The shareholders in general meetings and the directors acting collectively as a Board conduct the affairs of a company. Therefore, directors frequently meet to discuss various matters relating to the management and administration of the affairs of the company in the interest of stakeholder. Section 173 of Act contains provisions which deal with Meetings of the Board. The provisions of Section 173 are discussed hereunder:
1. Frequency of Board Meetings [Section 173 (1)]
i. First Board meeting: Every company shall hold the first meeting of the BOD within 30 days of the date of its Incorporation.
ii. Subsequent Board meetings: Every company shall hold minimum of 4 meetings every year but the gap between two consecutive board meetings shall not be more than 120 days.
Note: In case of sec. 8 companies which has not committed a default in filing of its financial statements or annual return with the registrar, sec. 173(1) shall apply only to the extent that the BOD of such companies shall hold at least one meeting within every six calendar months.
2. Participation in Board Meeting [Section 173(2)]
The participation of director in a meeting of Board may be either in person or through video conferencing or other audio-visual mode as may be prescribed. (Rule 3 of the Companies (Meeting of Board and its power) Rules, 2014
Note: Matters not to be dealt with in a meeting through video conferencing or other audio-visual means. (Rule 4 of the Companies (Meeting of Board and its power) Rules, 2014
i. The approval of annual financial statements;
ii. The approval of Board’s report;
iii. The approval of prospectus;
iv. The audit committee meeting for consideration of financial statements including consolidated financial statements if any to be approved by the board under sub- section (1) of Section 134 of the Act, and
v. The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover
3. Notice of Board Meeting [Section 173(3)]
i. A meeting of board shall be called by giving not less than 7 days notice in writing to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means.
ii. A meeting of the Board may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting.
iii. In case of absence of independent director from such meeting of the Board, decisions taken at such a meeting shall be circulated to all the director and shall be final only on ratification thereof by at least one independent director; if any.
4. Penalty for failure to give notice [Section 173(4)]
Every office of the company whose duty is to give notice under this section and fails to do so shall be liable to a penalty of Rs. 25,000.
5. Exemptions to Certain Companies [Section 173(5)]
In case of One person company, Small company, Dormant company, Private company (if private company is start up); it would be a sufficient compliance, if
i. At least one Board meeting is held in each half of a calendar year; and
ii. Gap between the two meetings is not less than 90 days.
Note: OPC in which there is only one director on its Board of Directors is exempted from compliance of sec. 173 (5) and 174.
6. Validity of meeting in case notice not given to any director
Companies Act 2013 and the Companies (Meeting of the Board and its Power) Rules, 2014 does not lay down any specific provision regarding validity of a resolution passed by the Board in case notice was not served to all the directors as stipulated in the Act.
Supreme Court, in case of Prameshwari Prasad vs. Union of India has held that the resolutions passed in the board meeting shall not be valid, since notice to all the Directors was not given in writing. Notice must be given to each director in writing. Hence, even though the directors concern knew about the meeting, the meeting shall not be valid, and resolutions passed at the meeting also shall not be valid.
7. Circulation of draft minutes
1. The draft minutes shall be circulated to all the directors within 15 days from the conclusion of meeting either in writing or in electronic mode.
2. Every Director who attended the meeting shall give his comments about the minutes, witin seven days of the receipt of draft minutes.
8. Special Measures under Companies Act, 2013 (CA-2013) in view of COVID-19 outbreak
a) The mandatory requirement of holding meetings of the Board of the companies within the intervals provided in section 173 of the Companies Act, 2013 (CA13) (120 days) stands extended by a period of 60 days till next two quarters i.e., till 30th September. Accordingly, as a one-time relaxation the gap between two consecutive meetings of the Board may extend to 180 days till the next two quarters, instead of 120 days as required in the CA-13.