Compliance law
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This article is written by Vaibhav Chauhan, pursuing a Diploma in Companies Act, Corporate Governance & SEBI Regulations from LawSikho

Introduction

The way board meetings run or conduct portrays a lot about the company and successful companies use these board meetings to work upon their key business strategies. The board of directors do have a crucial role to play in these board meetings because they are the ones who make sure that interest of minority shareholders are protected and how the operations of the company should be taken further along with addressing the complex issues faced by the companies. So, the major decision of the company is taken in these board meetings due to which it’s mere fact of importance to look after the compliance of law while conducting the same. Moreover, adhering to the compliances of law related to board meetings is of mere importance. The provisions related to Meetings of Board is governed by Chapter XII of the Companies Act, 2013 (hereinafter referred to as the Act) under Section 173 read with the Companies (Meetings of Board and its Powers), 2014 (herein referred to as the Rules, 2014).

This piece firstly deals with the compliance of law related to board meetings under Section 173 of the Companies Act, 2013 r/w rules, 2014 and Secretarial Standards-1 along with precedents to have clarity over the important issues. Secondly, a brief snapshot regarding the compliance involved in Audio Visual board meetings is also highlighted in this piece reference with COVID-19 and finally, a summary table dealing with pre and post compliances of law pertaining to a board meeting is also provided. 

What are the compliances under Companies Act, 2013 related to board meeting

It is important to understand the meaning of the word ‘compliance’ to start further. In furtherance to this “compliance” means to abide by a particular law, rule, or acting in consonance to an agreement.  So, it can be said that compliance with the Companies Act, 2013 and other related laws mentioned below is essential to avoid penalty for not looking after compliances/law related to board meetings. 

So, compliance related to board meetings is mentioned under Section 173 of the Act. This section governs the provision related to Meetings of Board read with Chapter XII of the Act which provides for Companies (Meetings of Boards and its Powers), 2014.

Section 173 of the Act provides that the directors of the company should conduct board meetings on a regular basis and the decisions should be recorded in consonance with the provision of the Act. In furtherance to this 173 (1) of the Act provides that the first board meeting should be conducted within 30 days from the date of its incorporation. Also, four meetings should be conducted in a financial year and the gap between the two board meetings should not be more than 120 days. Moreover, there are no constraints related to time and place for conducting the Board Meeting. But recently the Ministry of Corporate Affairs (herein referred to as MCA) increased the period of 120 days between the two board meetings by 60 days till September 30, 2020, in the light of COVID-19.

It is pertinent to mention here that from the legal point of view a company can conduct 4 board meetings back to back within a financial year because the only condition which one needs to adhere to is that the gap between the 2 boards meetings should not exceed 120 days. This issue usually occurs in companies at the time of conducting board meetings.

Further, Section 173(2) provides the freedom to the director of the company that they can be part of the board meeting by being there in person or by video conferencing or through any audio-visual means by which their participation with accurate time and date can be recorded as well as taken into consideration for future purposes. Now, relating this clause with the present pandemic caused due to COVID-19, it plays a very crucial role to conduct the board meeting through audio-visual means and the same has been recommended by government and Ministry of Corporate Affairs.

Also, Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 clearly states the requirements and procedures, in addition to the procedures required for Board meetings in person, for convening and conducting Board meetings through video conferencing or other audio-visual means. It is pertinent to mention here that not all matters can be dealt through video conferencing or other audio-visual means for the sanctity of the matter and thus Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 mention those matters which cannot be dealt through above-mentioned means.

One compliance which is crucial w.r.t board meetings from the viewpoint of the director is having quorum in consonance with section 174 of the Act, and its subsection 1 mandates to have at least two directors and 1-3rd of the total directors whichever is higher. Further Section 174 (2) states that if the number of directors is below the quorum mandates as specified in the Act then the continuing directors or the directors shall be liable to act in favour of increasing the number of directors. 

In reference to the above context, the judgment of Balakrishna v. Balu Subudhi; AIR 1949 Pat 184 would be crucial because it defines that the quorum was required during each and every stage of the board meeting. Where the number of directors was reduced below the quorum, the directors could not act.

Moreover, in the case of Re, Plymoth Breweries v. Penwill; {1967} 111 SJ  715 it was rightly held that where a person was aggrieved due to lack of quorum as specified in the Act and questioned the validity of the meeting, he had to take legal action within a reasonable time. On the contrary, in accordance with Section 174 (3), if at any time the number of interested directors exceeds or is equal to two-thirds of the total strength of the Board of directors, the number of directors who are not interested and present at the meeting, being not less than two shall be the quorum during such time.

In addition to above, section 173 (3) provides that the notice of board meeting shall be given not less than 7 days in advance from the date of conveying such meeting to every director at his address registered with the company. Also, in the case who is having the duty to provide such notice, made some default in notifying the same to the directors or say performing his part of duty then in consequence to this he will be held liable under the Act and penalized with INR 25000/-.

In the said context, the judgment of A. Chettiar v. Kaleeswarar Mills Ltd; [1956], AIR 1957 Mad 309 it was rightly observed that the compliance with the law can only be assured when directors are properly notified. Further as per Section 118 (1) of the Act after the board meeting was conducted, all the details should be framed or say recorded in Minutes of the Board Meeting and same should be maintained at the Registered Office of the Company for the purpose of reference and records. Moreover, as per section 134 (4), the director shall be required to disclose the number of meetings held in each financial year in its Director’s Report.

Point to remember:

Section 173 of the Act is not applicable upon One Person Company (OPC), Small Company, and Dormant Company.

