Section 174 Of Companies Act 2013: Quorum For Board Meeting

Section 174- Companies Act 2013 : Quorum for General Meeting

In the general sense, Quorum means the minimum number of people needed to hold meetings or make decisions during specific company meetings. The quorum is often considered the majority of members within a group or organization.

What is a Quorum? [sec-103]

‘Quorum’ means the minimum number of members who must be present to constitute a valid meeting and validate business at the meeting. If the quorum is not present, the meeting shall be considered invalid.

The Quorum for General Meetings

1. Public Company

• Five members are personally present if the number of members on the meeting date is not more than one thousand.

• Fifteen members are personally present if the number of members on the date of the meeting is more than 100 but up to 5,000.

• Thirty members are personally present if the number of members on the date of the meeting exceeds 5,000.

2. Any Other Company

• Two members personally present

Articles may prescribe a larger quorum than provided u/s 103.

When all company members are present in person, the quorum is present even if the quorum required by the articles is more than the number of members.

What is Section 174 of Companies Act 2013?

Section 174 of the Companies Act 2013 lays down that the quorum for a general meeting of the Board shall be:

1. 1/3rd of its total strength (any fraction contained in one-third being rounded off as one), or
2. Two directors, whichever is higher.

In calculating the total strength, any vacancy in the Board is excluded, and only the directors in office at the moment are taken into account. [sec174(2)]

Section 174 only indicates the minimum number of directors necessary to constitute a proper quorum. It is open to the company, by its articles, to show a higher, but not a lower, number is constituting a valid quorum.

[Amrit Kaur v. Kapurthala Flour Oil & General

Mills Co.(Pvt.) Ltd. (1984) 56. Comp Case 194]

Section 174 (1) of the Act

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Section 174 (2) of the Act

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Section 174 (3) of the Act

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Section 174 (4) of the Act

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Quorum – Disinterested Directors

The interested directors are not counted for the purpose of the quorum for a General Meeting. The quorum of disinterested directors is required for each business transacted at the Board meeting unless the articles provide for a higher quorum. Discussions or meetings would not be convened without the participation of a quorum of disinterested directors.

Disinterested Quorum means:

(A) a quorum of the Board consisting of directors who are not Parties to the subject Proceeding or any related Proceeding or

(B) if the quorum described in clause (A) cannot be obtained, a committee duly appointed by the Board and consisting solely of two or more directors who are not Parties to the subject Proceeding or any related Proceeding, provided that directors who are Parties to the subject Proceeding or a related Proceeding may participate in the designation of members of the committee.

Case in point: Y and D are two directors of a company who had made advances to the company in consideration of receiving debentures. The company had four directors, three of whom were quorum. A resolution was passed granting a debenture to Y. Y did not vote on the resolution. Another resolution was passed granting debentures to D, on which D did not vote. It was held that the issue of the two debentures formed one transaction in which Y and D were equally interested, and the two resolutions were invalid for want of quorum.

[Re. North Eastern Insurance Co. Ltd. (1919) 2 ch.198]

Quorum – Exception

No General meeting could take place without a quorum. However, due to circumstances beyond the control of the company or directors, the number of directors may be reduced below the minimum quorum. The reason for reduction could be death, registration, removal, automatic vacancy, or disqualification of a director. If the number of directors is reduced, the only exception is that a single director can either hold a board meeting to increase the number of directors to fix the minimum amount of quorum or summon a general meeting for a company.

A single director cannot hold a meeting for any purpose. This provision applies only if the number of directors is reduced to one. If there are only two continuing directors on the board, the condition of the quorum is fulfilled, and this exception will not be applicable.

Adjournment for want of Quorum

Suppose the meeting of the Board could not be held for want of quorum. In that case, unless the articles are otherwise provided, the meeting shall be automatically adjourned to the same day of the following week at the same time the meeting will be held on the next working day. If at the adjourned meeting there is no quorum, the meeting cannot transact any business.

[sec- 174(4)]

FAQs

1.What is a quorum in a company meeting Discuss with reference to s 174 of the CA 2013?

Ans. The quorum for a board meeting must be 1/3rd of the total number of directors or 2 directors whichever is the higher number. Therefore in case, there are only three directors in a company, then at least two must be present even though 1/3rd would entail that only one director needs to be present.

2.What is the requirement of quorum in case of a General Meeting of public company?

Ans. In the case of a public company, the quorum is: Five members present at the meeting if the number of members is within one thousand. Fifteen members present at the meeting if the number of members is more than one thousand but within five thousand.

3.What is the minimum quorum for a meeting?

Ans. A minimum quorum is one-third of the total strength of directors or 2 directors whichever is higher. A board meeting can take place only if the quorum is present and any decision taken in a Board meeting without the presence of a Quorum would be void.

4.What is quorum when should quorum be present in company law?

Ans. (1) Unless the articles of the company provide for a larger number, five members personally present in the case of ³ public company (other than a public company which has become such by virtue of section 43A), and two members personally present in the case of any other company,] shall be the quorum for a meeting of the …

5.What is a quorum for 7 members?

Ans. Examples: EX 1 A public body has seven (7) members, therefore a quorum is four (4) members.

6.What percentage is a quorum?

Ans. At least half of the members must participate if a constitutional law should pass the parliament (participation quorum of 50% based on the total number of members).

7.How many directors are in a quorum?

Ans. 2 directors

Unless otherwise specified in the company’s constitution, the quorum for a directors’ meeting is 2 directors.

8.What if at an adjourned meeting of the board of directors a quorum was not present?

Ans. Section 174 (4) of the Companies Act 2013 provides that if at the meeting of board of directors quorum is not present the meeting shall be adjourned to next week at same day , same time and same place. However the act is silent and offers no remedy if quorum is not present even at the adjourned meeting.

But SS – 1 Meeting on Board of Directors issued by Institute of Company Secretaries of India provides that if at the adjourned meeting quorum is not present the meeting shall be stand cancelled.

So on the basis of secretarial standard we can conclude that if quorum is not present at adjourned meeting of board of directors, the meeting shall stand cancelled.

9.What happens if a board meeting does not meet its quorum?

Ans. As per Section 174(1) of Indian Companies Act, 2013,

• The quorum for a meeting of the Board of Directors of a company shall be one- third of its total strength or two directors, whichever is higher, and the participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum. This doesn’t include OPC as it has only 1 director.
• Where a meeting of the Board could not be held due to lack of quorum, then rules under the articles of the company should be followed otherwise the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.