ONLINE BOARD MEETINGS VIA VIDEO CONFERENCING UNDER COMPANIES ACT, 2013

The daily business of a company can only be effectively carried out by a concrete policy formation and timely decision making. The powers of decision making and policy formulation in the company is vested on the members of the Board of Directors who will be meeting periodically and have conversations and reaching a consensus that will determine the future of the company.

For a company whose Directors are stationed at places that are very far from each other, it is often difficult to hold a board meeting at a common location especially at this age of technological advancement.

Therefore, the Companies Act, 2013 has provided a means for Directors to hold a Board Meeting at a commonplace without all of them having to be physically present. This is referred to as a Board Meeting by Video conferencing or any other Audio-Visual methods.

Participation in board meetings through video conferencing saves time and cost and allows one to convert the energy used for distant travels for meeting into a more productive venture.

This write-up will discuss the very provisions, issues, and procedures that relate to Board Meetings through online Video Conferencing.

SECTION 173(2) OF THE COMPANIES ACT, 2013-

The mode for the Board of Directors’ participation in meetings has been clearly specified in Section 173(2) of the Act. It states that the mode of participation may be through:

1. Physical presence (i.e in person)
2. Video conferencing and
3. Audio Visual means that can store, record the date and time of the proceedings of the meeting.

WHAT ARE THE RELATED ASPECTS OF ONLINE BOARD MEETINGS VIA VIDEO CONFERENCING AS PROVIDED IN THE COMPANIES ACT, 2013?

Before we discuss the related aspects of this Act, the Companies (Meetings of Board and Powers) Rules, 2014 shall hereinafter be referred to as ‘Rules’ while the Secretarial Standard -1 on Board Meetings of Directors shall hereinafter be referred to as ‘Secretariat Standard-1. Let us consider the provisions of the Act below:

1. The frequency of Board Meetings (S 173 para 2.1 of Secretarial Standard)

All companies are expected to hold a meeting of its Board of Directors at least four sessions within a year whether it is a private or a public company provided that the gap between two successive meetings does not exceed 120 days.

Where it is a single person company, then there is no minimum requirement for holding of board meetings. However, where a single person company has more than one director, then this requirement must be applied and where they hold a single meeting for each half of the year, the gap before the next meeting should exceed 90 days.

As provided in vide Notification No. GSR 466 E of June 5^th, 2015, the Board of Directors for a Section 8 Company shall hold a minimum of one meeting in within 6 months.

2. Notice (S. 173, Rule 3(3) of Rules and Para 1.3 of Secretarial Standard-1)

• ) Participants must first be informed about the time for holding such a meeting.
• ) The directors should be given at least 7 days to confirm that they are attending the meeting.
• Each director shall be served with a written notice by hand, email, speed post, facsimile or by other electronic means.
• The notice shall provide the directors with the option that is available for them to attend the meeting and any necessary information that will assist them in participating through the prescribed option which may include video conference or Audio-visual means.
• ) Where the director intends to attend the meeting through video conferencing or Audio-visual means, he shall inform the company on time for suitable arrangements to be made on his behalf.
• A single declaration on how to participate in such meetings can be made at the beginning of the year and this will be honored throughout the year.
• The director shall attend the meeting in person where he has not informed the company of attending via Video Conferencing.

WHAT IS THE PENALTY WHEN AN OFFICER OF THE COMPANY FAILS TO NOTIFY A DIRECTOR?

Section 173(4) of the Act prescribes a fine of Rs. 25000 if an officer of the company fails in his or her responsibility to notify the directors for the board meetings as provided in this Act.

3. Roll call and Quorum (sub-rules 4&5 of Rule 3 of Rules and Para 4.1.3 of Secretarial Standard -1)

• ) The Chairperson shall make a roll call at the start of the meeting.
• ) All participating directors irrespective of their medium of an attendant shall provide the following information:

1. Name;
2. Location of participation
3. That he has the agenda and other important documents for the meeting
4. That he alone is in possession of the materials or is attending the meeting from his location mentioned in clause (b).

• At the completion of the roll call, either the Chairperson or the Secretary of the Company shall present to the board any other person who is an attendee of the meeting but is not a member of the board of directors and shall confirm that the needed quorum has been formed.
• The Chairperson is to ensure that the quorum required is maintained throughout the meeting.
• ) A director is who is attending the meeting by an electronic means shall be included in the quorum except in specific business items which is in accordance with the provisions of this Act.

