Tuesday, September 7, 2010

Board Meeting Provisions

Board Meetings Procedures

Periodicity of the Board Meetings and time-interval

The section 285 of the Companies Act, deals with the provisions and procedures of the meetings of the Board of the Company. It promulgates that every company whether public or private, registered under this Act, must hold at least one meeting of the Board members in every three months. So, there must be at least four Board meetings in every year. 

Time-interval between two Board Meetings

The meeting can be held on any day unanimously selected by the members based on their ease and convenience, within the period of three consecutive months. Suppose the first meeting takes place on any day before the 31st March in a certain year, then the second meeting would be due in between the time of April and June, on any particular day. However, a company registered under the section 25 of the Companies Act, has the privilege to hold the Board meeting at least once in every six months.

Notice of Board Meeting

Sec 286 makes it obligatory to issue notices of board meetings to every director for the time being in India and at his usual address in India, meaning foreign directors and also to every other director meaning India directors. The section does not provide for minimum period of notice as provided by Sec 171 in case of general meetings. But such should be given within reasonable time. This section also does not provide for any particular form of notice. In Borian v. SBL Ltd; it was held, board meeting held without complying with provisions of Sec 286 and steps taken in violation of such provisions would render the meeting illegal and the business transacted therein should be declared null and void.

Disposal of Business (Sec 291)

The directors at a board meeting can dispose of any business for the management of the company except where the Companies Act 1956, or the memorandum or articles specifically prescribes the matters to be dealt with otherwise by resolution of members in a general meeting. Moreover the board while disposing of any business will always be subject to the provisions contained in the companies act, 1956 or any other act or in the memorandum or articles of the company or in any regulation not inconsistent therewith. No regulation made in the general meeting will invalidate any prior act of the board which would have been valid if that regulation would not have been made.

Day, Date, and Place of holding the Board Meetings

Day of holding Board Meeting

The meeting of Board can be held on any working day, chosen unanimously by the majority of the Board members, as per their ease and convenience. Moreover, the board meeting can also be held even on public holidays, which would be equally valid like other working day's meeting.

Time of holding Board Meetings

Usually the meeting is held during the business hours, but the board meetings can also be held outside the business hours, depending upon various factors entertained for the good of the company.

Place of holding Board Meetings

Similarly, there is no limitation on the place of board meetings, and the place of meeting can be kept within or outside the office, within or outside the town or state, or even the country, based on the productivity, profitability, and convenience of the very meeting.

Meetings of the Board (288-289)
If a meeting of the Board could not be held for want of quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day in the next week, at the same time and place, or if that day is a public holiday, till the next succeeding day which is not a public holiday, at the same time and place.
The provisions of section 285 shall not be deemed to have been contravened merely by reason of the fact that a meeting of the Board which had been called in compliance with the terms of that section could not be held for want of a quorum.
No resolution shall be deemed to have been duly passed by the Board or by a committee thereof by circulation, unless the resolution has been circulated in draft, together with the necessary papers, if any, to all the directors, or to all the members of the committee, then in India (not being less in number than the quorum fixed for a meeting of the Board or committee, as the case may be), and to all other directors or members at their usual address in India, and has been approved by such of the directors as are then in India, or by a majority of such of them, as are entitled to vote on the resolution.
Quorum for Board Meeting

The quorum for a meeting of the Board of directors of a company is one-third of its total strength (any fraction contained in that one third being rounded off as one) or two directors, whichever is higher. If the number of interested directors exceeds or is equal to two thirds of the total strength, the number of the remaining directors, that is to say the number of directors who are not interested present at the meeting being not less than two, shall be the quorum.

Where all the directors are interested, the company should increase the strength of the Board of Directors by appointing disinterested directors or by appointing additional directors not interested in the contract concerned if the articles of the company so authorise. If neither of these steps are possible, the proposed contract in which all the directors are interested should be placed before the general meeting of the company.

The quorum should be present not only at the commencement of the meeting but also at every stage of the meeting to give validity to the business transacted thereat.

