Annual Compliance

Provisions of Conducting Board Meeting through Video Conferencing under Companies Act, 2013

Carrying out a business of the company effectively requires regular decision making and proper policy-making by the company. The Board of Directors plays a significant role in this regard. They are required to have timely meetings and make decisions for the company. In this process, they are required to hold meetings regularly, which may be challenging to hold with everyone physically present together as directors of the company may be in different parts of the world. So what is the alternative to it? This article describes the Provisions of Conducting Board Meeting through Video Conferencing under Companies Act, 2013.

 Well, board meetings of a company can still be conducted without everyone’s physical presence together. The makers of the Company’s Act, 2013, understood this challenge and have provided for the provision of board meeting through video conferencing or other audio-visual means. In this article, we shall discuss the statutory provisions and procedural requirements concerning the board meeting through Video Conferencing under the Companies Act, 2013^[1].

Who can hold Board meeting through Video Conferencing?

Under section 173(2) of Companies Act, 2013 read with rule 3 of Companies Rules (Meetings of board and its power), 2014; every company may hold meetings of board through either video conferencing or other audio-visual means that can record and recognize the participation of the directors and that can record and store the proceedings of the board meeting along with date and time.

How often must the Board meetings be held?

Under section 173 and Para 2.1 of Secretarial Standard-1, companies, whether public or private limited companies must, hold a minimum of four board meetings between the directors in a calendar year. It is essential to note that the gap between two consecutive meetings of the board should not be more than one hundred and twenty days. When it comes to one person company, aforesaid minimum board meetings are not required to be held, if such a company has only one director on the Board of Directors. On the other hand, if the one person company has more than one director or if the company is either small or dormant, it shall be enough for them to hold minimum one meeting within each half of the calendar year. However, the gap between such two meetings must not be less than ninety days. Moreover, the Board of Directors of section 8 companies will hold a minimum one meeting in six calendar months.

Notice of Board Meeting

The procedure of any meeting begins with the first step of informing the participants of the meeting about it. Under section 173(3) and Para 1.3 of Secretarial Standard-1, an advance notice of seven days must be sent to all directors prior to the meeting in writing. Such notice about the meeting must be sent through the post, by hand, or by e-mail or any other electronic medium.

The notice must contain relevant details informing the directors about the option available to the directors to attend the board meeting through video conferencing or any other audio-visual means and all additional relevant information to allow the directors to attend the meeting through video conferencing or any other audio-visual means. In case of director wishing to participate in the meeting through video conferencing or any other audio-visual means, he shall intimate in prior to that effect sufficiently that the company can make necessary arrangements in this behalf. Alternatively, he or she may provide a single declaration about the participation in all meetings at the start of a year itself that will be valid for a year.

In case no intimation is given about participation in the board meeting through video conferencing, then there is a presumption clause for attending the meeting by a director in person.

In case any officer of a company who is required to give notice under this section and who fails to give such a notice, shall be punished with a penalty of Rs. 25000 under section 173(4) of the Act.

Procedure followed before the start of the meeting

Roll Call-

Under the sub-rule 4 and 5 of rule 3 of Companies Rules (Meetings of board and its power), 2014, a roll call will be taken at the start of the meeting by the chairperson, and every director participating in the board meeting through video conferencing or any other audio-visual means must state, for the record, namely:

• Name,
• His location from where he is attending the meeting,
• That he has got the agenda and all other relevant material for the meeting,
• And that no one else other than the director concerned is participating or having any access to the proceeding of the meeting at the location specified in clause (b).

Once the roll call is made, the chairperson or the Company Secretary will intimate the board regarding the names of people who are present for the meeting, other than the directors, at the request or through permission of the chairperson and shall make a confirmation regarding the quorum is complete. The presence of the required quorum throughout the meeting shall be ensured by the chairperson.

A director participating in such a board meeting through video conferencing or any other audio-visual means will be counted for quorum purpose, unless he has to be excluded for any item of business under the Act or Rules.

Conducting Board Meeting

Under sub-rules 8, 9, and 11 of Rule 3 of Companies Rules (Meetings of board and its power), 2014, once the quorum is fulfilled, the chairman shall further proceed for transacting businesses specified in the agenda of the meeting. The participants are required to identify themselves for the record before discussing any item of business in the agenda. In case, in the course of making a statement by the director in the board meeting through video conferencing, any statement is interrupted or garbled, then the chairperson or the company secretary may request or reiteration of the statement by the director.

In case a motion is objected, and there is a need to put it to vote, the chairperson will record the votes of every director who is participating, including the director who attends the meeting through video conferencing. Finally, the motion shall be passed on the decision of the majority once the chairperson makes a note of each vote by the director.

Whenever a discussion is completed on an agenda item, the chairperson will declare the summary of the decision made on such an item. The name of the directors shall also be announced who dissented from the decision of the majority.

