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Notes on Meetings of Board of Directors of Every Company

Notes on Board Meetings (Frequency/ Notice/ Exemption) of private, public, small, dormant and One Person Company u/s 173 of the Companies, Act 2013.

Chapter XII (Section 173-195) of the Companies Act, 2013 (CA 2013) deals with the provisions related to Meetings of Board and its Powers. Section 173 of the CA 2013 provides for Meetings of Board. The provisions of section 173 came into force on 1st day of April, 2014 vide Notification No. S.O. 902(E) issued dated 27-03-2014.

Recently, we have discussed about the punishment under section 172 where there is no punishment has been provided for contraventions of provisions of sections 149171 of CA 2013. Today, we shall learn about Board Meetings (BM) of the company provided under section 173 of CA 2013. Section 173 should be read with the Companies (Meetings of Board and its Powers) Rules, 2014.

Meetings of Board (Section 173) of CA 2013

Frequency of Board Meetings [Section 173 (1)]:

If you want to know that how many number of meetings shall be conducted by the Board of a company, then you will get your answer in sub-section (1) of section 173 of CA 2013.

  1. First Board Meeting: Every company shall hold the first meeting of the Board of Directors (BOD) within 30 days of the date of its incorporation.
  2. Subsequent Board Meetings: Every company shall hold a minimum number of 4 meetings of its BOD every year. Note that the gap between two consecutive meetings of the Board shall not be more than 120 days.

Exemption to Section 8 (Non-profit) Companies:

According to the proviso of Section 173(1) of CA 2013, the Central Government (CG) may by notification, direct that the provisions of sub-section (1) of section 173 shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.

Accordingly, the CG has now notified that sub-section (1) of section 173 shall apply to Section 8 (Non-profit) Companies only to the extent that the BOD of such Companies shall hold at least 1 meeting within every 6 calendar months. – Notification No. G.S.R. 466(E) dated 5th June, 2015.

In other words, a company formed under section 8 of CA 2013 i.e. Non-profit company shall hold two BM instead of four meetings every calendar year.

Participation in Board meeting [Section 173 (2)]:

As per sub-section (2) of section 173 of CA 2013, directors are allowed to attend or participate in a meeting of the Board either:

i) in person; or
ii) through video conferencing; or
iii) other audio visual means, as may be prescribed.

Such 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.

As per explanation given in the Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014, “video conferencing or other audio visual means” means:

– audio- visual electronic communication facility employed;
– which enables all the persons participating in a meeting;
– to communicate concurrently with each other;
– without an intermediary and to participate effectively in the meeting.

However, 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. Accordingly, CG has now notified in the Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014, the matters not to 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. –

(i) the approval of the Annual Financial Statements;
(ii) the approval of the Board’s Report;
(iii) the approval of the Prospectus;
(iv) the Audit Committee Meetings for consideration of financial statement including Consolidated Financial Statement (CFS), if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and
(v) the approval of the matter relating to Amalgamation, Merger, Demerger, Acquisition and Takeover.

Notice of the Board meeting [Section 173 (3)]:

Section 173(3) of CA 2013 provides that a meeting of the Board shall be called by:

– giving not less than 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.

However, a meeting of the Board may be called at shorter notice (i.e. less than 7 days) to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting.

Note that Rule 3(3)(b) of the Companies (Meetings of Board and its Powers) Rules, 2014 states that the notice of the meeting shall:

– inform the directors regarding the option available to them;
– to participate through video conferencing mode; or
– other audio visual means, and
– shall provide all the necessary information;
– to enable the directors to participate through video conferencing mode or other audio visual means.

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.

Penalty for failure to give Notice [Section 173(4)]:

Every officer of the company whose duty is to give notice under section 173 and who fails to do so shall be liable to a penalty of ₹25,000.

Exception to OPC, Small and Dormant Company [Section 173(5)]:

A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of Section 173 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 90 days.

However, the provisions of sub-section (5) of section 173 and section 174 shall not apply to One Person Company in which there is only one director on its Board of Directors.

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