Meaning and Legal Requirements

A Board Meeting is a formal gathering of the Board of Directors of a company to discuss and decide on the key policy matters, business strategies, and administrative affairs of the company. Since the Board of Directors is the supreme managerial body of the company, these meetings are the primary forum where the company's decisions are made. The proceedings and resolutions of these meetings are legally binding on the company.

The conduct of Board Meetings is strictly regulated by the Companies Act, 2013, to ensure proper governance, transparency, and accountability.

Section 173: Frequency and Conduct of Board Meetings

Section 173 of the Companies Act, 2013, lays down the statutory requirements for the frequency and conduct of Board Meetings.

Frequency of Meetings

1. First Board Meeting: Every company must hold its first Board Meeting within thirty (30) days of the date of its incorporation.
2. Subsequent Board Meetings: After the first meeting, every company must hold a minimum of four (4) Board Meetings every year.
3. Maximum Gap: The gap between two consecutive Board Meetings shall not be more than one hundred and twenty (120) days. This ensures that the Board meets regularly throughout the year to oversee the company's affairs.

Relaxation for Certain Companies

The requirement of holding four meetings a year is relaxed for a One Person Company (OPC), a small company, and a dormant company. For these companies, it is sufficient to hold:

• At least one Board Meeting in each half of a calendar year.
• The minimum gap between the two meetings must be at least ninety (90) days.

Mode of Participation

Directors can participate in a Board Meeting either:

• In person: By being physically present at the meeting venue.
• Through video conferencing or other audio-visual means: The Act permits directors to attend meetings remotely, provided such participation is capable of recording and recognizing the director, and storing the proceedings. However, certain matters (like the approval of annual financial statements or mergers) cannot be dealt with in a meeting held solely through video conferencing, though this restriction has been relaxed from time to time by the MCA.

Notice for Board Meeting

A Board Meeting can only be validly held if proper notice has been given to all the directors. The provisions for notice are laid down in Section 173(3) of the Companies Act, 2013, and the Secretarial Standards on Board Meetings (SS-1).

Length and Mode of Notice

• A notice of not less than seven (7) days must be given in writing to every director.
• The notice must be sent to the director's address registered with the company.
• It can be sent by hand delivery, by post, or by electronic means (such as email).

Notice for Shorter Duration

A meeting can be called at a shorter notice to transact urgent business. However, for such a meeting to be valid, at least one Independent Director, if any, must be present at the meeting.

If an independent director is not present, the decisions taken at the meeting shall be circulated to all the directors and will become final only on ratification thereof by at least one independent director.

Contents of Notice

The notice must specify the serial number, day, date, time, and full address of the venue of the meeting. While the Act does not explicitly mandate it, good governance and Secretarial Standards require that a detailed agenda, setting out the business to be transacted, must be sent along with the notice.

Quorum for Board Meeting

Quorum refers to the minimum number of qualified persons whose presence is necessary for a meeting to be validly constituted and to transact business. If the quorum is not present, any business transacted at the meeting is invalid.

The provisions for quorum are specified in Section 174 of the Companies Act, 2013.

Statutory Quorum Requirement

The quorum for a meeting of the Board of Directors shall be:

One-third (1/3) of the total strength of the Board OR two (2) directors, WHICHEVER IS HIGHER.

Note:

• "Total strength" refers to the total number of directors on the Board, not including directors whose places are vacant.
• Any fraction in the one-third calculation must be rounded off as one. For example, if the total strength is 8, one-third is 2.67, which is rounded off to 3. The quorum would be 3 directors.
• Directors participating through video conferencing are counted for the purpose of quorum.

Interested Directors and Quorum

An "interested director" is a director who is directly or indirectly interested in a contract or arrangement being discussed at the meeting. Section 174(3) states that where the number of interested directors exceeds or is equal to two-thirds of the total strength, the quorum shall be the number of directors who are not interested and are present at the meeting, which shall not be less than two.

Furthermore, an interested director shall not be counted towards the quorum during the discussion of the specific agenda item in which they are interested.

