By Sweta Rao1
Under the Companies Act, 1956, board meetings conducted by audio visual means (AVMs) were not specifically recognised. Thereafter, AVM was first recognised by the Companies Act, 2013,2 which not only recognised the concept but also indicated fairly elaborate provisions around its implementation. The need for AVMs was further pronounced by the COVID-19 pandemic. This article identifies the key watchpoints from a compliance standpoint for AVMs below.
- Video conferencing should enable all persons participating in the meeting to participate effectively and to communicate concurrently with each other. They should also be able to hear and see each other clearly during the course of the meeting.3 This can be achieved fairly easily with various kinds of online meeting tools available, namely, Microsoft Teams, Zoom, Google Meet, BlueJeans, among others. It is important to note that the communication between directors should not involve an intermediary4, i.e. a third party acting as a link between directors.
- Where a company proposes to conduct a meeting by video conferencing, it should provide necessary information (including, joining details, troubleshooting tips or a helpline number in case a director is not able to access the joining link, how questions may be asked by the participants during the meeting, among others) in the notice of the meeting5 and the director should intimate the company of his intent to participate in the meeting through electronic mode , else, it will be presumed that the director will be attending in person.6 Where a director wishes to attend a meeting by video conferencing and the notice of the meeting is silent regarding the same, the director should provide sufficient notice to the company for it to make necessary arrangements.7 A declaration from a director that he or she wishes to attend all meetings by video conference can be provided as a rolling declaration for a year, however, even during this period such director may attend a meeting in person.8
- Originally, the rules prohibited various items (such as approval of board's report, annual financial statements, prospectus, among others) to be discussed in an AVM.9 Exception to this prohibition was provided for the purposes of the COVID-19 pandemic and was extended from time to time. Eventually, in June 2021, this prohibition was completely omitted and now there are no restrictions on items to be dealt in an AVM.10
- In addition, by way of an amendment in 2017, it was clarified that so long a quorum is present physically at one location, other directors may join by video conference, and may participate in discussions with respect to the prohibited items referred above.11 At the moment, in light of the change referred in point 3 above, this relaxation is not of much benefit. However, should the restricted list of items be reintroduced in the future, this relaxation could be an effective way to manage and mitigate the burden.
- The Chairman must ensure that there is proper quorum throughout the meeting.12
- Attending a meeting by tele-conferencing is not the same as attending a meeting by video conferencing. Further, in case a director switches between modes of attendance during a meeting such director will not be counted towards quorum of the meeting.13
- Needless to say, directors should ensure complete confidentiality of the meeting proceedings. At the commencement of the meeting, directors attending through video conferencing are required to provide a roll call confirming that no one else has access to the meeting at their physical location.14
- The proceedings of the meeting should be recorded and should be available for future reference.15 It is, therefore, advisable to include some language to this effect in the notice of meeting that the meeting would be recorded so as to avoid any privacy or other concerns. Further, the recording should be stored as a part of the company's records and would be open for inspection by the Registrar of Companies in event of an inspection or investigation.16
- Draft minutes are required to be circulated within 15 days to directors.17 Directors must respond to the draft minutes circulated after a meeting. If directors do not respond within 7 days or a reasonable time as decided by the board after circulation of the draft minutes, it is deemed that the draft minutes have their approval.18
- Each time a director wishes to speak on a matter, he or she must identify himself or herself for the record of the meeting.19
Note that contraventions of the aforesaid requirements may (in egregious cases) invite penalties of INR 10,000 for the company and every "officer in default" with additional possible continuing penalties of maximum INR 2,00,000 for a company and INR 50,000 for a director.20 Therefore, while ability to conduct board meetings through video conferencing is a welcome move, it is advisable to take due care towards compliances and procedures.
1 Senior Associate, Khaitan & Co. The author can be contacted on firstname.lastname@example.org. The views expressed are personal.
2 Section 173(2) of the Companies Act, 2013 and Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014; see also Regulation 17(2) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015.
3 Rule 3(2)(f) of the Companies (Meetings of Board and its Powers) Rules, 2014.
4 Definition of "Electronic Mode" under Secretarial Standard 1 and Explanation to Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014.
5 Rule 3(3)(b) of the Companies (Meetings of Board and its Powers) Rules, 2014.
6 Rules 3(3)(c) and 3(3)(f) of the Companies (Meetings of Board and its Powers) Rules, 2014.
7 Rule 3(3)(d) of the Companies (Meetings of Board and its Powers) Rules, 2014.
8 Rule 3(3)(e) of the Companies (Meetings of Board and its Powers) Rules, 2014.
9 Section 173(2) of the Companies Act, 2013 and erstwhile Rule 4 of the Companies (Meetings of Board and Its Powers) Rules, 2014.
10 Companies (Meetings of Board and Its Powers) Amendment Rules, 2021, with effect from 15 June 2021.
11 Section 173(2), Second Proviso, Companies Act, 2013.
12 Rule 3(5)(b) of the Companies (Meetings of Board and its Powers) Rules, 2014.
13 Paragraph 1.2.3 of Guidance Note published by ICSI on Secretarial Standard 1.
14 Rule 3(4) of the Companies (Meetings of Board and its Powers) Rules, 2014.
15 Section 173(2) of the Companies Act, 2013 and Rule 3(2)(c) of the Companies (Meetings of Board and its Powers) Rules, 2014.
16 Section 173(2) of the Companies Act, 2013 and Rule 3(2)(d) of the Companies (Meetings of Board and its Powers) Rules, 2014.
17 Rule 3(12)(a) of the Companies (Meetings of Board and Its Powers) Rules, 2014.
18 Rule 3(12)(b) of the Companies (Meetings of Board and Its Powers) Rules, 2014.
19 Rule 3(8)(a) of the Companies (Meetings of Board and its Powers) Rules, 2014.
20 Section 450 of the Companies Act, 2013.
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