Does a company secretary attend board meetings?
It usually goes without saying that the company secretary attends board meetings, or at least has the opportunity to do so. If the company secretary is excluded, the directors are required by law to arrange for minutes to be taken.
How do you write a notice for a meeting?
Guidelines for Notices of Meeting
Do all directors have to attend board meetings?
(ii) Directors have a duty to attend meetings where they are reasonably able to do so. Often the Articles will provide that Directors can be removed if they do not attend meetings for a certain period. Normally, a Board meeting can be called by the company secretary, or any Director.
WHAT ARE THE ESSENTIALS OF A VALID BOARD MEETINGS?
Requisites of a Valid Meeting
If the business transacted at a meeting is to be valid and legally binding, the meeting itself must be validly held. A meeting will be considered to be validly held, if:
a) It is properly convened by proper authority. b) Proper notice must be served. (Sec. 101 and Sec. 102 of the Companies Act, 2013) c) Proper quorum must be present in the meeting. (Sec. 103 of the Companies Act, 2013) d) Proper chairman must preside the meeting. (Sec. 104 of the Companies Act, 2013) e) Business must be validly transacted at the meeting. f) Proper minutes of the meeting must be prepared. (Sec. 118 and 119 of the Companies Act, 2013)
Proper Authority to Convene Meeting: A meeting must be convened or called by a proper authority. Otherwise it will not be a valid meeting. The proper authority to convene general meetings of a company is the Board of Directors. The decision to convene a general meeting and issue notice for the same must be taken by a resolution passed at a validly held Board meeting.
Notice of Meetings: A meeting in order to be valid must be convened by a proper notice issued by the proper authority. It means that the notice convening the meeting be properly drafted according to the Act and the rules, and must be served on all members who are entitled to attend and vote at the meeting. For general meeting of any kind at least 21days notice must be given to members. A shorter notice for Annual General Meeting will be valid, if all members entitled to vote give their consent. The number of days in each case shall be clear days, i.e. the days must be calculated excluding the day on which the notice is issued, a day or so for postal transit, and the day on which the meeting is to he held. Every notice of meeting of a company must specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat.
Quorum of Meetings: Quorum is the minimum number of members who must be present at a meeting as required by the rules. Any business transacted at a meeting without a quorum is invalid. The main purpose of having a quorum is to avoid decisions being taken at a meeting by a small minority which may be found to be unacceptable to the vast majority of members. The number constituting a quorum at any company meeting is usually laid down in the Articles of Association. In the absence of any provision in the Articles, the provisions as to quorum laid down in the Companies Act, 2013 (under Sec.103) will apply. Sec. 103 of Companies Act provides that the quorum for general meetings of shareholders shall be five members personally present in case of a public company if the number of members as on the date of meeting is upto 1000, 15 quorum if number of members as on the date of meeting is more than 1000 but upto 5000 and if number of member exceeds 5000 than 30 quorum is required; and two members personally present for any private company or articles may provide otherwise.
Chairman of a Meeting: ‘Chairman’ is the person who has been designated or elected to preside over and conduct the proceedings of a meeting. He is the chief authority in the conduct and control of the meeting.
Agenda of Meetings: The word ‘agenda’ literally means ‘things to be done’. It refers to the programme of business to be transacted at a meeting. Agenda is essential for the systematic transaction of the business of a meeting in the proper order of importance. It is customary for all organisations to send an agenda along with the notice of a meeting to all members. The business of the meeting must be conducted in the same order in which the items are placed in the agenda and the order can be varied only with the consent of the meeting.
Minute: Minute of a meeting contains a fair and correct summary of the proceedings of a meeting. Minutes must be prepared and signed within 30 days of the conclusion of the meeting. The minute books of meetings must be kept at the registered office of the company or at such other place as may be approved by the board.
Proxy: The term ‘proxy’ is used to refer to the person who is nominated by a shareholder to represent him at a general meeting of the company. It also refers to the instrument through which such a nominee is named and authorised to attend the meeting.
Matters to be included in Board reports for OPC and Small Company
Once you have registered an OPC, there are a lot of compliances such as board reports and their particulars that need to be maintained to ensure smooth functioning of the company.
Matters OPC and small companies should include in board reports:
FAQ ON BOARD MEETINGS UNDER COMPANIES ACT 2013?
