Meetings of Directors:
Key Points:
1.Introduction of Meetings of Directors.
2. Types of Meetings of Directors.
(a) Board of Directors Meeting
(b) Meetings of Committees of Directors
3. Powers of Directors.
4. Statutory Provisions regarding Board Meetings.
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1.Introduction of Meetings of Directors:
Shareholder are the real owners of a company but
they do not actively participate in management and administration of the
company. For this purpose, they elect directors as their representatives. These
directors handle and control the systems of Management. Directors conduct
meeting on time to time.
2. Types of Meetings of Directors:
Meeting of directors may be divided into two parts –
(I) Board of Directors Meeting.
(II) Meeting of Committees of Directors.
(I) Board of Director Meeting – Board meeting are
very much essential in a company. All the important decisions regarding
companies are taken in Board meetings. Even, the decisions, which need consent
of shareholder under Companies Act, are taken in such meetings.
This is a fact that, in General Meeting, only formal
consent of shareholders is taken but in real, the majority belongs to directors,
their relatives and friends. So the status of General Meeting becomes like ‘Rubber
Stamp’ of the directors and the almost all the matters, the decisions taken by
the directors are accepted by General Meeting.
3. Powers of Directors:
Generally, the Directors have following Powers –
(i) To make call money on partly paid up shares.
(ii) Issue of debentures.
(iii) Borrowing powers.
(iv) Investment of money of the company.
(v) Giving loans.
(vi) Filling casual vacancy of any director.
(vii) Allotment of shares.
(viii) Forfeiture and re-issue of shares.
(ix) Recommendation of rate of dividend.
(x) Appointment of officers.
(xi) To manage and control the business.
(xii) All such works which the company have the
power to do.
But a board of director cannot perform those works
which are necessarily to be performed under the provisions of AOA and Companies
Act.
4. Statutory Provisions regarding Board Meetings:
(i). According to Company Law and AOA - If the
meeting is called illegally and acceptance for any contract is given in the
meeting, the second party cannot be held liable. i.e. the second party can
force the company to perform the contract. In such cases, Board of Director is
held liable.
(ii) Frequency of Meeting – A Board meeting may be
called as and when required. According to Section (173), every company has to
conduct first meeting of directors within 30 days of registration and will hold
at least four meeting in subsequent years. There should not be gap of more than
120 days within two meetings.
(iii) Right to Call the Meeting - Any director of
the Board may call the meeting on demand of meeting by a director, the Managing
Director, Management or Company Secretary may also call for Board of Director
meeting.
(iv) Place of Meeting - At any reasonable place.
(v) Notice of Meeting - The notice of every meeting
of Board of Director should be given to every director of the company, who is
in India. The director (s) who is out of India, the notice should be sent to
his usual address in India. If the person who is liable to give notice, makes
any default, maybe punished with a penalty of up to ₹ 25000 under section (173).
(vi) Period of Notice - At least 7 days’ notice. In
case of emergency, maybe of less days but in such case, one independent
director, must be present in meeting.
(vii) Contents of Notice - In notice, date, place
and time are to be mentioned. Meeting should be called on any working day
during office hours unless and until all the directors are ready for any Contra
situation. It is not compulsory to send agenda with notice until necessary
according to provisions of Act AOA.
In following cases, agenda must be sent –
(a) Appointment of CEO Under Section (203).
(b) Investment in Shares and Debentures of other
incorporated organisations under section (186).
(viii) Agenda of Meeting - Agenda means list of
matters to be discussed and decided. Meeting is conducted according to Serial Number
of agenda. Though it is not compulsory to send agenda with the notice,
according to Companies Act, but in practice agenda is sent to directors with
notice. Generally, routine matters are discussed first and important /disputed
matters thereafter.
(ix) Quorum – Quorum means the specific numbers of
directors which must be present in the meeting to make the meeting valid. According
to Section 174 (1), Quorum for Board meeting shall be 1/3rd of total directors
or two directors, whichever is more. While calculating 1/3rd of total directors,
any part (fraction) is rounded off.
During calculation of total directors, vacancies are
not computed. The directors who have interest in any matter, they are
considered for Quorum for that matter.
If number of directors who have interest in the
matter, is more than or equal to 2/3rd of total directors, the remaining
directors (who have not any interest in the matter) shall be the considered the
quorum for meeting, if their number is not less than two.
Quorum should be present during entire meeting. If
at any specific time, the quorum is not present, the discussion made on the
matter at that specific time, shall be void. Directors may decide the requisite
number of quorum if authority of AOA and this number maybe changed from time to
time but cannot be less than the quorum as prescribed in under section 174 (2).
If the meeting could not be held for want of quorum,
then, unless the AOA otherwise provide, the meeting shall automatically get
adjourned to the same day at the same time and place in next week or if that
day is a national holiday, till next succeeding day, which is not a national
holiday, at the same time and place.
If the meeting, due to any reason, discussion on
agenda could not conclude in one day, the chairman, with consent of directors
present may adjourn for next day. This adjournment must be informed to absent
directors.
(x) Chairman - For every Board meeting, appointment
of Chairman is compulsory. AOA of the company has provisions regarding Chairman.
Following provision have been given in Rule 76, Table ‘F’ in this regard –
(a) Board of Director may elect Chairman for its
meetings and can also determine the tenure.
(b) If Chairman is not elected or the elected Chairman
does not present himself in the meeting within 5 minutes of prescribed time,
the directors present may elect any person as Chairman among themselves to
conduct the meeting.
So, the Chairman of Board of Director maybe
appointed by AOA or maybe elected by the directors. Such appointed or elected Chairman presides over the meeting. If the director desire to remove the Chairman, they can do so by passing resolution and may appoint any other
directors as Chairman.
(xi) Voting - Each director has the right to give
one vote for every resolution presented in the meeting. But if any director has
any interest in any resolution, he is barred to cast his vote on that
resolution. If authorised by AOA, the Chairman has the authority to cast his
vote if the resolution has similar number of votes in favouring and against. He,
casts his vote, in the capacity of a director.
In Board of Director, voting is done by showing of
hands and all the resolution are passed by simple majority as long as,
according to the Act, a resolution needs unanimous decision.
In the following conditions, resolution are required
to be passed unanimously –
(a) Approval of Prospectus.
(b) Appointing a person as a Manager or Managing Director
who is already appointed as Manager and Managing Director in any other company.
(c) Intercompany investment etc.
(xii) Resolution by Circulation – Generally, the
resolution which are to be passed by Board of Director are to be presented and
passed in Board of Director meeting. But, if due to any reason, the Board of Director meeting is not possible, the resolution may be passed in following
conditions –
(a) Proforma of resolution has been sent to director
in the usual address in India, if he / she is out of India.
(b) Such proforma must be with required document.
(c) Number of directors, to whom the information has
been sent, should not be less than the required number of quorum.
(d) Such resolution must be accepted either by the
directors present in India or must be accepted by majority of the directors of
all the directors (directors present in India and outside India) of the company.
(xiii) Attendance Register of Directors - Every
company maintains an attendance register to keep the records of the directors
present in the board meetings. The company secretary has the responsibility to
obtain the signatures of directors in register.
