LEGAL ASPECTS GOVERNING BOARD MEETINGS THROUGH VIDEO CONFERENCING AND THE ELIGIBLE CRITERIA FOR PASSING CIRCULAR RESOLUTIONS UNDER THE NEW COMPANIES ACT, 2013 AND THE RULES FRAMED THEREUNDER
The Companies Act, 1956 gave the flexibility to the Board to pass the required resolutions either through Board Meetings or through circular resolutions in case of emergency. But Passing Circular Resolution had its own draw backs. Circular resolutions cannot be considered as Board meeting per se while calculating the no of meetings to be held in year. Besides certain provisions of the Companies Act, 1956 insist that the resolutions have to be passed in a duly convened Board Meeting.
In recent times, the Information Technology made it viable to have all kinds of meetings through Video Conferencing be it personal or business. Meetings through Video conferencing has shrunk the World and has made it look smaller than ever before. Now throughout the world, everybody is approachable at the click of the mouse. Realising this fact and keeping in pace with the new technology, the Ministry of Corporate Affairs gave a push under the Companies Act, 1956 to conduct Board Meetings through video conferencing vide its notification bearing no.28/11 dated 28.5.2011.
Under the new Companies Act, 2013, the Government has attempted to bring in more regulations by notifying a set of rules to be observed for conducting Board Meetings through Video Conferencing. The Government has for the first time used through Sections 173 and 174 the words ˜Board Meeting through Video Conferencing and other audio visual means™. The new rules announced by the Government for conducting Board Meetings through video conferencing though covering all aspects of ˜Meetings through Video Conferencing™ lack cohesiveness. In this article, I have attempted to answer the following questions by rearranging the rules so as to provide clarity for conducting Board Meetings through Video Conferencing.
a. What are the General Rules to be observed to conduct Board Meetings through Video conferencing?
b. What are the specific rules to be adhered by an Individual Director to participate in a Board Meeting through Video Conferencing?
c. What rules to be observed before convening the Board Meeting through Video Conferencing?
d. What rules to be observed during the course of Board Meeting through Video conferencing?
e. What rules to be observed after the Board Meeting is over mainly relating to Minutes preparation?
f. What matters are prohibited in Board Meetings conducted through Video conferencing?
GENERAL RULES TO BE OBSERVED FOR CONDUCTING A BOARD MEETING THROUGH VIDEO CONFERENCING
Before contemplating to conduct a Board meeting through Video Conferencing, the management should adhere to the following general rules governing the conduct of such meeting:
(1) The Company should ensure that there is an effective video or audio-visual connection. If the broadband signals are weak, it would result in poor Audio and Video communication. An agitated Board member could even take up the matter to Court and invalidate the poorly recorded meeting.
(2) The Chairman/ Secretary shall take due and reasonable care
a. to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures. (The Rules itself lays down identification procedure through roll call and I wonder why there should be one more separate point in the rule for ensuring sufficient security and identification procedure.)
b. 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;
c. to record proceedings and prepare the minutes of the meeting;
d. to store for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year. The recorded proceedings could be erased once the audit for the particular financial year is over.
e. to ensure that no person other than the concerned director are attending the Meeting or have access to the proceedings of the meeting through video conferencing mode or other audio visual means. (Though the rules allow that a person apart from the Director to be present in the venue where the Board Meeting is held, it prohibits any third person to be with an individual director except a disabled Director who could bring in an Assistant to be with him while participating in the meeting.)
f. to ensure that participants attending the meeting through audio visual means are able to hear and see the other participants clearly during the course of the meeting.
g. The notice of the meeting shall be sent to all the directors in accordance with the provisions of sub-section (3) of section 173 of the Act.
h. The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.
i. The director intending to participate through video conferencing or other audio visual means shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf.
j. The scheduled venue of the Board meeting should be in a place situated in India and all recordings of the proceedings at the meeting shall be deemed to have been made only in that place mentioned in the Notice.
k. The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.
l. From the commencement of the meeting and until the conclusion of such meeting, no person other than the Chairperson, Directors, Company Secretary and any other person whose presence is required by the Board shall be allowed access to the place where any director is attending the meeting either physically or through video conferencing without the permission of the Board.
m. Video conferencing or other audio visual means has been explained as Audio- Visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting.
