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The Tax Publishers Companies Act, 2013--Quorum for Board Meetings Holding Board Meeting Without Quorum--ROC May Slap Penalties D. Ramachandra Rao Board meeting of directors is an important affair undertaken by companies. Companies Act, 2013 and Secretarial Standard-1 provides the provisions for conduct of board meetings viz. frequency, timing, place, notice, agenda, etc. One such requirement is quorum which is to be achieved at a board meeting. The learned author discusses relevant statutory provisions of quorum in the Companies Act, 2013 and Secretarial Standard-1 along with recent case law imposing penalties on companies and director or officer in default on non-fulfillment of requirement of quorum in board meeting. 1. Relevant statutory provision As per provisions of section 173 of the Companies Act, 2013 (the Act'), every company, after its first board meeting of directors has to conduct four meetings in a year provided gap between two consecutive meetings does not exceed 120 days. However, certain companies like One person company, Small company, etc. have some relaxation in frequency of board meeting(s) as specified in section 173 of the Act. The participation in board meeting can be done through personal presence or through video conferencing or other audio visual means which are capable of recording and recognizing the participation and recording and storing proceedings of such meeting. Quorum means minimum number of directors that are mandatorily required to be present at board meeting so that proceedings of board meeting remain valid. Section 174 of the Act provides for quorum in board meeting to be at least 1/3rd of total number of directors or 2 directors, whichever is higher. The presence will include presence through video conferencing or other audio visual mode. While calculating quorum, if the 1/3rd or 2/3rd number of directors comes in fraction, the number shall be rounded off to one. 2. Secretarial Standard on Quorum in Board Meeting Secretarial standard-1 relates to board meeting and provides for provisions pertaining to board meeting compliances. Clause 3.1 of SS-1 states that quorum for board meeting should be 1/3rd of total number of directors or two directors whichever is higher. The provision is similar to that of Companies Act, 2013. Further, quorum should be present throughout the board meeting and not only at the time of commencement of meeting. Directors participating through electronic mode are eligible to form quorum. 3. Violation of provision of quorum in Board Meeting The board meeting shall stand adjourned in case board meeting could not take place due to want of quorum. The meeting shall adjourn to same time and place as original meeting on the same day the following week. In case the adjourned date is national holiday, then, board meeting will be held at same place and at the same time on the following day. Alternatively, where the requirement of quorum in a board meeting is not met, the directors present may either act for the purpose of increasing the number of directors to that fixed for quorum or may act to summon/call a general meeting. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Companies Act, 2013--Quorum for Board Meetings

Holding Board Meeting Without Quorum--ROC May Slap Penalties

D. Ramachandra Rao

Board meeting of directors is an important affair undertaken by companies. Companies Act, 2013 and Secretarial Standard-1 provides the provisions for conduct of board meetings viz. frequency, timing, place, notice, agenda, etc. One such requirement is quorum which is to be achieved at a board meeting. The learned author discusses relevant statutory provisions of quorum in the Companies Act, 2013 and Secretarial Standard-1 along with recent case law imposing penalties on companies and director or officer in default on non-fulfillment of requirement of quorum in board meeting.

1. Relevant statutory provision

As per provisions of section 173 of the Companies Act, 2013 (the Act'), every company, after its first board meeting of directors has to conduct four meetings in a year provided gap between two consecutive meetings does not exceed 120 days. However, certain companies like One person company, Small company, etc. have some relaxation in frequency of board meeting(s) as specified in section 173 of the Act. The participation in board meeting can be done through personal presence or through video conferencing or other audio visual means which are capable of recording and recognizing the participation and recording and storing proceedings of such meeting.

Quorum means minimum number of directors that are mandatorily required to be present at board meeting so that proceedings of board meeting remain valid. Section 174 of the Act provides for quorum in board meeting to be at least 1/3rd of total number of directors or 2 directors, whichever is higher. The presence will include presence through video conferencing or other audio visual mode.

While calculating quorum, if the 1/3rd or 2/3rd number of directors comes in fraction, the number shall be rounded off to one.

2. Secretarial Standard on Quorum in Board Meeting

Secretarial standard-1 relates to board meeting and provides for provisions pertaining to board meeting compliances. Clause 3.1 of SS-1 states that quorum for board meeting should be 1/3rd of total number of directors or two directors whichever is higher. The provision is similar to that of Companies Act, 2013.

Further, quorum should be present throughout the board meeting and not only at the time of commencement of meeting. Directors participating through electronic mode are eligible to form quorum.

3. Violation of provision of quorum in Board Meeting

The board meeting shall stand adjourned in case board meeting could not take place due to want of quorum. The meeting shall adjourn to same time and place as original meeting on the same day the following week. In case the adjourned date is national holiday, then, board meeting will be held at same place and at the same time on the following day.

Alternatively, where the requirement of quorum in a board meeting is not met, the directors present may either act for the purpose of increasing the number of directors to that fixed for quorum or may act to summon/call a general meeting.