THE COMPANIES ACT 2013: SECTION 173 - BOARD MEETINGS
Updated: Apr 1
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In this article, we will discuss the Board meetings of a Company and some provisions related to it.
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 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. The provisions of Section 173 are discussed hereunder:
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 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