A Board Meeting is a formal meeting of the board of directors of an organization and any invited guests, held at definite intervals and as needed to review performance, consider policy issues, address major problems and perform the legal business of the board.

Why are Board Meetings Held?

The Board is also responsible for managing the affairs of the whole company. In the case of a Public Limited Company, the first board meeting according to company law has to be held within the first 30 days after the incorporation date. Additionally, a minimum of 4 board meetings must be held in a span of one year.

The shareholders in general meetings and the directors collaborating as a Board conducts the affairs of a company. Therefore, directors frequently meet to discuss various matters relating to the management and administration of the company’s affairs in the interest of stakeholders. Section 173 of the Act contains provisions that deal with Meetings of the Board.

What is Section 173 of Companies Act 2013?

Section 173 of Companies Act 2013 states the following :

1. Frequency of Board Meetings [Section 173 (1)]

i. First Board meeting: Every company shall hold the first meeting of the BOD within 30 days of the date of its Incorporation.

ii. Subsequent Board meetings: Every company shall hold a minimum of 4 meetings every year, but the gap between two consecutive board meetings shall not be more than 120 days. Note: In case of sec. Eight companies that have not committed a default in filing their financial statements or annual returns with the registrar, sec. 173(1) shall apply only to the extent that the BOD of such companies shall hold at least one meeting every six calendar months.

2. Participation in Board Meeting [Section 173(2)]

The director’s participation in a meeting of the Board may be either in person or through video conferencing or another audio-visual mode as may be prescribed. (Rule 3 of the Companies (Meeting of Board and its power) Rules, 2014 Note: Matters not to be dealt with in a meeting through video conferencing or other audio-visual means. (Rule 4 of the Companies (Meeting of Board and its power) Rules, 2014

i. The approval of annual financial statements;

ii. The approval of the Board’s report;

iii. The approval of prospectus;

iv. The audit committee meeting for consideration of financial statements, including consolidated financial statements, if any, to be approved by the Board under sub-section (1) of Section 134 of the Act, and

v. The approval of the matter relating to amalgamation, merger, demerger, acquisition, and takeover.

3. Notice of Board Meeting [Section 173(3)]

i. A meeting of the Board shall be convened by giving not less than seven days’ notice in writing to every director at his address registered with the company, and such notice shall be sent by hand or by post, or by electronic means.

ii. A meeting of the Board may be called at short notice for carrying on an urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting.

iii. In case of absence of an independent director from such meeting of the Board, the decisions are taken at such meeting shall be circulated to all the directors and shall be final only on its ratification by at least one independent director; if someone.

4. Penalty for Failure to Give Notice [section 173(4)]

Every office of the company whose duty is to give notice under this section and fails to do so shall be liable to a fine of Rs. 25,000.

5. Exemption to Certain Companies [section 173(5)]

in the case of one person company, small company, dormant company, private company (if the private company is a start-up); This would be sufficient compliance, if

i. At least one Board meeting is held in each half of the calendar year; And

ii. There is a gap of not less than 90 days between the two meetings. Note: OPCs which have only one director on their Board of Directors are exempted from complying with the clause. 173(5) and 174.

6. Validity of Meeting

in case notices not given to any director, Companies Act 2013 and the Companies (Meeting of the Board and its Power) Rules, 2014 does not lay down any specific provision regarding the validity of a resolution passed by the Board in case notice was not served to all the directors as stipulated in the Act. The Supreme Court, in the case of Prameshwari Prasad vs. Union of India, has held that the resolutions passed in the board meeting shall not be valid since notice to all the Directors was not given in writing. The notice must be given to each director in writing. Hence, even though the directors concerned knew about the meeting, the meeting shall not be valid, and resolutions passed at the meeting will not be accurate.