Q: Are all companies required to hold Board Meetings every quarter? A : As per Section 173 of the CA 2013 and Secretarial Standards 1, all companies whether private limited companies or public companiesare required to hold at least four meetings of its Board of Directors in each quarter every year where the gap between two consecutive board meetings is not more than one hundred and twenty days. As per the notification No. GSR 466 E dated 05 June 2015, in case of a Section 8 company, the Board of Directors of the company shall hold at least one meeting within six calendar months. In case of an OPC, if there is only one director on the Board of Director, the quarterly board meetings are not required to be held. However, if the OPC has more than one director or in case of small or dormant companies, it will suffice the requirement, if they hold at least one meeting in each half of the calendar year and the gap between two meetings should not be less than ninety days. Further, any business which is required to be transacted at the meeting of the Board of Directors of a company, it shall be sufficient if, in case of such OPC, the resolution by such director is entered in the minutes book.
Q: Can a Company restrict a director from participating in a meeting through video conferencing if he has not given an intimation of participating in the video conference meetings at the beginning of the year? A: No, a company cannot restrict a director from participating in a meeting through video conference if he has not given intimation at the beginning of the year. An intimation given to the company or chairman on receipt of the notice calling the board meeting would suffice the requirement for attending the meeting through video conferencing. Q: What are the matters which cannot be considered at a meeting held through video conferencing or other audio visual means? A: As per Rule 4 of the Companies (Meetings of the Board and its Powers) Rules, 2014, following matters shall not be considered through video conferencing or other audio visual means: (i) Approval of annual financial statements; (ii) Approval of boards report; (iii) Approval of prospectus; (iv) Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any,to be approved by the Board of Directors pursuant to Section 134(1) of the CA, 2013; (v) Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover. However, as per The Companies (Amendment) Bill, 2016, which is yet to be notified, has proposed participation of Directors on certain items at Board Meetings through video conference or other audio visual means if there is quorum through physical presence of Directors. Q: Is the notice calling for the board meeting required to state that the meeting is being convened at a short notice? A: Yes, as per Secretarial Standards-1 effective from 1 July 2015, a company is required to state the fact that the board meeting is convened at a short notice in the notice calling the meeting. However, the CA, 2013 is silent in this regard .
Q: Can a director interested in the contract participate in the board meeting or be counted for quorum as per Section 174 of CA 2013? A: As per provisions of Section 188 of the CA 2013, if any director is directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement then such director shall disclose the nature of his concern or interest at the meeting ofthe Board in which the contract or arrangement is discussed and shall not participate in such meeting. However, in case of a private limited company, as per notification No. GSR 464E dated 5th June 2015, an interested director can participate and vote in a board meeting after disclosing his interest in the particular transaction. The interested director, will be included for the purpose of determining the quorum of the meeting.
Q: Can meetings of the Audit Committee be held through video conference? A: Yes, the meetings of Audit Committee can be held through video conference except the meeting where financial statements including consolidated financial statements is considered for approval under Section 134(1) of CA, 2013.
Q: Is a company required to obtain approval of the Audit Committee for all the transaction entered into with related parties? A: Yes, as per Section 177 of CA, 2013 read with Rule 6 and 6A of the Companies (Meetings of Board and its Power) Rules, 2014, a company is required to obtain approval of the Audit Committee for all the transactions entered into with related parties. Also, the AuditCommittee has an option to grant omnibus approval which shall be valid for a period of one financial year. However, as per the Companies (Amendment) Bill, 2016 which is yet to be notified, proposes to insert following amendments: Ratification by Audit Committee of transactions involving amount not exceeding INR 1 Crores within 3 months of transaction; Consequences of non-ratification of the transactions; Exemption from approval of audit committee to transaction between a holding company and its wholly owned subsidiary.
Q: Which powers of the board are required to be exercised at a duly convened board meeting? A: As per Section 179 of CA, 2013 read with Rule 8 the Companies (Meeting of Board and its Powers) Rules 2014, following powers of the Board can be exercised by means of a resolution passed at a duly convened Board meeting: (a) To make calls on shareholders in respect of money unpaid; (b) To authorise buy back of securities; (c) To issue securities, including debentures, whether in or outside India; (d) To borrow monies; (e) To invest the funds of the company; (f) To grant loans or give guarantee or provide security in respect of loans; (g) To approve financial statements and the Boards report; (h) To diversify the business of the company; (i) To approve amalgamation, merger or reconstruction; (j) To take over a company or acquire a controlling or substantial stake in another company; (k) To make political contributions; (l) To appoint internal auditors and secretarial auditor; (m) To appoint or remove KMP; As per the notification dated 5 June 2015, in case of a Section 8 Company, matters referred to in point no. (d), (e) and (f) may be decided by the Board by circulation instead of at a meeting. Q: Can a private company grant loan to its directors? A: Sec 185 of the CA 2013 restricts loans to directors including private limited companies. However as per the notification dated 6th Jun 2015, a private company may grant loan to its directors subject to fulfilment of all of the following conditions: No body corporate has invested in the share capital of the company; Borrowings from banks/financial institutions/any other body corporate is less than twice the paid up share capital of the company and fifty crores whichever is lower; and There is no subsisting default in repayment of existing borrowings at the time of the transaction.
