Section 173 of Companies Act, 2013 – Meetings of Board

SECTION 173. MEETINGS OF BOARD

[Effective from 1st April, 2014]

(1) Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board:

Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.

[4] [Provided further that a Specified IFSC private company shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year.]

[5] [Provided further that a Specified IFSC public company shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold atleast one meeting of the Board of Directors in each half of a calendar year.]

EXEMPTIONS

Section 173(1) shall apply to a Section 8 Company only to the extent that the Board of Directors, of such Companies shall hold at least one meeting within every six calendar months, vide Notification No. 466(E) dated 5th June, 2015.

The above mentioned exception shall be applicable to a Section 8 company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar, vide amendment notification G.S.R. 584(E) dated 13th June 2017. 

(2) The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be 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 date and time:

Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means.

[10] [Provided further that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter specified under the first proviso]

(3) A meeting of the Board shall be called 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 delivery or by post or by electronic means:

Provided that a meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting:

Provided further that in case of absence of independent directors from such a meeting of the Board, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.

(4) 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.

[(5) A One Person Company, small company, 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 conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days;

Provided that nothing contained in this sub-section and in section 174 shall apply to One person Company in which there is only one director on its Board of Directors.][6]

Exemption

[9][For Private Companies, Sub-section (5) of section 173 shall be read as follows:-

[(5) A One Person Company, small company, 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 conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:

Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors

The above exceptions/modifications/adaptations shall be applicable to a private company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar] vide Notification No. G.S.R. 583(E) dated 13^th June, 2017

Applicable Rules

Companies (Meetings of Board and its Powers) Rules, 2014

[Effective from 1st April, 2014]

Rule 2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a)    ‘‘Act’’ means the Companies Act, 2013;

(b)    ‘‘Annexure’’ means the Annexure to these rules;

(c)    ‘‘Fees’’ means the fees as specified in the Companies (Registration offices and fees) Rules, 2014;

(d)    “Form’’ or “e form” means a form set forth in Annexure to these rules which shall be used for the matter to which it relates;

(e)    ‘‘Related party’’ means a director or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party;

(f)    ‘‘section’’ means the section of the Act;

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the same meanings respectively assigned to them in the Act or in the said rules.

Rule 3. Meetings of Board through video conferencing or other audio visual means.—A company shall comply with the following procedure, for convening and conducting the Board meetings through video conferencing or other audio visual means.

(1) Every Company shall make necessary arrangements to avoid failure of video or audio visual connection.

(2) The Chairperson of the meeting and the company secretary, if any, shall take due and reasonable care—

(a) to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures;

(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.

(e) to ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting through video conferencing mode or other audio visual means; and

(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:

Provided that the persons, who are differently abled, may make request to the Board to allow a person to accompany him.

(3) (a) 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.

(b) 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.

(c) A director intending to participate through video conferencing or audio visual means shall communicate his intention to the Chairperson or the company secretary of the company.

(d) 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.

[7] [ (e) Any director who intends to participate in the meeting through electronic mode may intimate about such participation at the beginning of the calendar year and such declaration shall be valid for one year :

Provided that such declaration shall not debar him from participation in the meeting in person in which case he shall intimate the company sufficiently in advance of his intention to participate in person.]

(f) In the absence of any intimation under clause (c), it shall be assumed that the director shall attend the meeting in person.

(4) At the commencement of the meeting, a roll call shall be taken by the Chairperson when every director participating through video conferencing or other audio visual means shall state, for the record, the following namely:—

(a) name;

(b) the location from where he is participating;

(c) that he has received the agenda and all the relevant material for the meeting; and

(d) that no one other than the concerned director is attending or having access to the proceedings of the meeting at the location mentioned in clause (b);

(5) (a) After the roll call, the Chairperson or the Company Secretary 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.

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

(b) The Chairperson shall ensure that the required quorum is present throughout the meeting.

(6) With respect to every meeting conducted through video conferencing or other audio visual means authorised under these rules, the scheduled venue of the meeting as set forth in the notice convening the meeting, [***][1], shall be deemed to be the place of the said meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

(7) 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.

(8) (a) Every participant shall identify himself for the record before speaking on any item of business on the agenda.