4. Conducting of Board Meeting (Sub-rules 8, 9 & 11 of Rule 3 of Rules)

• ) With the complete quorum, the Chairperson shall commence with the business of the day as mentioned in the meeting’s agenda.
• ) For record keeping, every participant is required to identify his or herself before making any contribution to the meeting’s agenda.
• Where a video or audio of a participant of the meeting is unclear, the chairperson shall call for the specific director to make a recap.
• Where a vote shall be required, the chairperson shall count the votes of all the participants irrespective of their medium of the attendant.
• ) The decision reached shall be based on most number votes casted.
• The chairperson shall inform the quorum of the decision taken and the name of any director who may have a contrary view on the matter.

5. Minutes of Board Meeting (S. 118, Sub-rules 11 & 12 of Rule 3 of Rules and Para 7 of Secretarial Standard 1)

• ) The minutes of the board meetings in the company must be kept in a Minute Book.
• ) As prescribed by the Act or by the board, the minute can be stored electronically.
• Timestamp shall be used for the maintenance of minutes that are stored electronically.
• The particulars of the directors who participated in the meeting shall be mentioned in the minute irrespective of their medium of attendance.
• ) The draft minute of the meeting shall be circulated either by writing or electronically to all the directors within 15 days of the conclusion of the meeting.
• Every director who attended the meeting shall confirm the accuracy of the draft minute or can enter a comment within 7 days of its receipt of the draft or as the board may decide and failing to do this shall be taken as an approval.
• After this, the draft minute shall be copied into the minute book and shall be signed by the chairperson.

6. Obligations of the Chairman and Company Secretary (Rule 3(2) of Rules)

It is the responsibility of the Chairperson of the meeting and the Secretary to:

• ) Ensure that the integrity of the meeting is maintained by keeping to the rules governing identification of the participants.
• ) Ensure that the proper video conferencing or audio-visual equipment and facility is available to the online participants for the effectiveness of the meeting.
• Ensure that the proceedings of the meeting are recorded and stored in the minute book.
• Ensure that the recording of the meeting is well marked and stored in the company’s archives at least before the year’s audit is completed.
• ) Ensure that no third-party other than the concerned directors are participating in the meeting or have access to the proceedings either by video or audio-visual means.
• Ensure that there is a clear communication between online participants and other participants in the meeting.

Issues that relate to Online Board Meeting via Video Conferencing-

• Participation of all directors in Board Meeting via Video Conferencing:

1. There is no limit to the number of directors that must be physically present in the meeting.
2. It is possible for all directors to partake online.
3. The chairman or company secretary or a person that is duly nominated by the chairman shall be physically present at the venue of the meeting to keep records of the proceedings and fulfill other necessary requirements as provided in the paragraph 123 of the Guidance Note of B.O.D issued by the Institute of Company Secretaries of India.
4. Where the restricted matters are to be discussed, it is mandatory for board members that would form a quorum to be physically present in the meeting. The restricted matters shall be highlighted below.

• ) Restricted Matters for Online Board Meeting (S. 173(2) Rule 4 of the Rules)

The following matters shall not be discussed through a video conference or an audio-visual media:

1. Approval of the periodic financial report
2. Approval of reports of the Board
3. Approval of the company’s prospectus
4. Audit committee meetings for the board’s approval of the financial statements.
5. Approval of matters that concerns merging, takeover, amalgamation, and demerger.
6. Where a quorum has been formed through physical presence, any other director can participate in the meeting through online.
7. Where the chairman participates in the meeting through a video conference, he should relinquish his responsibilities in respect to the items listed above to disinterested director who is physically present in the meeting.

• Allowability of Online adjournment of Board Meeting (S. 173, Rule 3 of the Rules

1. The board meeting can be adjourned electronically irrespective of the fact that the original board meeting was held physically.
2. The rules of adjournment must comply with the provisions of this Act and rules.

• Power of the Company to restrict a director from taking part in a board meeting through a video conferencing

2018. The right to attend a board meeting by video conferencing lies with the director and not at the discretion of the company’s chairperson or secretary as held by the NCLAT in the case between Achintya Kumar Barua and Ranjit Barthkur 2018.
2019. The director that intends to attend the board meeting through a video conferencing as provided in Section 173(2) of the Act shall notify the company for the necessary arrangements to be made.