Section 174 : Quorum for Board Meeting

Section 174 of the Companies Act, 2013 deals with the Quorum for Board Meeting

The quorum for the Board meeting shall be 1/3rd of its total strength or 2 directors, whichever is higher, including the participation of directors by video conferencing or audio visual means.

However the articles of association may provide for higher number of quorum.

In case of Section 8 Companies, quorum shall b minimum 8 members or 25% of total strength, whichever is less.

"Total strength" hereon shall not include directors whose place is vacant.

However, if the no. of continuing directors is less than the required quorum of the meeting then such continuing directors can hold a meeting only for two purposes :- 

      I.        To hold a general meeting of the company;

    II.        To increase the number of directors to that fixed for the quorum.

Interested Directors in the Meeting

Where the number of interested directors is equal to or exceeds 2/3rd of the total strength of the Board, the number of directors not interested and present at the meeting, but not less than 2, shall be the quorum for the meeting.

Eq: In case a company has 12 directors on its Board out of which 10 of them are interested,  in such a case remaining 2 Directors shall form the quorum.

Although requirement of 4 Directors is a requisite quorum being 1/3rd of 12, but 10 directors being interested, the other 2 disinterested directors shall constitute a quorum for the meeting.

Where all the Directors are Interested:

Ø  to increase the strength of the Board by appointing disinterested Directors; or

Ø  to appoint additional Directors who are not interested for the said contract,  if authorized by articles.

If impracticable, the proposed contract to be placed in the annual general meeting for consent.

Interested Director means every director of a company, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered or to be entered into:

1.    In case of a body corporate –

·         If such director or such director in association with any other director, holds more than two per cent. shareholding of that body corporate; or

·         If such director is a promoter, manager, Chief Executive Officer of that body corporate;

2.    In case of a firm or other entity –

·         If such director is a partner, owner or member, as the case may be.

·          

ADJOURNMENT OF THE MEETING

Where the meeting could not be held because of absence of quorum, the meeting shall automatically stand adjourned to to the same day at the same time and place in the next week. or where that day is a  National Holiday, till next succeeding day, which is not a national holiday, at the same time and place.

Any fraction shall be rounded off as one.

APPLICABILITY AS PER SECRETARIAL STANDARDS - I

1.    The quorum shall be present throughout the meeting, also while transacting the business items.

2.    In case a Director is interested on a particular item, he shall not be included for the purpose of the quorum, and shall not be present physically or through electronic mode, during discussions and voting on such item.

3.    With the express permission of Chairman, the interested Director may be allowed to attend the meeting, but shall not be counted for the purpose of quorum and shall not be allowed to vote on it.

4.    The leave of absence shall be granted only if the request for such leave has been received by the CS or Chairman.

5.    The office of director shall become vacant in case he absents himself from all the meetings of the Board during the period of 12 months, with or without seeking permission of leave.

Chairman of the Board Meetings

1.    The Chairman of the Company shall be the Chairman of the Board.

2.    If company does not have a Chairman, Directors may one among themselves to be the Chairman of the Board.

Chairman of the Committee Meetings

1.    The member of the Committee appointed by the Board, or elected by the Committee as Chairman, shall conduct the meeting of such Committees.

2.    In case if no Chairman is elected, or unable to be present, the Committee shall elect one among themselves to act as the Chairman of the Committee, unless provided by the articles.

Quorum for Meeting of Committees

In case of Committee meeting, the presence of all the members of the committee constituted by the Board shall be necessary to form a quorum unless stipulated by Board or articles or under the Act.

Attendance Registers

1.    Every company shall keep separate attendance registers for Board Meeting and also for Committee Meetings.

2.    The pages shall be serially numbered.

3.    It shall be periodically bounded depending upon the size and volume, in case of kept in loose leaf form.

4.    It shall contain the details regarding - 

                          i.        serial number of meeting

                         ii.        date of meeting;

                        iii.        place of meeting;

                       iv.        time of meeting;

                        v.        name of Directors;

                       vi.        signature of each Director;

                      vii.        Name & signature of CS

                     viii.        Persons attending by Invitation.

                                                      QUERIES

Q1. What is the place where Board Meetings can be held?

Ans. A Board Meeting may be held at any place, in India or abroad.

Q2. Why Board meetings cannot be convened on a National Holiday?

Ans. Section 174(4) of the Companies Act, 2013 prohibits holding of Board meetings adjourned for want of Quorum on National Holidays. Even as per Section 96(2) of the Companies Act, 2013, AGM cannot be held on a National Holiday. By inference, it can be understood that the intention of the legislature is to avoid holding Meetings on National Holidays. Therefore, Board Meetings shall not be convened on National Holidays.

Q3. Can participation of a Director in a Meeting telephonically or through teleconferencing be considered as participation of a Director through Electronic mode or Meetings through Electronic mode?

Ans. No. As per SS-1, “Electronic Mode” in relation to Meetings means Meetings through video conferencing or other audio-visual means. Thus, participation of a Director in a Meeting telephonically or Meetings through teleconferencing cannot be considered as participation of a Director through Electronic mode or Meeting through Electronic mode.

Q4. Is it mandatory for companies to provide their directors with the facility of participation in meetings through electronic mode?

Ans. It is not mandatory for companies to provide their directors with the facility of participation in meetings through electronic mode.

Q5. In case companies do not provide the directors with the facility of participation in meetings through electronic mode, can the directors insist on attending the meetings through such mode?

Ans. No, Section 173(2) of the Act is an enabling provision which recognizes presence of directors participating through electronic mode. It is an option with the director to attend the Board Meeting through electronic mode but it is not his right. This option may be exercised by the Director only when this facility is provided by the company to its director(s). If the company has not offered to provide facility of participation through electronic mode and the director insists to attend the meeting through electronic mode, the company may decide whether to provide the same or not.

Q6. Is it mandatory for a company to hold at least one Meeting of the Board physically or all Meetings can be held through Electronic Mode?

Ans. There is no such restriction. However, the company should ensure presence of physical quorum during consideration of any of the restricted items of business.

Q7. Is it mandatory for a Director to attend at least one Meeting of the Board physically?

Ans. No. A Director may attend all the Meetings of the Board through electronic mode, if the company provides such facility. However, physical quorum should be present during consideration of any of the restricted items of business.

Q8. If the original Meeting of the Board was conducted physically, can the adjourned meeting be conducted through electronic mode?

Ans. There is no restriction in SS-1 to hold the adjourned meeting through electronic mode, provided provisions relating to meetings through electronic mode is complied with.

References:
Companies Act, 2013
Secretarial Standards I

Contact:

CS Divyanshu Bansal
Email ID: divyanshubansal401@gmail.com