SPECIFIC RULES FOR THE INDIVIDUAL DIRECTOR WHO INTENDS TO PARTICIPATE IN THE BOARD MEETING THROUGH VIDEO CONFERENCING
a. A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairman/ Company Secretary of the Company.
b. If the director intends to participate through video conferencing or other audio visual means, he shall give prior intimation to that effect sufficiently in advance so that company is able to make suitable arrangements in this behalf.
c. The director, who desiring to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year. (In the absence of any intimation it shall be assumed that the director shall attend the meeting in person.)
RULES TO BE OBSERVED WHILE CONDUCTING THE PROCEEDINGS OF THE BOARD MEETING
A roll call should be taken at the commencement of the meeting by the Chairman/Secretary of the Company. A roll call is nothing but calling out the name of each Director, the location from where he is participating, confirming whether he has received the Agenda copy and the relevant material for the meeting and also confirming that no one other than the Director is participating or having access to the Meeting™s proceedings at the location where is presently attending.
The Chairman/Secretary shall then read out the names of persons (other than the Directors who are present at the meeting) to assist/guide/witness the proceedings of the Meeting the Board. (A Non Director could attend at the request/permission of the Chairman.)
The Chairman/Secretary shall confirm that the required quorum is present throughout the meeting.
(The rule says that a director participating either in person or through video conferencing or other audio visual means shall be counted for the purpose of quorum. However none of the Directors either present personally or through video conferencing or other audio visual means shall be counted for the purpose of quorum for such item of business where his name should be excluded for the purpose of quorum under any of the provisions of the Act or the rules). This is in line with Section 300 of the Old Companies Act, 1956 maintaining disinterested quorum. )
Each item of business should be taken up one by one as per the Agenda specified in the Notice.
Every participant shall identify himself for the record before speaking on each item of business on the agenda.
If a statement of a director in the meeting is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.
If a motion is objected to and there is a need to put it to vote, the Chairman shall call the roll that is to say that he shall first announce that he shall be doing the roll call and call out the name of each director who shall identify himself while casting his vote and the Chairman shall then note the vote of each director.
The Chairman shall then 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.
RULES TO BE OBSERVED AFTER THE CONCLUSION OF THE MEETING MAINLY RELATING TO THE MINUTES OF THE MEETING
i. After completion of the meeting, the minutes shall be entered in the minute book as specified under section 118 of the Act and signed by the Chairman.
ii. The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio visual means.
iii. The draft minutes of the meeting shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode, which includes fax or e-mail, as may be decided by the Board.
iv. Every director who attended the meeting, whether personally or through video conferencing or other audio visual means, shall confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days or some reasonable time as decided by the Board, after receipt of the draft minutes failing which his approval shall be presumed.
v. Finally the minutes shall be entered in the minute book as specified under section 118 of the Act and signed by the Chairman
MATTERS THAT ARE PROHIBITED IN A BOARD MEETING CONDUCTED THROUGH VIDEO CONFERNCING
By virtue of powers granted to Section 173(2) of the Companies Act, 2013, the Central Government has prescribed that following matters not to be dealt in a Board Meeting though Video Conferencing or through Audio Visual Means atleast for the time being. The Government may add some more items in the list over a period of time.
(i) the approval of the Annual Financial Statements;
(ii) the approval of the Board™s report;
(iii) the approval of the prospectus;
(iv) the Audit Committee Meetings for consideration of Accounts; and
(v) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
A. Section 175 lays down the following criteria for passing resolution by circulation
i. The draft resolution should be circulated to all the Directors or the members of the committee together with the necessary papers if any for their perusal.
ii. The said documents could be sent to the local Indian address registered with the Company and the same be either hand delivered or sent by post or by courier.
iii. The said documents could be sent through any electronic mode as prescribed by the Government.
iv. The circular resolution should be approved by majority of the Directors or the members who are entitled to vote at the resolution.
v. The circular resolution should be noted by the Board in the subsequent Board Meeting or by the members in the subsequent committee Meeting thereof and it shall be made as a part of the minutes of that meeting.
B. Circular resolution shall not be passed under the following circumstances:
i. Certain provisions of the Act specifically lays down that certain matters shall be dealt with only in a duly convened Board Meeting.
ii. One third of the total no of Directors could insist that an intended circular resolution should be dealt only in a duly convened Board Meeting.