SECTION 173: MEETING OF BOARD
SECTION 173: MEETING OF BOARD
SECTION 173: MEETING OF BOARD
Section 173 of the Act contains provisions which deal with Meetings of the Board. This section requires the directors upon whose shoulders the management of the company rests to meet and interact regularly. The aim is to ensure that the powers which vest in the directors should be exercised collectively and every director should have the knowledge of the decisions taken for the smooth conduct of the business operations. The provisions of Section 173 are discussed hereunder:
(i) Frequency of Board Meetings [Section 173 (1)]
(a) First Board meeting: Every company shall hold the first meeting of the Board of Directors within 30 days of the date of its Incorporation.
(b) 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.
(ii) Exemptions to Certain Companies [Section 173(5)]:
In case of a One Person Company (OPC), small company and dormant company, the provision regarding conducting of four Board meetings every year is not applicable. These entities are required to conduct one Board meeting in each half of a calendar year and the gap between the two meetings must not be less than 90 days. This is the minimum requirement and if so done, they shall be deemed to have complied with the provisions of Section 173.
OPC having only one director: One more exemption is given to One Person Company which has only one director on its Board of Directors. Such OPC shall not be required to hold even a single Board meeting during the year. Thus, it is totally exempted from the provisions of Section 173(5).
Modifications in respect of Section 8 companies and Private companies
1. Vide Notification No. G.S.R.466(E) dated 5'" June, 2015 as amended by Notification No. G.S.R. 584 (E) dated 13" June, 2017, Section 173 (1) shall apply to a Section 8 company only to the extent that the Board of Directors of such a company shall hold at least one meeting within every six calendar months. This is subject to the conditions that the company has not committed a default in filing its financial statements under Section 137 or Annual Return under Section 92 with the Registrar.
2. Vide Notification No. GSR 464(E), dated 5-6-2015, as amended by Notification No. GSR 583(E), dated 13-6-2017, in case of private companies, for sub-section (5) of Section 173, the following sub-section shall be substituted:
"(5) A One Person Company, small company, dormant company and a private company (if such private company is a start-up) shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days:
Provided that nothing contained in this sub-section and in section 174 shall apply to One Person Company in which there is only one director on its Board of Directors.”
The above substitution is effective subject to the conditions that the private company has not committed a default in filing its financial statements under Section 137 or Annual Return under Section 92 with the Registrar.
(iii) Participation by Directors in Board Meetings:
(a) Means to attend Board Meetings: Section 173(2) of the Act allows the directors of a company to attend Board meetings in the following manner:
Thus, the directors besides meeting in person, are also permitted to meet through
electronic mode i.e. video conferencing or other prescribed audio-visual means.
Meaning of the term “video conferencing or other audio-visual means”: It refers to audio-visual electronic communication facility employed which enables all the persons participating in a meeting to communicate concurrently with each other without an intermediary and to participate effectively in the meeting.[as per
Explanation to Rule 3]
Essentials of audio-visual means: According to Section 173 (2), the audio-visual
means should be capable of-
. recording and recognizing the participation of the directors; and
. recording and storing the proceedings of such meetings along with date and time.
Matters which cannot be dealt with in a meeting through electronic mode: The
Central Government may, by notification, specify matters which shall not be dealt with in a meeting through video conferencing and other audio-visual means.
Provided further that where there is quorum in a meeting through physical presence of directors, any other director may participate through video conferencing or other audio visual means in such meeting on any matter specified under the first proviso.
(iv) Notice of Board Meeting:
Period of Notice
At least 7 days' notice in writing to all the directors at their registered address, sent by hand delivery, by post, or by electronic means.
Shorter Notice (Less Than 7 Days)
To transact an urgent business, at least one independent director, if any, shall be present. In absence, decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director, if any.
Option to Participate Through Video Conferencing Mode or Other Audio-Visual Means (Rule 3)
Notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio-visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio-visual means.
On Receipt of Notice
A director intending to participate through video conferencing or other audio-visual means shall communicate his intention to the Chairperson or the Company Secretary of the company.
If No Intimation is Received from Director of His Participation Through the Electronic Mode
It shall be assumed that the director shall attend the meeting in person.
(v) Penalty for failure to give notice: Section 173(4) prescribes a penalty of Rs. 25,000 in respect of every officer of the company whose duty is to give notice under Section 173 and who has failed to do so.