Consequences of Lack of Quorum

If a meeting could not be held for want of quorum, then unless the Articles of Association provide otherwise, the meeting shall automatically stand adjourned. It will be held at the same day, time, and place in the next week. If the adjourned meeting also lacks quorum, the meeting stands dissolved.

Resolutions passed at Board Meetings

The decisions of the Board are formalized by passing resolutions. A resolution is a formal expression of the decision or opinion of the Board.

Voting and Passing of Resolutions

Unless specified otherwise in the Act or the Articles, all questions at a Board Meeting are decided by a simple majority. The Chairman of the meeting may have a second or casting vote in the case of an equality of votes, if the Articles provide for it.

Powers to be Exercised at Board Meetings (Section 179)

While the Board can delegate many powers, Section 179 lists certain powers that the Board must exercise only by means of resolutions passed at duly convened Board Meetings. These are critical decisions that cannot be passed by circulation. They include:

• To make calls on shareholders in respect of money unpaid on their shares.
• To authorise the buy-back of securities.
• To issue securities, including debentures, whether in or outside India.
• To borrow monies.
• To invest the funds of the company.
• To grant loans or give guarantees or provide security in respect of loans.
• To approve financial statements and the Board's report.
• To diversify the business of the company.
• To approve amalgamation, merger, or reconstruction.

Resolutions by Circulation (Section 175)

As an alternative to transacting business at a physical meeting, the Act allows certain decisions to be made by passing a resolution by circulation. This is a process where a draft resolution, along with the necessary papers, is circulated to all the directors for their approval.

• Passing of Resolution: The resolution is considered passed if it is approved by a majority of the directors who are entitled to vote on the resolution.
• Recording: Once passed, the resolution must be noted at the next Board Meeting and made part of the minutes of that meeting.

The powers listed under Section 179 (as mentioned above) cannot be passed by circulation and must be decided at a formal Board Meeting only.

Annual General Meeting (AGM)

The Annual General Meeting (AGM) is a mandatory, yearly gathering of the members (shareholders) of a company. It is the most important meeting for shareholders as it provides them with an opportunity to interact with the management, review the company's performance, and vote on key matters concerning its governance and future. The AGM is the primary platform for shareholder democracy and accountability.

Section 96: Requirement and Time Limits

Section 96 of the Companies Act, 2013, makes it compulsory for every company, other than a One Person Company (OPC), to hold an AGM every year. The provisions regarding the timing of the AGM are very strict:

Time Limit for First AGM

A company must hold its first AGM within a period of nine (9) months from the date of closing of its first financial year. For the first AGM, there is no need to hold it in the same calendar year of incorporation.

Time Limit for Subsequent AGMs

For all subsequent AGMs, the following three conditions must be met:

1. The AGM must be held within six (6) months from the date of closing of the relevant financial year.
2. The AGM must be held once in every calendar year.
3. The gap between two consecutive AGMs shall not be more than fifteen (15) months.

The company must comply with all three conditions. The Registrar of Companies (RoC) has the power to grant an extension of time for holding an AGM (other than the first AGM) by a period not exceeding three months, if there are special reasons for the delay.

Business Transacted at an AGM

The business transacted at an AGM is divided into two types:

• Ordinary Business: These are the four standard items that are mandatorily discussed at every AGM:
  1. Consideration and adoption of the annual financial statements, Board's report, and auditor's report.
  2. Declaration of dividend, if any.
  3. Appointment of directors in place of those retiring.
  4. Appointment of and fixing the remuneration of the statutory auditors.
• Special Business: Any business other than the four ordinary business items is considered special business. For any special business, an explanatory statement must be annexed to the notice of the meeting.

Extraordinary General Meeting (EGM)

An Extraordinary General Meeting (EGM) is any general meeting of the members of a company other than the statutory Annual General Meeting. EGMs are called to transact some urgent or special business that cannot be postponed until the next AGM. For instance, an EGM may be called to alter the company's Memorandum or Articles, to approve a major acquisition, or to remove a director.

Called by Directors or Members (Section 100)

An EGM can be convened by the following:

1. By the Board of Directors

The Board of Directors can call an EGM at any time they deem fit by passing a Board resolution.

