Apr 15, 2011
Posted on Friday, April 15, 2011 by DEVESH PANDEY
Provisions of Minutes of Board Meetings under Companies Act 1956
Types of recording the minutes of the Board meetings
The Board meeting minutes are basically of two types, as stated below:—
(i) Minutes of narration, and
(ii) Minutes of decisions or resolutions.
1 Minutes of narration
As the expression "Minutes of Narration" itself indicates, the minutes of narration mean minutes, which are in a descriptive or narrative form. They contain preamble to formal resolutions or record of directors/members present, record of leave of absence, confirmation of minutes of previous meeting, proposal as to vote of thanks to chair, etc.
These are records of events or items of business, which do not require formal resolutions to establish them. In general, they consist of:—
(a) recording names of those who are present at the meeting;
(b) recording of the reading and signing of the minutes of the previous meeting;
(c) recording of leave of absence;
(d) recording of the tabling and consideration of correspondence received;
(e) taking note of financial statements, reports, plans, etc., tabled and considered;
(f) taking note of the receipt of disclosure notice from directors;
(g) declaration of closure of meeting.
2 Minutes of decisions or resolutions
These are records of formal decisions of the directors of the company at duly convened meeting and are prefixed by the word 'Resolved'. Minutes of resolution may be recorded in various ways. They may be simply set down as a statement of what was resolved. Alternatively, they may be accompanied by a statement indicating the mover and seconder and how the resolution was carried. Either form of recording the resolution is acceptable. Some advocate that the latter form should be used in respect of minutes of general meetings of members and the former in respect of Board meetings. But that is entirely a matter of opinion. A third type of recording, which is desirable in cases where the recitals are numerous and/or lengthy, is one which prefixes a recital to the resolution. A recital is a short explanation of why it is necessary or expedient to pass the resolution. It is generally not necessary, and in fact brought with the risk of unpredictable consequences, to record the discussion which led up to the adoption of a certain resolution or making of a certain decision. Only the decisions or resolutions actually taken and the names of the persons proposing and seconding those decisions or resolutions, should, therefore, be recorded. However, motions carried through or ruled upon by the chairman are on the same footing as resolutions for the purpose of recording the minutes.
As the element of urgency is part of the word 'minutes' as used in the context of minutes of proceedings, it is advisable to draft the minutes as soon as possible after the conclusion of meetings.
Contents of the minutes of Board meeting
The Board meeting minutes should contain the following details:—
(a) Date, time and place of the Board meeting;
(b) Names of the directors present in the meeting;
(c) Name of the person on the chair;
(d) Granting of leave of absence to the directors;
(e) Confirmation of previous meeting's minutes;
(f) Confirmation of minutes of committee meetings;
(g) Recording the resolutions passed by circulation during the period of the previous Board meeting to the date of the current Board meeting, if any;
(h) Various items of agenda discussed at the meeting;
(i) The names of directors, if any, who have dissented from any resolution passed at the meeting;
(j) Appointment of officers made at the meeting;
(k) The fact of unanimity of decision of directors as required by sections 316, 372A and 386;
(l) Reading of notice given by the directors for disclosure of their interest, other directorship and their shareholdings and non-disqualification for their appointment under section 274 of the Act;
(m) Vote of thanks to the chair;
(n) Signature of the chairman with date in his own hand.
Time-limit for recording and signing of minutes of Board meetings
Section 193(1) of the Companies Act, 1956 inter alia provides that every company shall cause minutes of all proceedings of every meeting of its Board of directors, to be kept by making within thirty days of the conclusion of every such meeting concerned, entries thereof in the books kept for that purpose with their pages consecutively numbered.
Correction in the minutes of the Board meetings
Minutes once recorded and signed cannot be changed materially, subsequently. If a correction involves a major departure from the earlier minutes, the proper procedure is to pass a resolution at a subsequent meeting and mention the fact of the resolution in the old minutes as a cross reference.
Adoption of minutes of Board meetings
It is the general practice to draft the Board meetings minutes and get it approved by the chairman and thereafter it is recorded in the minutes book. Simultaneously, copy of the draft minutes is circulated to all the directors either before or at the time of circulating the agenda for the next meeting. At the next meeting, the minutes of the earlier meeting recorded in the book, are adopted by the Board and in token thereof, the chairman signs the minutes with the date. It would be more appropriate to record that 'the Board approved the minutes of the previous meeting of the Board held on .......' instead of saying that 'the Board confirmed minutes of the last meeting'.
Action on any resolution can be taken after conclusion of the meeting
Action on any resolution or any matter approved by the Board at a meeting can be taken immediately on the conclusion of the meeting. It is not necessary to wait till the minutes are recorded, approved and adopted at the next meeting. [Karnataka Bank Ltd. v A.B. Datar (1994) 99 Comp Cas 417 (Kar)] It must be ensured that the extracts of the resolution passed has the approval of the chairman.
Numbering of minutes and resolutions
Either of the following methods may be used for the purpose of numbering of the minutes:—
(i) Number the minutes of the Board meeting like 1st, 2nd, 3rd and so on as to confirm that there is no fabrication in the minutes at a later stage.
(ii) Resolution may also be serially numbered with identification of the number of the Board meeting like 1.2, 4.12, 6.7 (in that case the 1, 4 and 6 denotes the number of the Board meeting and 2, 12 and 7 specify the item number of the particular business transacted at the meeting). It may be noted that the number should be confined to special items and not to routine matters.
Circulation of the minutes of the Board meetings among the directors
The Companies Act, 1956 has neither provided for confirmation of minutes of the Board meeting at the next such meeting nor it has contained provisions making it mandatory to circulate the minutes of Board meetings among directors. Generally, at the time of nomination of directors on Boards by financial institutions, banks, etc., they impose conditions in this regard. In general practice, the nominating bodies require circulation of minutes. It is also a good secretarial practice that after the minutes have been written and got signed, should be circulated among the followings:—
(i) All the directors, including nominee director of company;
(ii) The financial institutions/bank which has nominated director on the Board of a company.
Inspection of the minutes of the Board meetings
The Companies Act, 1956 has no express provision in relation to inspection of minutes books of Board meetings, the same shall be open for the inspection of auditors. The directors shall also be eligible to see these books.
Related registers and files to the minutes of the Board meetings
Following optional registers may also be taken care of being related to minutes books of Board meetings:—
(i) Attendance Register of directors;
(ii) Common Seal Register;
(iii) Index of Minutes Register;
(iv) Agenda Book.
In addition to the above, the file containing the notices of Board meetings, letters of disclosures made by the directors, copy of the statements placed before the meeting duly initialed by the chairman, proof of dispatch of notice to the directors, copy of the resignation letter from the directors, agenda papers, etc. should be carefully kept in the custody of the company secretary of the company.