Procedure followed post-meeting

As per section 118, sub-rules 11 and 12 of rule 3 of Companies Rules (Meetings of board and its power), 2014, and Para 7 of Secretarial Standard-1, every company must ensure that they keep minutes of all Board Meetings in a minute’s book. It may be maintained in electronic mode in the manner prescribed under the Act and as decided by the board.

The minutes will contain the details of the directors who participated in the board meeting through video conferencing or any audio-visual means. The draft minutes of the board meeting, within 15 days of completion of board meeting, shall be circulated to all the directors in writing or in electronic mode as decided by the board.

Once the directors receive the draft minutes, all directors who attended the meeting, either in person or by video conferencing or other audio-visual means, will confirm or provide his or her comments in writing regarding the accuracy of the recording of that meeting in the draft minutes in seven days or time decided by the Board, failing which his consent regarding such matter shall be presumed. Eventually, the minutes will be entered in the minute book, and it shall be signed by the chairperson.

What are the duties and responsibilities of Chairman and Company Secretary?

Rule 3(2) of Companies Rules (Meetings of board and its power), 2014, lays down the responsibilities of Chairman and Company Secretary. They shall take due and reasonable care to-

• Safeguard the integrity of the meeting by maintaining sufficient security and identification procedures,
• Ensuring the availability of proper video conferencing or any other audio-visual facility or equipment for providing transmission of communication for effective participation of all directors and any other authorized participants of the board meeting,
• Recording proceedings and drafting the minutes of the meeting,
• Store the tape recordings for safe keeping and marking the tape recording or any other electronic recording mechanism as a record of the company before the completion time of audit of that year,
• Ensuring no other person other than the concerned directors are attending or having access to the proceedings of the board meeting through video conferencing or other audio-visual means,
• Ensuring that all participants are able to hear and see the other participants clearly during the meeting,
• Ensuring that the required quorum is present during the meeting,
• Ensuring all directors are sent the notice of the meeting according to the provisions of section 173(3).

Issues concerning the board meeting through video conferencing

(1) – Approval of adjourned board meeting through electronic mode

An adjourned board meeting means the continuance of such an original meeting. An adjourned meeting can be conducted online through video conferencing, or other audio-visual method provided it is in compliance with the provisions of section 173 rule 3 of Companies Rules (Meetings of board and its power), 2014, and secretarial standard-1.

In case the original meeting was held in person; still, the adjourned meeting can be conducted by electronic means as long as the provisions relating to the conduct of such meetings are kept or followed with.

(2) -Number of directors participating in the board meeting through video conferencing

As per the provisions of section 173(2), there is no limitation on the number of directors that must be present during the meeting. Hence, all directors may attend the board meeting through video conferencing. All directors can participate in a meeting via electronic mode as per Para 1, 2, 3 of the guidance note on the meetings between board directors issued by the Institute of Company Secretaries of India.

Minimum one person, who either is the chairperson or the Company Secretary, must be physically present at the venue of the meeting provided in the notice to ensure proper recording and to protect the integrity of the meeting.

(3) -Matters that are prohibited from being dealt with in a board meeting through video conferencing

The proviso in section 173(2) specifies that the central government may notify matters that shall not be dealt in a meeting through either video conferencing or other audio-visual means. The matters that should not be dealt with in any meeting held via video conferencing or other audio-visual means are:-

• Approval of annual financial statements,
• Approval of the boards report,
• Approval of the prospectus,
• Audit committee meetings for considering financial statements including the consolidated financial statement, if any to be approved by the board under subsection 1 of section 134 of the Act,
• And the approval of matter with respect to amalgamation, mhttps://enterslice.com/learning/board-meeting-through-video-conferencing/erger, demerger, takeover, and acquisition.

(4) -Can a company restrict a director from attending or participating in a board meeting through video conferencing?

As per section 173(2), it provides the provision to a director for participating in a meeting via video conferencing. As we discussed earlier, in order to avail of this facility, such director must give a prior intimation to that effect sufficiently beforehand that allows the company to make arrangements for the meeting.

In the case of Achintya Kumar Barua vs. Ranjit Barthkur, the National Company Law Appellate Tribunal (NCLAT) held that if any director intends to attend board meeting by video conferencing, then the company must allow the attendance. NCLAT held that the use of the word “may” in section 173(2) gives only an option to the director that enables him to decide whether he desires to participate in the meeting personally or through video conferencing. The word “may” doesn’t allow the company to deny the right given to the directors of participating in person or through any electronic mode.

Therefore, it can be concluded that the attendance does not depend upon the company or the discretion of the chairperson, but the option is with the director.

Conclusion

With the technological advancement, anyone can be connected with each other irrespective of their locations or any other barrier. The provision of video conferencing has really enabled an effective working process, thereby saving time and money and increasing productivity. It is a creative way of communicating where one can convene a board meeting from the luxury of their location without compromising with the productivity or affecting its governance. Now, more and more companies are using the instrument of technology to conduct board meetings, and it’s been widely accepted by the participants.