[Opinion] Case law relating to board meeting conducted with no quorum

[2022] 140 taxmann.com 459 (Article)

1. Board meeting

A board meeting is a meeting that is held between the directors of a company. Such meetings are held usually to take important decisions about the company. To make sure that such decisions are not taken arbitrarily, the Companies Act 2013 requires a quorum for the meeting and the decisions taken in the meeting to be valid. Section 174 of the Companies Act 2013 provides for the quorum to be present while conducting the board meeting.

2. Quorum

Quorum in relation to the board meeting is the one requiring minimum number of directors that are mandatorily required – rather a must – to be present at any of the company’s board meetings to make the proceedings of that meeting valid.

3. Provision on quorum as per Companies Act 2013

The required quorum for a board meeting must be 1/3rd of the total number of directors or two (2) directors whichever is the higher number at every board meeting. Therefore in case, there are only three directors in a company, then at least two must be present even though 1/3rd would entail that only one director needs to be present. If the directors are not physically present but take part in the meeting via any audio/visual means, they too shall be considered part of the quorum as per the amended provisions of the Companies Act 2013.

4. Secretarial Standard on quorum

As per sub-section (10) of section 118 of the Companies Act 2013, every company shall have to observe secretarial standards with respect to general and board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act 1980 and approved as such by the Central Government. The secretarial standard -1 (SS-1) on meeting of the board of directors also spells out that quorum for a board meeting must be 1/3rd of the total number of directors or 2 directors whichever is the higher number.

As per clause 3.1 of SS-1, the quorum shall be present throughout the meeting. Quorum shall be present not only at the time of commencement of the meeting but also while transacting business.

The SS-1 further states that the directors participating through electronic mode in a meeting shall be counted for the purpose of quorum, unless they are to be excluded for any items of business under the provisions of the Companies Act 2013 or any other law.

Click Here To Read The Full Article