Sections of Act under which Board Resolutions are to be passed at a board meetings

Sec 262 – filling a casual vacancy in the Board
Sec 292- the power to
            (a) make calls on shareholders
            (aa) authorise the buy back referred to in the first proviso to clause (b)        of sub section 2 of Sec 77A
(b) issue debentures
(c) borrow moneys otherwise than on debentures
(d)invest the company’s funds
(e)make loans

Sec 297- Board’s sanction for certain contracts in which particular directors are interested
Sec 299- Disclosure to the Board of Directors interest in a transaction of the company
Sec 308- Disclosure to the board of a director’s shareholding
Sec 316and 386- Approval to the appointment of a person as manager in more than one company
Sec 372A(3)- Power to make inter corporate loans and investment.

Board Meetings Minutes

Minutes- Meaning

The term ‘minutes’ though not defined in the Companies Act, 1956, may be considered as a written record of proceedings of a meeting of any Company duly kept in pursuance of the law. Minutes contain inter alia a description of the type of meeting to which they relate, its date, time and venue, mention about persons attended the meeting concerned, confirmation of minutes of previous meeting as a result of practice, decisions taken, process at the meeting, discussions held, voting on resolutions, etc.
Minutes may also be defined as the written record of the business transacted at the meetings. Minutes record what was done at the meeting. i.e. decision taken at the meeting, therefore, the minutes should contain record of the business transacted at the meeting as a whole and should exclude any reference to conduct or events which are not themselves items of transacted business.
Classification of Minutes

Minutes can be classified according to the type of meetings and are bifurcated with, into the following three categories, and are named accordingly---
1. Minutes of Board meetings
2. Minutes of meetings of committee of the Board
3. Minutes of General meetings

Recording of Minutes
Minutes should start with the name of a company and it shall state the time, date, place, type of meeting, a record of the name of the members present in the meeting, etc. Minutes should contain summary of the discussions held leading to the resolution. The aforesaid statement is generally written in bold capital letters and it may be on the following style such as 'MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS OF ….. LIMITED AT THEIR MEETING HELD ON …..AT, THE …TH DAY OF …., …., AT THE REGISTERED OFFICE OF THE COMPANY, AT '……….', AT … A.M/P.M.'
Every company shall cause minutes of all proceedings of every general meeting and of all proceedings of every meeting of its Board of directors or of every committee of the Board, to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered.

Each page of every such book shall be initialled or signed and the last page of the record of proceedings of each meeting in such books shall be dated and signed.  In the case of minutes of proceedings of a meeting of the Board or of a committee thereof, by the chairman of the said meeting or the chairman of the next succeeding meeting. The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat. All appointments of officers made at any of the meetings aforesaid shall be included in the minutes of the meeting.
In the case of a meeting of the Board of directors or of a committee of the Board, the minutes shall also contain-
(a) the names of the directors present at the meeting; and

(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring in, the resolution.
Penalty for defaults in keeping proper minutes
Section 193(6) provides  if default is made in complying with the foregoing provisions of Section 193 in respect of any meeting, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees.
Presumptions as to minutes as conclusive evidence
Minutes of the proceedings of meetings kept in accordance with the provisions of section 193, shall be an evidence of the proceedings recorded therein. This does not mean, however, that such minutes are conclusive evidence of the proceedings and cannot be brought into question. Meaning thereby, in the event of any legal proceeding, it will be accepted as evidence, and the onus of disproving them will be upon the person who is contesting their accuracy. Where the articles provide that the minutes are to be conclusive evidence of the facts stated therein, it is not open to the shareholders to dispute their accuracy unless the minutes were shown to have been written up fraudulently.
In C.R. Priyachandrakumar v Puraswalkam Permanent Fund Ltd. (1995) 83 Comp Cas 150 (Mad), it was held that if company is properly recording and maintaining the minutes which contain a resolution relating to appointment of a director and further if shareholders challenge the validity of the appointment, burden would be upon the shareholders that the appointment was not valid. The court would start with the presumption that the minutes constitute prima facie evidence of the proceedings recorded therein.
Dealing the reference to section 193 under the section, the Madras High Court, in V.G.Balasundaram and others Vs. New Theatres Carnatic Talkies Private Limited and others (1993) 77 Comp Cas 324, was pleased to refer/observe that "section 193 of the Companies Act, 1956, provides that every company shall cause minutes of all proceedings of every general meeting of its board of directors or of every committee of the board to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in books kept for that purpose with their pages consecutively numbered. If the presumption is not available under section 193, presumption under section 195 is also not available".

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