RELEVANT STATUTORY PROVISIONS

Section 173 of the Companies Act, 2013 (“Act”) elaborates on the manner in which board meetings are to be conducted. Section 173(1) of the Act specifies that every company shall hold the first meeting of the board of directors of the company (“Board”) within thirty days of the date of the company’s incorporation and thereafter hold a minimum number of 4 (Four) meetings of the Board every year with a gap of not more than 120 (One Hundred and Twenty) days between two consecutive meetings of the Board.

Section 173(2) of the Act states that the participation of directors in a meeting of the Board may either be in person or through video conferencing or any other audio-visual means as may be prescribed in the Act. Such 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 the date and time of such meeting.

Section 173(3) of the Act states that a Board meeting shall be called by giving not less than 7 (Seven) days’ notice in writing to every Director at his/her address registered with the company. Such notice shall be delivered by hand delivery or by post or by electronic means such as e-mail.

The process for conducting Board meetings through video conferencing is prescribed under Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014 (“Rules”). Principles for convening and conducting Board meetings are provided in the Secretarial Standard on Meetings of The Board of Directors (“Secretarial Standards”). These Secretarial Standards were issued by the Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Act in 2015 and revised again in 2017.

STEP BY STEP PROCEDURE FOR CONDUCTING BOARD MEETINGS THROUGH VIDEO CONFERENCING

Step 1: Notice

The primary requirement for conducting a Board meeting, under Section 173 (3) is sending an advance notice of the meeting to all the directors of the company. Further, a minimum of 7 days’ time has to be given to the directors before the meeting to submit their confirmation of attendance. Rule 1.3.1 of Secretarial Standards elaborates on the procedure of sending the notice and specifies that the notice must be delivered by hand, by registered post, by fax, by e-mail or by any other electronic means such as e-mail.

Rule 3(3)(b) of the Rules requires that the notice of the meeting shall inform the directors of the option available to them to attend and participate in the meeting through video conferencing or other audio-visual means. All the necessary information to enable the directors to attend and participate in the meeting through video conferencing or other audio-visual means must also be specified in the notice. As per the explanation provided for Rule 1.3.4 of the Secretarial Standards, the notice must also contain the contact number or e-mail address(es) of the chairperson of the Board (“Chairperson”) or the company secretary recording the minutes of the meeting (“CS”), to whom the director shall convey his/her confirmation of participation in the meeting.

Further, the notice must seek advance confirmation from the directors regarding the mode of their participation in the meeting i.e. through electronic mode or in person. Rule 3(3)(c) of the Rules states that if a director intends to participate in a Board meeting through video conferencing or audio-visual means, then the director will be required to communicate his/her intention to the Chairperson or the CS. This intimation must be done sufficiently in advance so that company is able to make suitable arrangements for the same.

As per Rule 3(3)(e) of the Rules, any director who desires to participate in all Board meetings through video conferencing or other audio-visual means must intimate his/her intention of participation through electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

As per the Secretarial Standards and the Rules, if there is no intimation regarding participation through electronic mode, then it shall be presumed that the director will be attending the meeting in person.

Step 2: Attendance

The next step before the meeting commences is the roll call of attendees. As per Rule 3(4) of the Rules, a roll call shall be taken by the Chairperson before the meeting commences. This shall be done when every director participating through video conferencing or other audio-visual means shall state, for the record, the following namely:

  1. His/Her Name;
  2. Location from where he/she is participating through electronic means;
  3. Acknowledgement of receipt of the agenda and all the relevant material for the meeting; and
  4. Representation that no one other than the concerned director is attending via proxy or having access to the proceedings of the meeting.

As per Rule 4 of the Secretarial Standards, every company has to maintain an attendance register for all board meetings conducted. Rule 4.1.3 of the Secretarial Standards read with Rule 3(3)(7) of the Rules states that the attendance register shall be deemed to have been signed by the directors participating through electronic mode, if their attendance is recorded in the attendance register and authenticated by the company secretary recording the minutes of the meeting. In the event there is no company secretary, then the attendance must be recorded by the chairperson of the Board or by any other director present at the meeting, if so authorised by the chairperson. Additionally, the fact of such participation must also be reflected in the minutes of the meeting duly recorded.

Step 3: Commencement of meeting

Rule 3(3)(5) of the Rules states that after the roll call is completed, the Chairperson or the CS shall inform the Board about the names of persons other than the directors who are present for the said meeting at the request or with the permission of the chairperson and confirm that the required quorum is complete. It is the responsibility of the Chairperson to ensure that the quorum is maintained throughout the meeting.

A director participating in a meeting through video conferencing or other audio-visual means shall be counted for the purpose of computing quorum, unless the director is to be excluded for any items of business under any provisions of the Act or the Rules.

According to Rule 3(3)(8) of the Rules, every participant shall identify himself/herself for the record before speaking on any item of business on the agenda. If a statement made by a director attending the meeting through video conferencing or other audio-visual means is interrupted or garbled, the Chairperson or the CS shall request for a repeat or reiteration by the concerned director.