(b) If a statement of a director in the meeting through video conferencing or other audio visual means is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.

(9) If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll and note the vote of each director who shall identify himself while casting his vote.

(10) 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.

(11) (a) At the end of discussion on each agenda item, the Chairperson of the meeting 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 [8] [and the draft minutes so recorded shall be preserved by the company till the confirmation of the draft minutes in accordance with sub-rule (12).]

(b) The minutes shall disclose the particulars of the directors who attended the meeting through video conferencing or other audio visual means.

(12) (a) 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 as may be decided by the Board.

(b) 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.

(c) 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 Chairperson.

Explanation.—For the purposes of this rule, “video conferencing or other audio visual means” means 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.

Rule 4. (1) Matters not to be dealt with in a meeting through video conferencing or other audio visual means.—[The] [2]following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means.—

(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 financial statement including consolidated financial statement, if any, to be approved by the Board under sub-section (1) of Section 134 of the Act][3]; and

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

[12] [(2) For the period beginning from the commencement of the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 and ending on the [13][30th September, 2020], the meetings on matters referred to in sub-rule ( 1) may be held through video conferencing or other audio visual means in accordance with rule 3.]

[11] [ Provided that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means.]

Applicable Circulars

Special Measures under Companies Act, 2013 (CA-2013) and Limited Liability Partnership Act, 2008 in view of COVID-19 outbreak

General Circular No. 11 /2020 dated 24th March, 2020

In order to support and enable Companies and Limited Liability Partnerships (LLPs) in India to focus on taking necessary measures to address the COVID-19 threat, including the economic disruptions caused by it, the following measures have been implemented by the Ministry of Corporate Affairs to reduce their compliance burden and other risks

*****

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 next two quarters i.e., till 30th 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.

*****

Gap between two board meetings under section 173 of the Companies Act, 2013 (CA-13) — Clarification — reg.

General Circular No. 08/2021 dated 3rd May, 2021

In view of the difficulties arising due to resurgence of Covid-19 and requests received from stakeholders, it has been decided that the requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (120 days) stands extended by a period of 60 days for first two quarters of Financial Year 2021-22. Accordingly, the gap between two consecutive meetings of the Board may extend to 180 days during the Quarter — April to June 2021 and Quarter— July to September, 2021, instead of 120 days as required in the Companies Act, 2013.

[1] The words “which shall be in India” omitted by Companies (Meetings of Board and its Powers) Second Amendment Rules, 2014 vide Notification No. GSR 590(E) dated 14th August, 2014

[2] Substituted for “(1) The” by Companies (Meetings of Board and its Powers) Second Amendment Rules, 2014 vide Notification No. GSR 590(E) dated 14th August, 2014.

[3] Substituted for the words “consideration of accounts” by Companies (Meetings of Board and its Powers) Second Amendment Rules, 2014 vide Notification No. GSR 590(E) dated 14th August, 2014.

[4] Inserted vide Notification no. G.S.R. 9(E).dated 04th January, 2017.

[5] Inserted vide Notification no. G.S.R. 08(E).dated 04th January, 2017.

[6] Substituted vide Notification F. No. 1/1/2014-CL-V dated 13th June, 2017, prior to substitution it read as under-

“(5) A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:

Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.”

[7] Substituted by the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 vide Notification No. G.S.R. 880(E) dated 13th July, 2017. Prior to the substitution it read as under:

” The director, who desire, 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.”

[8] Inserted by the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 vide Notification No. G.S.R. 880(E) dated 13th July, 2017.

[9] Inserted in Notification No, G.S.R 464(E) dated 5th June, 2015

[10] Inserted by the Companies (Amendment) Act 2017 vide Notification No. S.O. 1833(E) dated 7^th May, 2018.

[11] Inserted by the the Companies (Meetings of Board and its Powers) Amendment Rules, 2018 vide Notification No. F. No. 1/32/2013-CL.V-Part dated 7^th May, 2018.

[12] Inserted by the Companies (Meetings of Board and its Powers) Amendment Rules, 2020 vide Notification No. F. No. 1/32/2013-CL.V-Part, dated 19th March, 2020.

[13] Substituted for the words “30th June, 2020” by the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2020 vide Notification No. G.S.R. 395(E) dated 23rd June, 2020.