2. By the Directors on the Request of Members (Requisitionists)

The members of a company have the right to demand that the Board call an EGM. This is a crucial right that allows shareholders to bring important matters to a vote. The Board is legally obligated to call an EGM if it receives a valid requisition from:

• Members holding at least one-tenth (1/10) of the paid-up share capital of the company (for a company having a share capital).
• Members holding at least one-tenth (1/10) of the total voting power (for a company not having a share capital).

Once a valid requisition is received, the Board must proceed to call a meeting within 21 days and the meeting must be held within 45 days from the date of the requisition.

3. By the Requisitionists Themselves

If the Board fails to call the meeting within the stipulated 21 days, the requisitionists themselves may proceed to call the EGM. This meeting must be held within three months from the date of the original requisition. The company must reimburse any reasonable expenses incurred by the requisitionists in calling such a meeting.

Class Meetings

A Class Meeting is a meeting held by the holders of a specific class of shares (e.g., preference shareholders). Such meetings are not meetings of all the members of the company but only of a particular class of them.

Class meetings are required to be held when it is proposed to alter or vary the rights and privileges attached to that specific class of shares. For example, if a company wants to change the dividend rate on its preference shares, it must call a meeting of the preference shareholders and get their approval through a special resolution passed at that meeting.

The purpose of class meetings is to protect the interests of a particular class of shareholders and to ensure that their rights are not changed without their consent.

Notice for General Meeting

A general meeting can be validly held only if a proper notice has been sent to all persons entitled to receive it. The provisions for notice are laid down in Section 101 of the Companies Act, 2013.

Contents and Service of Notice

• Length of Notice: A clear notice of at least twenty-one (21) days is required for calling a general meeting.
• Shorter Notice: A meeting can be called at a shorter notice if consent is given by not less than 95% of the members entitled to vote at such meeting.
• Contents: The notice must specify the place, date, day, and the hour of the meeting and must contain a statement of the business to be transacted. For any special business, an explanatory statement setting out all material facts must be attached.
• Service of Notice: The notice must be sent to every member of the company, the legal representative of any deceased member, the official assignee of an insolvent member, the statutory auditor(s), and every director of the company. It can be sent by post or through electronic means like email.

Quorum for General Meeting (Section 103)

Quorum is the minimum number of members who must be present at a meeting for it to be valid. If the quorum is not present, no business can be transacted.

According to Section 103, unless the Articles of Association provide for a larger number, the quorum for a general meeting is:

For a Public Company:

• 5 members personally present if the total number of members is not more than 1,000.
• 15 members personally present if the total number of members is more than 1,000 but not more than 5,000.
• 30 members personally present if the total number of members exceeds 5,000.

For a Private Company:

• 2 members personally present.

If the quorum is not present within half-an-hour from the time appointed for holding the meeting, the meeting shall stand adjourned to the same day in the next week, at the same time and place.

Voting at General Meetings

Voting is the mechanism through which members express their approval or disapproval of the resolutions placed before them. The Companies Act provides for several methods of voting.

Show of Hands

This is the most common and initial method of voting at a general meeting. The chairman asks the members who are in favour of the resolution to raise their hands, and then asks those who are against it to do the same. In this method, the principle is "one member, one vote", regardless of the number of shares held.

Poll

A poll can be demanded by members if they are not satisfied with the result of a vote by show of hands. In a poll, the voting is done according to the number of shares held, i.e., "one share, one vote". A poll can be demanded by the chairman or by members holding at least 1/10th of the total voting power or holding shares on which at least five lakh rupees (₹5,00,000) has been paid up.

Postal Ballot (Section 110)

For certain important resolutions, such as altering the objects of the company or changing the registered office, the company must get the members' approval through a postal ballot. This involves sending the resolution and a postage-prepaid envelope to the members, who then send back their assent or dissent. This allows members who cannot attend the meeting to participate in the decision-making process.

E-voting (Voting by Electronic Means)

The Companies Act, 2013, has made it mandatory for every listed company and every company having not less than 1,000 members to provide the facility of e-voting to its members. This allows members to cast their votes electronically from anywhere in the world through a secure online platform, making the voting process more convenient, transparent, and broad-based.