WHETHER THE PROVISIONS OF
THE COMPANIES ACT 2013 ALLOW THE PRIVATE LIMITED COMPANIES TO HOLD BOARD
MEETINGS AT A SHORTER INTERVAL TO TRANSACT SOME URGENT BUSINESS?
The
answer is NO as it does not openly
prescribe the manner in which the private limited companies can convene a board
meeting at a shorter notice.
The
section 173 (3) of the Companies Act 2013 states that
A meeting of the Board shall be called
by giving not less than seven 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:
Provided that 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:
What Secretarial Standard of ICSI says ?
As
per Secretarial Standard 1, Clause 1.3.1 which states that the notice convening
a Meeting shall be given at least seven days before the date of the Meeting,
unless the Articles prescribe a longer period.
As
per Secretarial Standard 1, Clause 1.3.1 which states that to transact urgent
business, the Notice, Agenda and Notes on Agenda may be given at shorter period
of time than stated above, if at least one Independent Director, if any, shall
be present at such Meeting. If no Independent Director is present, 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.
In case the company does not have an Independent Director, the decisions
shall be final only on ratification thereof by a majority of the Directors of the company, unless
such decisions were approved at the Meeting itself by a majority of Directors
of the company. The fact that the Meeting is being held at a shorter Notice
shall be stated in the Notice.
The
Companies ( Meetings of Board and its Powers) Rules 2014 issued as per the
G.S.R 240 ( E ) dated 31st March 2014 issued by the GOI is silent
about the seven days’ notice for the board meeting and whether a board meeting can be convened at a shorter
notice by the companies or not.
CONVENING A GENERAL MEETING AT A SHORTER NOTICE
Section 101 of Companies Act details
about the notice of meeting of the General Meeting. Section 101 (1) states that
a general meeting of a company may be called by giving not less than clear
twenty-one days’ notice either in writing or through electronic mode in such
manner as maybe prescribed:
Provided that a general meeting may be
called after giving a shorter notice if consent is given in writing or by
electronic mode by not less than
ninety-five per cent of the members entitled to vote at such meeting.
In
other words , CA 2013 is very clear about the convening of a general meeting at
a shorter notice whereas it is ambiguous in convening the board meeting at a
shorter notice as regards to private limited companies.
No independent director is to be
appointed for a private limited company under the CA 2013. As such, the
wordings in the section 173 (3) of the Companies Act 2013 as regards to the
presence of one independent director in the board meeting that is convened at a
shorter notice is ambiguous and creating administrative inconvenience to the
private limited companies.
For instance, if a private limited
company with just two directors can have the board meeting at a restaurant
where they meet accidently and willing to treat it as a board meeting held at a
shorter notice with their mutual consent and to record the proceedings of their
discussion through the minutes. However
, wording of section 173 (3) does not allow this as it creates an impression
that private limited companies cannot call their board meetings at a shorter
notice as there are no independent directors in the private limited company.
One may argue that the SS-1 is clear
and it allows that a shorter meeting of a board of directors of a company can
be held with the consent of the majority of the directors of the company.
However,
it is to be noted that In Rupak Gupta v. U.P. Hotels Ltd, it was held by NATIONAL COMPANY
LAW TRIBUNAL NEW DELHI BENCH( NCLT) that for conducting e-board meeting
under rule 3 (3)(e) is directory, not
mandatory. Directors can attend board meeting via video-conferencing
without intimating at beginning of calendar year as prior intimation required
for conducting e-board meeting under rule 3 (3)(e) is directory, not mandatory.
Hence, in view of the above, it is submitted that section 173 (3) of the
Companies Act 2013 has to be amended that in case of private limited companies,
with the consent of all the directors or the majority of the directors, a
private limited company can convene a board meeting at a shorter notice or with
the less than seven days’ notice as explained and illustrated in the SS-1. This
will help the private limited companies to transact the urgent business at a
shorter interval without any legal impediments.
Will the MCA issue a clarification circular or removal of doubt allowing
the private limited companies to convene a board meeting a shorter notice to
transact some urgent businesses with the consent of all or the majority of
directors under section 173 of CA 2013?
