|
|
Total Number of Subscribers: 451 |
|
|
|
||
|
|
||
|
Date: 2nd August 2008 |
Compiled by Mr. M. Sathya Kumar |
|
|
|
The debate to allow meetings of the board of directors through
teleconferencing or video conferencing in India has been ongoing since the
advent of developments in technology and other legal systems permitting the
same such as Mauritius, Canada and certain states in United States. Further,
the Commerce Ministry had requested the Department of Company Affairs, to
allow meetings of the board of directors of companies located in the Special
Economic Zones (‘SEZs’) through teleconferencing or
video conferencing. Companies (Amendment) Bill, 2003 The Companies (Amendment) Bill, 2003 (‘the Bill’), which has been introduced in the Rajya Sabha on May
7, 2003
contains inter alia provisions amending certain provisions of the Companies
Act, 1956 (‘the Act’) relating to board meetings and
in particular, enables a company in India to hold meetings through
teleconferencing or video conferencing. Some of the other amendments as
proposed in the Bill relating to meetings of the board of directors are as
follows:
The Bill has introduced Section 285(2), which provides that
"any meeting of the board of directors may be held by participation of
the directors of the board through teleconferencing or video conferencing and
such
meeting shall be valid if the minutes of such meeting has been approved and
signed subsequently by all directors of the Board who participated in such meeting." (Emphasis supplied)
The proviso to the said Section 285(2) as proposed in the Bill
stipulates that the Central Government may notify that certain powers may not
be exercised in a meeting held through teleconferencing or video
conferencing. It therefore appears that if any director participating in a
meeting held via teleconferencing or video conferencing fails to sign the
minutes of such meetings for any reason whatsoever then such a meeting would
be invalid and consequently all decisions taken or resolutions passed in such
a meeting would also be invalid. Signing of Board Minutes: Additional Rquirement The Act contains various provisions regarding preparation and
keeping of minutes, such as that the minutes have to be prepared before the
expiry of 30 days from the date on which the meeting was held and the
chairman has initialled every page of the minutes and affixed his/her
signature on the last page. However, if the minutes are not prepared and kept
in the manner prescribed under Section 193 then the following consequences
would arise: (i) the said minutes would not be admissible in evidence
(Section 194 of the Act); (ii) the benefit under Section 195 (which, inter
alia provides that if the minutes are kept in accordance with the provisions
of Section 193 of the Act, then until the contrary is proved, the meeting
would be deemed have been duly called and held and all proceedings that have
taken place in such a meeting would be valid) would not be available; and
(iii) the company and every officer of the company who is in default is
liable to pay a fine of upto Rs 500 (Section 193). However, it is to be noted
that failure to comply with these provisions does not invalidate the meeting. On the other hand, under the provisions of the Bill, the minutes
of a meeting held via teleconferencing or video conferencing is required to
be approved and signed by all the directors participating in the meeting,
failing which such a meeting would be invalid. Accordingly, under the provisions of the Act, a physical meeting
of the board is valid, even though the minutes of such a meeting is not
prepared or kept in accordance with the provisions of the Act. However, under
the provisions of Section 285(2), as proposed a meeting held by
teleconferencing or video conferencing is valid only if all the directors
participating in such a meeting sign the minutes. Therefore, the proposed new section 285(2) seeks to impose a
substantive onus in addition to the provisions of Section 193 of the Act,
which directly impacts the validity of meetings and the resolution passed
thereat, irrespective of the compliance with the provisions of Section 193. Significant Advantage? To illustrate the point, a situation could arise wherein a
meeting of the board may be required to be convened on an urgent basis, for
instance, to authorise a company to execute a document. Under the provisions
of the Act, a resolution could be passed in a physical meeting or by
circulation. In case of a physical meeting, once the directors pass a
resolution, the company would be permitted to act on the said resolution even
if the minutes are subsequently not kept and maintained in accordance with
Section 193. Accordingly, a company could immediately upon completing the
meeting, issue a certified extract of the requisite resolution and validly
take action on such basis. However, convening such a physical meeting on an
urgent basis may be time consuming for the company. On the other hand under the provisions of Section 285(2), a
company, in a similar situation may convene a meeting of the board via
teleconferencing or video conferencing and resolutions to the effect may be
passed. However, the company would not be able to act on the said resolution
until and unless the directors attending such meetings sign the minutes of
such meeting in accordance with Section 285(2). If the same is not complied
with, such a meeting would be invalid. Consequently, the company would not be
entitled to issue a certified extract of the requisite resolution
immediately, to enable the urgent action, as required. Consequently, it would appear that a resolution passed by
circulation would possibly achieve the desired purpose of passing and
implementing a resolution on an urgent basis. It is further observed from the aforesaid provisions that the
purpose of Section 285(2) of the Bill is to make it convenient for companies
to organize and hold meeting of its board of directors. Further, it appears
that the purpose of approval and signing of the minutes of a meeting of the
board held through teleconferencing or video conferencing by all the
directors participating in such meetings is to ensure that the proceedings of
the meeting are recorded to enable implementation of the resolutions passed
therein and prevent any potential misuse. However, in view of the foregoing,
it would appear that holding meetings via teleconferencing or video
conferencing would not effectively enable speedy action by the board but
rather facilitate a director to attend such meetings without traveling to the
place where the meeting would be held. Article by Diwakar Agarwal and Souvik
Ganguly, This article was first published in The Economic Times (Corporate
Counsel section), in India, on June 28, 2003. The views expressed in this article are those of the authors and do not represent the views of the firm. This article does not purport to be professional advice, nor a complete or comprehensive study on the subject. It is recommended that professional advice be sought before taking any action pursuant to any matter contained in this article. |
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
Rewards waiting for feedback at |
|
|
|
|
|
|
|
||
|
|
|
|
|
|
Disclaimer: We believe that the information contained in this e-zine is true. If you do not wish to receive Smart Trainee please click here. |
|
|
|
||
|
|
|
|
|
|
Click here to contact us, if you are unable to view the content properly |
|
|
|
|
|