If a motion is objected to and there is a requirement to put it to vote, the Chairperson shall record the votes of each participating director including such director(s) who is attending the meeting remotely via video-conferencing. The Chairperson shall make a note of each director’s vote and the motion shall be passed on the basis of a simple or special majority depending on the subject matter of the motion subject to the Act. Each director must identify himself/herself while casting their vote. At the end of discussion on each agenda item, the Chairperson shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

Step 4: Minutes of the Meeting

Rule 3(3)(11) of the Rules states that after completion of the meeting, the minutes of the meeting shall be entered in the minute book and signed by the Chairperson as specified under Section 118 of the Act. The minutes of the meeting must disclose the particulars of the directors who attended the meeting through video-conferencing or other audio-visual means.

As per Rule 3(3)(12) of the Rules, the draft minutes of the meeting shall be circulated among all the directors within 15 (Fifteen) days of the meeting either in writing or via electronic mode, as may be decided by the Board.

Every director who has attended the meeting, whether personally or through video-conferencing or other audio-visual means, shall confirm or give his/her comments in writing, about the accuracy of the draft minutes, within 7 (Seven) days or some other reasonable time as decided by the Board. Failure to submit the comments within the specified timeline shall be deemed to be the director(s)’ approval of the accuracy of the draft minutes.

FREQUENTLY ASKED QUESTIONS

1. What happens if some of the directors are abroad? Can they attend the meeting via video conferencing? Is the video conferencing facility only available to directors who are located abroad? Do the directors present in India have to mandatorily attend the Board meetings in person?

The directors can attend the meeting through video conferencing in any circumstance, irrespective of their location. Section 173(2) of the Act does not make it mandatory for the directors to attend the meeting in person, regardless of location. The use of the term “may” in this section implies that the directors have the option to either attend the meeting in person or through video conferencing and other audio-visual means.

Section 173(2) does not put any limitation on the number of directors who have to be mandatorily present during the meeting physically. Therefore, even if a few directors are in India, it is up to them to decide in whichever manner they want to attend the meeting. In fact, all directors can attend the meeting remotely via video conferencing. However, a board meeting where any of the restricted matters listed in Rule 4 of the Rules and discussed in paragraph 3.4 below is discussed, such a board meeting would mandatorily require at least such number of directors as required to constitute quorum in the articles of association of such company, to be present physically at the venue of the board meeting.

2. What will be recorded as the scheduled venue of the Board meeting if the meeting is entirely conducted through video conferencing?

According to Rule 3(3)(6) of the Rules, the scheduled venue of the meeting as mentioned in the notice convening the meeting shall be deemed as the place of the meeting and all recordings of the proceedings of meeting shall be deemed to be made at such place only.

3. What are the duties of the chairperson of the Board conducting a Board meeting through video conferencing?

Rule 3(2) of the Rules specifies the duties of the chairperson of the Board tasked with conducting a Board meeting through video conferencing or any other audio-visual means. The chairperson must take due and reasonable care:

  1. To safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;
  2. To ensure availability of proper video conferencing or other audio-visual equipment or facilities for providing transmission of the communications for effective participation of the directors and other authorised participants at the Board meeting;
  3. To record proceedings and prepare the minutes of the meeting;
  4. To store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company, for a minimum period of the time till completion of the audit of concerned company for that relevant financial year;
  5. To ensure that no person other than the concerned director(s) is attending or have access to the proceedings of the meeting through video conferencing or other audio-visual means;
  6. To ensure that the participants attending the meeting through audio-visual means are able to hear and see the other participants clearly during the course of the meeting: Provided that the persons, who are differently abled, may make a suitable request to the Board to allow a person to accompany him/her to the meeting.

4. Can all matters can be dealt with in the meetings conducted through video conferencing?

No, all matters cannot be dealt with in a meeting conducted through video conferencing. Rule 4 of the Rules clarifies that certain matters cannot be dealt with in a video conferencing meeting. According to Rule 4 of the Rules, the following matters shall not be dealt with in any meeting held through video conferencing or other audio-visual means:

  1. The approval of the company’s annual financial statements;
  2. The approval of the Board’s annual report;
  3. The approval of the prospectus of the company;
  4. Audit committee meetings for consideration of accounts;
  5. The approval of matters relating to amalgamation, merger, demerger, acquisition, takeover or any other corporate restructuring of the company.

However, where there are at least such number of directors as required to constitute quorum in the articles of association of such company are present physically at the venue of the board meeting, any other director may participate in a board meeting dealing with the above-mentioned matters through video conferencing or other audio-visual means.

This post was co-authored by Namrata Bhagwatula and Ashish Nath Jha. Namrata is a Senior Associate in the Delhi Office of GameChanger Law Advisors. Ashish is a 4th year B.A. LLB Hons. student at Gujarat National Law University, who is interning with us over the summer.

For any further queries on this topic, please contact Namrata Bhagwatula (namrata@gamechangerlaw.com)