How many Board Meetings does a Company have to undertake in a year?
Board of directors (BOD) are an elected group of individuals that represent shareholders. The board is a governing body that typically meets at regular intervals to set policies for corporate management and oversight. A company is not an actual entity but a legal one so it cannot take actions and make decisions. The board of directors’ act as agents through which the company takes actions as well as makes decisions.
To make such decisions, the BOD conducts Board meetings. For the effective functioning and management, it is imperative that board meetings be held at frequent intervals. Holding proper board meetings is also mandated by Section 173 of the Companies Act. Let us learn about these provisions in detail in this article.
What is the time limit for holding the first board meeting by a Company?
Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation.
How many board meetings should a company hold in a year?
A company should hold a minimum 4 meetings of its Board of Directors every year. However, not more than 120 days shall intervene between two consecutive meetings of the Board.
For instance, if for FY 19-20, the first board meeting for the year of ABC Private Limited was held on 30th June, 2019, then the 2nd board meeting should be held before 28th October, 2019 (before 120 days are lapsed)
How many board meetings are required to be held by a dormant company?
A One Person Company, small company and dormant company are required to hold at least one meeting of the Board of Directors in each half of a calendar year and the gap between the two meetings should not be less than 90 days
How are directors required to attend the board meetings?
- Directors may participate in a board meeting either in person or through video conferencing or other audio-visual means, as may be prescribed.
- Such video conferencing or other audio-visual means should be 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.
- The Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio-visual means.
- If Article of Association (AOA) of company provides for a specific time/place/city, then meeting should be held only as per AOA.
- All the Directors may participate in a Meeting through Electronic Mode. In such a case, at least one person, who may either be the Chairman or the Company Secretary or in the absence of the Company Secretary, any other person duly authorised in this behalf by the Chairman, should be physically present at the scheduled venue of the Meeting given in the Notice to enable proper recording, to safeguard the integrity of the Meeting and to fulfil other requirements of law in this regard.
What matters cannot be dealt With in a Meeting through Video Conferencing or Other Audio-Visual Means?
The following matters shall not be dealt with 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 section 134(1)
- the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
How many days’ notice is required to be given for a board meeting?
- A Board meeting shall be called by giving at least 7 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 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.
- In case of absence of independent directors from such a board meeting, 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.
Are there any requirements for an independent director’s meeting?
The independent directors of the company shall hold at least one meeting in a financial year without the attendance of non-independent directors and members of management.
The meeting shall be held to review the performance of Non-Independent Directors and the Board as a whole; to review the performance of the Chairman and to assess the quality, quantity and timeliness of flow of information between the company management and the Board and its members that is necessary for the Board to effectively and reasonably perform their duties.
What are the consequences or not serving proper notice of a Board Meeting?
Every officer of the company whose duty is to give notice of a board meeting and who fails to do so shall be liable to a penalty of Rs 25,000.
What is the quorum of a Board Meeting?
The quorum for a meeting of the BOD of a company shall be 1/3rd of its total strength or 2 directors, whichever is higher. Participation of the directors by video conferencing or by other audio-visual means shall also be counted for the purposes of quorum.
Are interested directors to be also included in the quorum?
Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into:
- with a body corporate in which such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or
- with a firm or other entity in which, such director is a partner, owner or member, as the case may be, shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting
Where at any time the number of interested directors exceeds or is equal to 2/3rd of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.
What happens when the required quorum is not present at a meeting?
Where a meeting of the Board could not be held for want of quorum, then, unless the articles of the company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.
For instance, a Meeting was convened on 8th August at the Registered Office of the company. On that day, the required Quorum was not present. In the absence of any provisions to the contrary in the Articles, the Meeting was automatically adjourned to the same day in the next week, i.e. 15th August, at the same time and place. However, since 15th August is a National Holiday, the adjourned Meeting should be held on 16th August
Who shall conduct the Board Meeting?
- The Chairman of the Board shall conduct the Meeting of the Board.
- 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.
- If no Chairman is elected or chairman is not in attendance, unless articles provide otherwise, the directors present at the meeting shall elect one of themselves to the chair and conduct the meeting.
- Unless otherwise provided in the Articles, in case of an equality of votes, the Chairman shall have a second or casting vote.
What are the powers of the Board that can be exercised at a meeting?
The following powers of the BOD shall be exercised only by means of resolutions passed at meetings of the Board:
- to make calls on shareholders in respect of money unpaid on their shares;
- to authorise buy-back of securities under section 68
- to issue securities, including debentures, whether in or outside India
- to borrow monies
- to invest the funds of the company
- to grant loans or give guarantee or provide security in respect of loans
- to approve financial statement and the Board’s report
- to diversify the business of the company
- to approve amalgamation, merger or reconstruction
- to take over a company or acquire a controlling or substantial stake in another company
- any other matter which may be prescribed
Are there any restrictions on the powers of the Board at a meeting?
The Board can exercise following powers only with the consent of the company by Special Resolution:
- To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or any one undertaking if the company has more than one undertaking.
- To invest, otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation
- To borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up capital, free reserves and securities premium apart from temporary loans obtained from the company’s bankers in the ordinary course of business
How are minutes of a Board meeting required to be maintained?
- Section 118 of the Companies Act contains information on how the minutes of Board meetings shall be maintained.
- Every company shall cause minutes of the proceedings of every meeting of its Board of Directors, to be prepared and signed in such manner as may be prescribed and kept within 30 days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered.
- The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.
- All appointments made at any of the meetings aforesaid shall be included in the minutes of the meeting.
What should the minutes of board meeting consist of?
Apart from the things mentioned above, in the case of a meeting of the Board of Directors, the minutes shall contain:
- the names of the director’s present at the meeting; and
- in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.
What should the minutes of board meeting not comprise of?
Any matter which, in the opinion of the Chairman of the meeting:
- is or could reasonably be regarded as defamatory of any person; or
- is irrelevant or immaterial to the proceedings; or
- is detrimental to the interests of the company shall not be included in the minutes of the board meeting
What shall be the consequences if proper minutes are not maintained?
- If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of Rs 25,000 and every officer of the company who is in default shall be liable to a penalty of Rs 5,000.
- If a person is found guilty of tampering with the minutes of the proceedings of meeting, he shall be punishable with imprisonment for a term which may extend to 2 years and with fine which shall not be less than Rs 25,000 but which may extend to Rs 1 lakh