company law

Essential Guidelines for Board Meetings Under the Companies Act, 2013

Understanding Board Meetings Under the Companies Act, 2013

Board meetings play a critical role in corporate governance, allowing directors to make strategic decisions on behalf of the company. The Companies Act, 2013 outlines various regulations governing these meetings, including aspects such as frequency, notice requirements, quorum, and record-keeping. This blog delves into the essential provisions and obligations that companies must adhere to regarding board meetings.

Frequency of Board Meetings

Initial and Subsequent Meetings

  1. First Board Meeting:

    • Must occur within 30 days of incorporation, or within 60 days for a company registered in an International Financial Services Centre (IFSC).

  2. Subsequent Meetings:

    • Companies are mandated to hold a minimum of four board meetings each calendar year.
    • The interval between consecutive meetings should not exceed 120 days.
    • If a meeting fails to meet quorum, it is adjourned; an adjourned meeting is viewed as a continuation of the original meeting, thus the 120-day count continues from the original date.

Relaxation for Certain Entities

  • One Person Companies (OPC), Small Companies, Dormant Companies, and Start-up Private Companies:

    • Required to hold at least one board meeting in each half of the calendar year (totaling two meetings).
    • The minimum gap between these meetings is 90 days.
    • OPCs with only one director are exempt from this requirement.

  • Section 8 Companies:

    • Must hold at least one board meeting every six months.

Notice of Board Meetings

Original Board Meeting Notice (Section 173(3))

  • Every director must receive notice at least seven days prior to the meeting date, including alternate directors where necessary.
  • Notices can be sent to the director’s registered address, whether in India or abroad.
  • Meetings scheduled based on specific days or intervals require notice regardless of pre-determined dates.

Adjourned Meetings

  • Notice of an adjourned meeting must be provided to all directors.
  • If a board meeting is adjourned due to lack of quorum, it automatically reschedules for the same day and time the following week, unless that day falls on a national holiday.

Short Notice Meetings

  • In urgent situations, meetings can be convened on shorter notice, with at least one independent director required to be present. If an independent director cannot attend, resolutions must be circulated for ratification later.

Delivery of Meeting Notices

Notices are to be served via various means, including:

  • Hand delivery
  • Registered post
  • Email
  • Facsimile or any electronic method
  • Note that common postal methods lacking proof of delivery are not permissible.

Agenda Inclusion in Notices

While the Companies Act does not require agendas to be included in the notice, it is best practice for directors to be informed of discussion topics to prepare adequately. Many company articles may mandate the inclusion of an agenda.

Participation in Board Meetings

Directors can attend board meetings either in person or via video conferencing, provided the technology used can both record attendance and document meeting proceedings.

Quorum Requirements (Section 174)

  • General Quorum:

    • Defined as the greater of one-third of total directors or at least two directors present.

  • Quorum for Interested Directors:

    • If the number of interested directors equals or exceeds two-thirds of the board, only non-interested directors can count towards the quorum.

  • Specific Cases for Section 8 Companies:

    • Quorum consists of the lower number of eight directors or 25% of the total strength.

  • If Quorum Is Lacking:

    • Should a board meeting lack the required quorum, it is automatically adjourned, following the same rules for rescheduling as previously noted.

Minutes of Board Meetings (Section 118)

Preparation and Content:

  • Minutes must be prepared within 30 days of meeting conclusion, summarizing discussions accurately.
  • The chairman has discretion over including or excluding particular topics deemed irrelevant or harmful to the company’s interests.

Conclusion

Understanding and complying with the provisions related to board meetings under the Companies Act, 2013 is essential for effective corporate governance. Companies need to ensure they adhere to these rules to avoid penalties and ensure smooth operations. Regularly reviewing these laws can provide clarity and help directors fulfill their responsibilities effectively.