7. Circulation of Draft Minutes

i. The draft minutes shall be circulated to all the directors within 15 days from the conclusion of the meeting, either in writing or in electronic mode.

ii. Every Director who attended the meeting shall give their comments about the minutes within seven days of receiving the draft minutes. 8. Special Measures under Companies Act, 2013 (CA-2013) because of the COVID-19 outbreak

a) The mandatory requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (CA13) (120 days) stands extended by a period of 60 days till the next two quarters, i.e., till the 30th of September. Accordingly, as a one-time relaxation, the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters, instead of 120 days as required in the CA-13

Provided

The Central Government may, by notice, determine that the requirements of this subsection shall not apply to any class or description of enterprises, or shall apply subject to such exceptions, changes, or restrictions as may be indicated in the notification.
Provided further that a Specified IFSC public company shall convene its first Board of Directors meeting within sixty days of its creation, and thereafter at least one Board of Directors meeting in each half of the calendar year. Provided Section 173(2) The participation of directors in a meeting of the Board may be in person or through video conferencing or other audio visual means, as prescribed, which are 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: Explanation: The participation of the Director and other audiovisual methods shall be considered towards the quorum for the Board Meeting. Section 173(3) A meeting of the Board shall be called by giving not less than seven days’ written notice to each director at his address registered with the company, and such notice shall be sent by hand delivery, by post, or by electronic means (if Director’s address is not available with the company, then DIN application form address shall be considered for sending Notice of Board Meeting): According to SS-1, if a notice is issued through express mail or courier, two more days must be included. Example: Board meeting is on July 20, 2022, and if notice is to be sent through express mail or courier, the date of providing (at least) notice will be July 10, 2022. Provided, however, that a meeting of the Board may be held with less notice to conduct urgent business, provided that at least one independent director, if any, is present.
Provided further that, in the absence of independent directors at such a meeting of the Board, the decisions made at such a meeting shall be circulated to all directors and shall only become final upon ratification by at least one independent director, if any.
Explanation: Less than seven days notice is required for urgent transactions if an independent director is present at the meeting; if there is no independent director in the business, the decision must be accepted by a majority of the firm’s directors. (4) Each official of the firm who is required to provide notice under this section but fails to do so is subject to a fine of twenty-five thousand rupees. (5) A One Person Company, a small company, a dormant company, and a Private Company (if such private company is a start-up) shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been held in each half of a calendar year and the interval between meetings is not less than ninety days: Explanation: the above-mentioned firm (Opc, small company, inactive) is required to have two Board meetings per calendar year, with a minimum interval of 90 days between each meeting. The provisions of this subsection and section 174 do not apply to One-Person Corporations, which have just one director on their Board of Directors.

Section 174 of of Companies Act 2013 – Quorum of Meetings of Board

1/3 (fractions are rounded to the next whole number) of overall strength (excluding directors whose positions are vacant) or 2 directors (whichever is higher).Participation through video/audio methods shall also be considered for quorum purposes.
If the number of interested directors is less than two-thirds (fractions shall be rounded to the next whole number), the quorum shall be the number of non-interested directors present at the meeting (minimum of two).
If a meeting cannot be convened due to a lack of quorum, the meeting is rescheduled to the same day, time, and location the following week (or, if that day is a national holiday, the next day that is not a national holiday).

Faqs:

1. What is Section 172 of the Companies Act 2013?

If a company contravenes any of the provisions of this Chapter and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

2. What is the penalty for not holding board meeting?

As per the provisions of section 173 (4) of the Companies Act 2013, every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty five thousand rupees.

3. Can board meeting be called at shorter notice?

In case of a Meeting conducted at a shorter Notice, the expedient mode which ensures delivery of Notice before the Meeting may be adopted by the company irrespective of mode of delivery of Notice specified by a particular Director.

4. How many days is the minimum for notice of meeting?

As provided in sub-section (1) of section 101, a general meeting may be called by giving not less than 21 clear days‘ notice in writing or through electronic mode in such manner as may be prescribed.

5. Is it compulsory to prepare minutes of the meeting?

Section 118 (1): Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner

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Board Meetings In Company Law: Section 173 Of Companies Act 2013

Divyanshita Singh

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