Compliance with secretarial standards relating to board meetings

In continuance to above mentioned section one has to also comply with secretarial standards issued by Institute of Company Secretaries of India (herein referred to as ICSI) and Section 118 (10) of the Act provides that every company shall act in consonance with secretarial standards with respect to general and Board meetings specified by the ICSI constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government. Therefore Secretarial Standard- 1 (hereinafter referred to as SS-1) clearly governs the concept of Meeting of Board of Directors and is applicable upon every company except One Person Company and same is governed by Section 8 of the Act. Thus, every Board Meeting conducted by the companies and directors should be in consonance with SS-1.

What are the compliances connected with an Audio Visual (AV) board meeting?

Considering the present pandemic caused due to COVID-19 it is significant to take safety and privacy measures related to audio visual board meetings to be taken into consideration. Thus the compliances which can be looked into at the time of conveying the AV board meeting is provided below:

  1. No person other than the directors should attend the audio-visual board meeting;
  2. Roll call should be ensured during the meeting:
  3. The proceedings should be recorded for safety purposes and for future references; and
  4. Maintenance of the records of an audio-visual board meeting.

So, above-mentioned compliances need to be looked into for conducting audio visual board meetings.

Summary of compliances – pre and post board meeting

Below mentioned is the tabular representation of Pre and Post Board Meeting compliances of law which are required to be looked into at the time of conducting the Board Meeting. Moreover, for the purpose of clarification SEBI (Listing Obligations and Disclosure Requirements), 2015 is only applicable upon listed companies and Secretarial Standard-1 issued by ICSI is applicable upon all companies. So, Pre-Meeting compliances are provided below:

Pre meeting compliances

S No.

Compliance Particulars

Timeline

Remarks

Filing Mode

Applicable laws

Date of Sending Notice to Stock Exchange

5 days in advance of conducting the board meeting. 

A) At least 5 days in advance for considering financial results as per regulation 29 (1) (a) of SEBI (LODR), 2015.

B) For regulation 29 (1) (b) to (f) of LODR, 2015- 2 Working days–

*(But excluding the date of the intimation and date of the meeting)

C) As per reg. 29(3) (a),(b) of LODR, 2015 stock exchange should be informed by  advance notice of 11 working days.

For NSE one can file at NEAPS PORTAL and For BSE it is BSE LISTING CENTRE.

SEBI (LODR) Regulations 2015

Press Release for Board Meeting in Newspaper

5  days before i.e. the date of Submission of information to Stock Exchange

Published in at least one English language national daily newspaper circulating in the whole or substantially the whole of India and one in a daily newspaper published in the vernacular language of the region, where the registered office of the listed entity is situated.

Newspaper

SEBI (LODR) Regulations 2015

Agenda of the Meeting & Notes to the Directors

Notice to be given 7 days prior from the date of board meeting unless Articles prescribed the longer period including the date of sending the notice.

Should be delivered by hand or by post or any other electronic means. 

Any mode of Correspondence under Secretarial Standard-1.

SS-1

Intimation to Directors w.r.t to conveying of Board Meeting. 

Seven days before the date of the meeting including the date when the notice was sent.

Should be delivered by hand or by post or any other electronic means.

Any mode of Correspondence under Secretarial Standard-1.

SS-1

Post-meeting compliances

S No.

Compliance Particulars

Timeline

Remarks

Filing Mode

Applicable laws

Disclosure of event with Stock Exchange

Within 30 minutes of when the board meeting is concluded.

Should be filed within 30 minutes as mentioned in the conclusion letter, with both the exchanges namely NSE and BSE.

For NSE one can file at NEAPS PORTAL and For BSE it is BSE LISTING CENTRE.

SEBI (LODR) Regulations 2015- Schedule –III (4).

A Listed entity should publish the financial results in Newspaper

Within 48 Hours of conclusion of the board meeting.

Results should be published in at least one English language national daily newspaper circulating in the whole or substantially the whole of India and one in a daily newspaper published in the vernacular language of the region, where the registered office of the listed entity is situated.

Newspaper

SEBI (LODR) Regulations 2015- Regulation 48

Minutes Preparation

Filed within 15 days from the date when Board Meeting was concluded. 

Draft of minutes shall be circulated by
hand or through speed post or by registered post or courier or e-mail or through any other recognized electronic means to all the members of the board for their comment. 

Any mode of Correspondence as per SS1

Rule 3(12) of the Companies (Meetings of Board and its Powers) Rules, 2014

At last, this table is provided to have a clear look upon the compliances related to the Board Meeting. Moreover, Section 173 of the Act along with other pertinent sections of the Act is mentioned above for the clear understanding and substantiated with case laws too.

So, compliances of law in board meetings should be looked in the light of above-mentioned laws and regulations mentioned above and board of directors along with the company plays a crucial role to abide by these laws to ensure the smooth functioning of board meetings.

Conclusion

At last, a board meeting is a place where crucial decisions are taken up by the company and its directors or in simple words it is the real place where brainstorming sessions took place because decisions took place in the Board Meetings could make or destroy the company’s performance and market standing. So, compliances, as mentioned above, need to be looked into at the time of conducting one. Moreover, compliances related to the board meeting as provided in the Companies Act, 2013, Secretarial Standard-1 and SEBI (LODR), 2015 plays a very important role to conduct Board meetings which are in consonance with these laws. On a said pretext, all the laws primarily focus upon the compliances which company and its director’s needs to abide by and on the other hand it also mentions the penalty for not acting in compliance with the laws and rules related to Board Meeting. Hence, this article provides a strong snapshot of what all are the compliances pre and post conveying the Board Meeting. Moreover, accountability of directors should not be overlooked to comply with the compliances. Therefore, the directors and the company must adhere to the said pre and post Board Meeting compliances, so that no penalty could be imposed. 


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