Board Meetings, Companies Act, 2013 : Meaning, Quorum, Requirements and FAQs

What is Board Meeting?

Board Meetings are the furnace in which corporate destinies are mapped out and strategic decisions are made; i.e., meeting at the highest level where board members or their representatives are present. Under the Companies Act, 2013, which requires regular gatherings to discuss important issues impacting the company, these meetings are required by law. Effective governance is ensured by a well-organized board meeting, which promotes accountability and transparency. Within the complex world of corporate governance, Board Meetings are essential occasions that influence a company’s course. It is crucial to comprehend the subtleties involved in holding these meetings to guarantee adherence to the Companies Act, 2013.

Geeky Takeaways:

• Board Meetings are held at the highest level where board members or their representatives are present.
• The Board of Directors acts as agents through which the company takes actions as well as makes decisions.
• All the directors are actively encouraged to attend board meetings, and the option of video conference is available too, in case of impossibility.

Board Meetings under Companies Act, 2013

In every company, the Board of Directors is the supreme authority and has the power to make all the major decisions of the company. The board is also responsible for managing the affairs of the company.

For smooth functioning and management, Board Meetings must be held at frequent intervals. The schedule for Board Meetings is as follows:

• Section 173 of the Companies Act provides that all public and private companies must hold four board meetings in a calendar year.
• A company registered under Section 8 of the act must hold a board meeting or the government body at least once in six months.
• Small companies, Dormant companies, and One Person Companies shall come together in a meeting at least once in each half of the calendar year.

Gap between two Board Meetings: In addition to the above, as per Section 173 of the Act, 120 days is the maximum gap interval between two consecutive board meetings in a single calendar year. Also, if it is a Small Company, Dormant Company, or a One Person Company, the interval between two consecutive meetings should not be less than 90 days.

Notice of Board Meetings

The Notice of Board Meetings is the first light that signals that the discussions are about to begin. It is stated in Section 173(3) of the act that a meeting shall be called by notice to each and every director in writing. This official notice, which includes the meeting’s date, time, and location, is sent to each and every director. It is crucial to comply with the statutory deadlines for the issuance of notices in order to give directors enough time to get ready and participate actively in the discussions.

• Issuance: All directors must receive notice of a board meeting.
• Notice Mode: It may be sent electronically, by hand delivery, or by post.
• Timeframe: The notice must be sent in writing no later than seven days prior to the meeting, or within the time frame specified in the company’s articles.

Quorum for the Board Meetings

To ensure the legitimacy of a Board Meeting, a quorum must be present. Quorum implies the minimum number of members of the board to conduct a valid board meeting. This threshold is outlined in the Companies Act, 2013, highlighting the importance of having the necessary number of directors present in order to make decisions that have legal standing.

• Minimum Attendance: The term “Quorum” describes the bare minimum of directors that must be present for a meeting to be deemed legitimate. The minimum number of directors that must be present is two.
• Requirement: As per section 174 of the act, the quorum for a board meeting is one-third of the board’s total strength or two directors, whichever is higher, unless the company’s articles specify a different number.

Participation in Board Meetings

Being physically present is no longer the only criterion for participation in the age of digital transformation. Board meeting participation is now also possible in a virtual mode, overcoming geographical restrictions. This paradigm change allows for a dynamic interchange of ideas by accommodating different points of view.

• Directors may take part in person if they so choose.
• Virtual Attendance: Under the Act, directors may participate in audio-visual sessions, such as video conferences, virtually.

Requirements for Conducting a Valid Board Meeting

Having a legitimate Board Meeting is essential to good corporate governance and goes beyond simple formalities. To guarantee the legitimacy of the meeting and the enforceability of the decisions made, several conditions must be carefully met. These consist of following the items on the agenda, accurately recording the minutes, and following protocol.

1. Proper Agenda: A list of the items to be discussed should be distributed with the notice. Anything which is not mentioned must not be discussed in the meeting.

2. Minutes of the Meeting: Detailed minutes of the meeting must be kept up to date and documented according to the guidelines.

3. Resolution: Resolutions are frequently used to formalize decisions, and they need to be properly documented.

4. Right Convening Authority: The Board Meeting must be held under the direction of proper authority; ie., the Company Secretary or any authorized person.

5. Proper Presiding Officer: The Board Meeting must always be conducted in the presence of a Chairman of the Board.

6. Proper Notice: A Formal Notice needs to be served to all members before conducting a Board Meeting.

Conclusion

Board meetings are the threads in the corporate governance tapestry that tell the story of a company’s success. Directors and Stakeholders must both understand the nuances of these meetings in light of the Companies Act, 2013. A comprehensive understanding guarantees smooth compliance and efficient decision-making, from the sending of notices to specifying quorums and welcoming digital participation.

Board Meetings, Companies Act, 2013- FAQs

What does the Companies Act, 2013 mention about the Importance of Board Meetings?

Board meetings are legally required forums where directors discuss important issues, guaranteeing openness and responsibility.

Can meetings of the board be held virtually?

Yes, Board Meetings can now be held in a virtual mode, allowing participation from anywhere in the world.

What are the essential conditions for holding an authorized board meeting?

The Companies Act, 2013 prescribes that procedural guidelines must be strictly followed, as well as the agenda, minutes, and accurate recording.

How often should board meetings be held?

At least four times a year with a maximum 120-day gap between meetings.

What is the quorum for a board meeting?

One-third of the total board strength or two directors, whichever is higher.

How much notice is required for a board meeting?

A minimum of 7 days, but shorter notice is allowed with consent.

Is minute-taking mandatory?

Yes, minutes must be recorded within 30 days and maintained for seven years.

Can a director participate electronically?

Yes, and the director is considered present for quorum.

What matters require board approval?

Financial Statements, Auditor Appointments, Budget Approval, and other major decisions.

What are the requirements for conducting a valid board meeting?

The requirements include: There must be a Proper Agenda, Minutes of Meetings to be updated, Presence of any authorized person and a chairman, and a proper Formal notice must be served regarding the meeting.