Q. Can loan be given by a holding company to its wholly owned subsidiary company or a guarantee given or security provided by a holding company to any loan made to its wholly owned subsidiary? A: Yes, as per the proviso to Section 185(1) loan given by a holding company to its wholly owned subsidiary company or a guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempt from the purview of Section 185 of CA, 2013 provided the same is utilised for the principal business activities by the subsidiary.
Q: Is a private company exempt from Section 186 of CA, 2013? A: A private company is not exempt from the applicability of Section 186 of CA, 2013 Q: Will salary advances made by the Company for only one or two months (without interest) come within the preview of Loan? A: There is a difference between advance and loan. Loan is lending of money with absolute promise to repay whereas advance is to be adjusted against supply of goods and services. Advance given to employees against current months salary will not be in the nature of loan and the same will not fall within the purview of Section 186.
Q: Is unanimous consent of the board required for entering into a transaction under Section 186? A: Yes, as per Section 186(5) of the CA, 2013, consent of all the directors present at the meeting is required for entering into a transaction.
Q: When is the approval from the public financial institutions not required for entering into transactions under Section 186? A: As per the proviso to Section 186(5) of the CA, 2013, approval of public financial institutions is not required under the below circumstances: The amount involved in the transaction does not exceed 60% of the paid up share capital, free reserves and securities premium account and 100% of its free reserves and securities premium account, whichever is higher; and There is no default in repayment of loan installments and interest to public financial institutions.
Q: Which are the transactions covered under Section 188 of the CA, 2013? A : The following transactions are covered under Section 188 of the CA, 2013: Sale, purchase or supply of goods or materials; Sale or disposal of or buying of property of any kind; Leasing of property of any kind; Availing of or rendering any services; Appointment of an agent for purchase or sale of goods, materials, services or property; Related parties appointment to any office or place of profit in the company or its subsidiary or associate company; Underwriting of subscription of any securities or derivatives.
Q: Can Company provide interest free loans? A: No, the Company shall not provide any loan without interest. As per Section 186(7) of the CA, 2013, no loan shall be given at a rate lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan.
Q: Which are the transactions that would not require approval of the shareholders under Section 188? A: As per Section 188(1) of the CA, 2013, following transactions do not require approval of the shareholders under Section 188 of the CA, 2013: Transactions in ordinary course of business and on arms length basis; Transactions between holding company and wholly owned subsidiary company whose accounts are consolidated and laid before shareholders at AGM.
Q: Can a member of a private company interested in a particular transaction participate and vote at a general meeting? A: Yes, an interested member of a private company can participate and vote at general meeting on matters requiring approval for related party transaction pursuant to exemption Notification No. GSR 464(E), dated 05th June, 2015.
Q : Can a Director who is also a member of a private company participate and vote at a meeting for the transaction related to payment of remuneration to such directors? A: Yes, an interested Director who is also a member of a private company can participate and vote at meeting to approve the transactions related to payment of remuneration to such Director.
Q : In what circumstances is the prior approval of Board required for entering into specified contracts or arrangements with related parties under Section 188? A : As per Section 188 of the CA 2013, Boards approval is required for the contracts or arrangements with related parties specified in Section 188(1) (a) to (g) which are either not in ordinary course of business or not at arms length basis. Further, in the case the transactions exceed the prescribed threshold, prior approval by ordinary resolution of the company shall be required for entering into such contract or arrangement with related party.
Q : Which are the transactions exempted from being entered in Register of Contracts and Arrangements in which the directors are interested? A: The following transactions are exempted from being entered in the Register of Contracts and Arrangements in which the directors are interested: Sale/purchase/supply of any goods/services, if the value does not exceed five lakh rupees in the aggregate in any year Transaction by a banking company for the collection of bills in the ordinary course of its business
Q- Which are the different type of companies required to adopt vigil mechanism? A: Pursuant to Section 177(9) of the CA, 2013 read with Rule 7 of the Companies (meetings of Board and its Power) Rules, 2014, Vigil Mechanism is required to be adopted by the following companies: Every listed company; Companies which accept deposits from the public; Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees.