In this article, Kinjalkini Rai Choudhary, pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, and Anith Johnson, pursuing a Diploma in Companies Act, Corporate Governance and SEBI Regulations from LawSikho.com discuss Practical and Procedural Aspect for Conveying and Conducting Board Meetings and General Meetings.

Introduction

The object of a company is to ensure good corporate governance by increasing the transparency and the accountability of the company. Section 118 (10) of the Companies Act 2013, makes it necessary on companies to observe a secretarial standard regarding all the general and board meetings as The Institute of Companies Secretaries of India mentions it. The process of board meetings is first held then it relates to the general meetings.

Meeting Procedures

Board Meetings

The Board meetings or the Management meeting is the part where one can play their part in the governance of the body. As it is given in the rules all the Directors or Committee acts as a whole, mainly the board or the committee should think and do all the activities as one particular body and not like collection of individuals. Any directors or committee persons are not allowed to make any decision outside their meeting unless they are given authorization about such meeting in some way.

The members of the board or the committee must make it sure to meet regularly and to have an effective control over the work and executive management of the company. The Board when having their meeting should have decided a formal schedule of matter to discuss and take any such decision so that the control of the company is totally in their hands.

Convening of Board Meeting

SS-1 provides the guidelines for convening a board meeting. Any director, company secretary or a person authorized by the board can convene a meeting of the board in consultation with the chairman, or in his absence with the managing director or in his absence with any whole-time director. Each board meeting shall have a serial number. Directors can also participate in the board meeting through video conferencing or other audio visual means unless it is prohibited by the Companies Act, 2013.

Chair

Chairman is the head of the board of directors and is expected to be independent while taking decisions. The term Chairman is not defined under the Companies Act, 2013. AOA of the company provides the manner and procedure for the appointment of Chairman. If AOA doesn’t provide for the appointment of Chairman then the board of directors will appoint among themselves a person who will be the chairman. The chairman has to maintain high standards of corporate governance in the company. 

According to SS-1, chairman has to ensure the required quorum is present at the board meeting. If the chairman is interested in any item of business then he/she shall entrust the proceedings to other non- interested director. This is only applicable to public companies and not private companies. In the case of Related Party Transaction, the chairman must disclose his interest and shall not participate or vote in the meeting.

The Directors are elected in the way for one of their own to preside and rule. The articles of the constitution states that the chair which is elected if not present within 10 minutes of the appointment meeting, then one can choose someone else to chair that meeting.

The primary work of the chairperson is to see through the meeting and be in a greater position and authority than the other directors, though there is not any legal support for such view.

The article of constitution gives the chairperson a casting and deliberative vote in the cases where there is equal voting rights, but it should be kept in mind that this right can only be given by the articles. The casting vote shall not be used so as a result might not be an unjust or inequitable.

Frequency

As per section 173(1) of the Companies Act, 2013 a company is required to hold a meeting with the board of directors within 30 days of its incorporation. Each company will hold at least 4 board meetings in a year and not more than 120 days shall intervene between 2 board meetings. 

According to SS-1, all independent directors are required to meet once a year to review the performance of non-independent directors and the board. The Company Secretary shall facilitate such a meeting if it is desired by the independent directors. 

Quorum

Quorum means the minimum number of directors required to hold a meeting. The presence of directors is very important to make important decisions for the company. As per section 174 of Companies Act, 2013 the quorum for a board meeting shall be one-third of its total strength or two directors whichever is higher. The Articles of Association (AOA) can also provide for a larger quorum but then board meetings should be held as per AOA.  If there is a lack of quorum then the board meeting shall be adjourned unless the articles state otherwise. The meeting shall be adjourned to the same day in the next week and if the adjourned date is a national holiday then it will be conducted on the following day.

As per SS-1, if the quorum is reduced below the minimum fixed number then no business decision shall be taken. Every company shall maintain an attendance register for the meetings. It shall contain the details of the meetings and it shall be signed by the directors. If the directors are attending through electronic means then the chairman shall take a roll call.

If the company is a public company then it must have at least two directors who will have the right to vote relating to the matters at a board meeting or else a quorum cannot be present.

If the company is a proprietary company, then the decision lies up to the director to set up the number of members which are necessary to form a quorum at a board meeting, but if it is not done so then most of the articles state that it is two other than those with single director companies.

Usually, many of the companies may disqualify any director from voting because of any interest, which might be there before any meeting takes place and is not counted towards the quorum. Such many other bodies might not make such similar provisions.

What one cannot do is willfully stay away from boards meetings to prevent the quorum and hamper the business. For example where there is a board of two which two forms the quorum, of those two one cannot stay away or avoid the business to take place.

Attendance

The general duty of the board is to work and care with diligence. The duty shall not bind one to attend all the board meetings but one has to attend whenever there is a reasonable circumstance. One cannot refuse to attend board meeting to do away with business by denying the quorum. The directors must report how many board meetings were held in the year and how many meetings each director has attended. It is important to attend the meeting when possible by the director and try not to be excluded from such board meeting.

When a director takes part in excluding him improperly from the boardroom of a fellow director then he may be sued penalized personally for such act.

Notice

Section 173(3) of Companies Act, 2013 mandates that all directors must be informed through a notice at least 7 days before the board meeting. The notice shall be in writing and has to be sent to the registered address of the director through hand delivery, registered post or by electronic means. A board meeting can also be called on a shorter notice period provided that at least an independent director should be present at the meeting. If the independent director is not present then the board decision shall be circulated and it shall be final only after ratification from the independent director. An OPC, small company or dormant company shall have at least one meeting in each half of the calendar year and the gap between 2 meetings shall not less than 90 days. 

As per SS-1, the notice shall be issued by the Company Secretary and if there is no Company Secretary any director or any person authorized by the board will be responsible for it. The notes on the agenda of the meeting shall also be provided to the directors seven days before the meeting. The notes will cover relevant facts regarding the items which require approval by the board. If the board meeting is adjourned then the notice shall be given to all the directors.

Just and reasonable notice of the board meeting should be given to all the directors and committee persons as required. If the meeting is invalid then all the members of the board who are actually present will be saved for the next meeting or the notice might be simply waived. For example in 1993 it happened that of not giving notice when the board of the church had met to decide an important issue which was involved about their membership. One of the members was then overseas and as not given such notice. When he had returned he complained that the meeting was invalid and the court upheld his claim.

A reasonable notice actually means that to have a usual practice of meeting by the body of members. If the board meets at a fixed time and fixed destination every month than a notice need not be given and may be considered unnecessary. If the company has a usual practice to give verbal notices than such notice would be reasonable.

It should be kept in mind that the notice must be given to all the directors. Notice, which is given to majority, shall not validate or help in the proceedings. Where notice giving becomes less important that is in the case of instant meeting. Sometimes there is a need to hold meetings instantly then notice may not be served. If the director feels that an instant meeting is foisted on him than he may complain about it instantly.

One may feel obliged to participate in the meeting, but if someone challenges the meeting later, then it will be accepted that your participation was an unwilling one.

Video Conferencing

According to Section 173(2) of Companies Act, 2013 a director is allowed to attend a board meeting either in person or through video conferencing. Rule 3 of Companies (Meetings of Board and its Powers) Rules, 2014 provide for the guidelines to conduct a board meeting through video conferencing or other audio visual means. The procedure for convening a board meeting through video conferencing is as follows:

• All necessary arrangements shall be made by the company to avoid the failure of video or audio visual connections. 
• The chairman or company secretary must ensure that security protocols are followed to safeguard the integrity of the meeting. The chairman shall ensure the availability of audio-visual equipment or other facilities required for the effective participation of the directors. The chairman shall also record proceedings of the meeting and prepare minutes of the meeting.
• The notice must be sent to the directors 7 days prior to the board meeting. The notice shall inform the directors about the option available to them to participate through video conferencing or other audio visual means.
• If a director intends to participate through video conferencing shall give prior intimation to the chairman.
• A roll call shall be taken by the chairperson at the commencement of the meeting. Every director participating through video conferencing shall state for the record the following:-

1. Name;
2.  Location of the director;
3. That the director has received the agenda;
4. No other director is attending the meeting or the having access to the proceedings of the meeting at the location mentioned in clause (b). 

• The chairman shall inform the directors that the required quorum is complete and ensure their presence throughout the meeting. 
• Each director shall identify himself for the record before speaking on any agenda or item. If the statement is interrupted due to any technical reason then the chairman shall request for a repeat by the director.
• If a motion is objected and a vote is required then the chairman shall call the roll and note the vote of each director. Each director shall identify himself while casting the vote.
• At the end of each agenda item, the chairperson shall announce the summary of the decision taken. 
• The chairperson shall prepare the minutes and it shall contain the particulars of the directors who attended the meeting. The draft minutes shall be circulated among all the directors within 15 days of the meeting either in writing or in electronic mode. Every director shall give his comments on the accuracy of recording of proceedings within seven days or within a reasonable time as decided by the board. 
• The minutes shall be entered in the Minute Book as specified under Section 118 of Companies Act, 2013.

Minutes

As per Section 118 of Companies Act, 2013 every company is required to prepare the minutes of a board meeting. It shall include the names of the directors present at the meeting and details of the resolution. The minutes shall contain a fair and correct summary of the board meeting and it is the discretion of the chairman with regard to the inclusion and non-inclusion of any matter. It is mandatory for every company to maintain a minute book and it should not be tampered. Section 118(12) of Companies Act, 2013 provides that if a person is held guilty of tampering the minutes of proceedings of a board meeting then he shall be liable with imprisonment for a term which may extend to two years and with fine which shall be not less than twenty-five thousand rupees and which may extend to one lakh rupees. 

According to SS-1, a company should follow a uniform method while recording minutes. It can be either in electronic form or any manner prescribed under the act as may be decided by the board. Minutes shall be pasted or attached in the minute’s book. The contents of the minutes are divided into two types:-

• General Contents
• Specific Contents

Powers of Board of Directors

Section 179 of the Companies Act, 2013 read along with Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014 provide for the powers of the board and they are as follows:-

• To make calls on shareholders’ money
• Authorize buy-back of securities;
• Issue of securities
• Utilizing funds of the Company 
• Approving financial statements
• Expansion of business operations
• Acquisition of another company
• To make Political contributions
• Appointment or removal of Key-Managerial Personnel (KMP)
• Appointment of internal auditor

Resolution by Circulation

Section 175 of Companies Act, 2013 read along with Rule 5 of The Companies (Meetings of Board and its Powers) Rules, 2014 provide for the passing of resolution by circulation. The draft along with necessary papers needs to be circulated to all the directors who are entitled to vote on the resolution. The draft resolution shall be sent by hand delivery, courier or electronic means whichever is approved by the board of directors. If a director is interested in any transaction he/she will not be entitled to vote on that resolution. The resolution shall also be made part of the minutes of such meeting.

According to SS-1, each resolution shall be explained with a note setting out the details of the proposals. It shall include relevant material facts and details of the proposal so that the directors can take an informed decision. Note shall also signify how the director will give his assent or dissent. The director has to respond within 7 days after receiving the resolution. If the director has not responded within 7 days it shall be assumed that the director has abstained from voting. The resolution is passed after it receives majority acceptance by the directors.

Casual Or Instant Meetings

The directors may frequently meet in casual manner for the discussion and transaction of business. But there must be an intention that the intention of the instant meeting by the board must be there and there shall also be awareness by the members who are present that the directors are involved in the governing the company’s affair.

Directors with an Interest

If one has any interest in a particular matter than he must declare it before the board. This rule applies to other bodies also.

In case of public companies not only can one vote on a matter but also one shall not be present while there is a consideration of the matter. The board has to pass a resolution which will have the interest which the person has stated and it should also be given that the fellow directors are satisfied that the interest of the person shall not disqualify them, then they can stay and vote.

In proprietary companies one must declare their interest and stop from voting. One cannot assume that the members of board will have their own interest. It is important to declare the nature and need of the interest, which will be duly passed in the board meeting. If you are disqualified from voting than one must keep in mind not to break the fiduciary duty by accepting and closely associating with effort to get success. The secretary will record all such declaration.

Minutes

Minute is something, which must be kept for all proceedings of directors meetings. All the meetings must be entered in a minute within a month of that meetings date and that person who was the chairperson of that meeting must sign it. The minute book must be kept at the companies registered office or at the place where business is carried out.

Telephonic meetings and Video Conferences

The directors need to meet together in order to hold a valid meeting. In modern technology it is possible that the meeting can be held by telephone or video link. If one person is going to use electronic measure to hold meetings then they must make sure every participating person needs to be aware about the meeting and contribute towards it.

General Meetings

A company other than those who are proprietary company must hold an AGM at least every year and not more than five months after the ending of the company’s financial year. In case of newly formed companies the time period is bit relaxed which is 18 months is given to hold their first AGM. If the company cannot or fails to hold an AGM then the company itself or the officers who are defaulters will be guilty of an offence. The main work of an AGM is:

• To declare dividends.
• To keep an account and reports of the directors and auditors.
• To elect directors in place of who are retiring.
• To appoint and remunerate auditors.

Requirements to hold an AGM

There is a difference between the first and all other AGMS. The first one must be held within 18 months of incorporating or within 5 months after the ending of the first financial year whichever is earlier for the company. Other AGMS must be held once in every year. In an AGM each member must be given a copy of the company’s financial statement and the director’s statement, which contains the financial statement, and auditors statement.

Informing and Giving Notice

To convey about the AGM is usually in the hands of the director. The notice of the meeting should have

1. The date, time and place of the meeting.
2. To mention the nature of business.
3. To be transparent and clear.
4. The notice must be issued on proper authority.
5. To give it all those who are entitled to get it.

It is the duty of the director’s to see that the members are not misleading and that the notice should not create any breach or confusion in the company. If the notice misleads a member then legal action may be taken.

Chairperson

A person who is elected by the directors of the company usually heads the general meeting. The person who will be the chair of the general meeting needs to maintain an effective hand and remain neutral at the meeting and during a debate needs to act as a referee. The main duties of the person who will be the chairperson needs to:

• Preside the meeting in the proper manner.
• To conduct everything according with the article or constitution.
• To see that there is proper order during debates in the meeting.
• To maintain correctness of the minutes by signing then.
• Declare the end of meeting at the end of the business.

Voting

Usually, every shareholder has one vote and the method of voting are:

1. By the show of their hands.
2. By raising the voices.
3. By the way of ballot.
4. Poster way of voting (it is only permitted by the article of the constitution).

Any person who is attending a meeting if given the right to vote and to demand a poll, though the article can guide the way in which the poll may be taken.

Minutes

The minutes of general meeting must be maintained and put into the minute book within the month of the meeting. The main need of the minutes is

1. To tell them those who did not attend the meeting what had happened.
2. To advise future officer and member to understand the work of the body.
3. It should be available for the inspection by the members.
4. To maintain a record of debates.

Procedure at a meeting

The formal rules for holding a meeting as directed by the Chairperson shall be followed:

• Any discussion will not be allowed until there is a motion before the meeting
• The discussions which are held must be relevant to the matter before the meeting, either be it a motion or any amendment or any point of order or any explanation needed to be given personally.
• The speakers who are present at the meeting shall rise up and address to the Chair.
• The Chair at any time can rise up to address the meeting or to address any person who is then speaking and after that shall resume his or her seat.
• Any person shall not speak more than one time to a motion except any proposer of substantive motion who is given the right to reply.
• Any previous speaker to the motion can speak again on an amendment or for the debate, on any point or order and by seeking the permission of the Chair.
• The Chairperson will take decision that which speaker will be given the priority if the meeting is made by resolution and he will also decide which person will or will not be heard, and a motion will be moved to that effect and not debated.
• In the meeting the speaker who will not be heard will be decided by resolution.
• The Chair in the meeting will be impartial but in case of small formal meeting but in case of small informal meeting he or she might take part in the discussion of meeting and may also move any second motion or amendment. The person will not need to vacate or leave the chair. In case of formal meetings to preserve the impartiality, the Chair should take no part in formulating the motion.
• The business of the meeting should be done according to the order of the agenda, until and unless the meeting decides to take things in some other order.
• In the meeting the voting will take place according to the articles or constitution or by the laws.
• The motion is the Chair declares either lost or won.

After the end of one meeting, the Chair will again discuss and arrange for the next meeting if it thinks it to be appropriate. The Chair declares the meeting either to be adjourned till the next meeting or closed.