Amended and updated notes on section 173 of Companies Act 2013. Detail discussion on provisions and rules related to meetings of Board.
Chapter XII (Sections 173–195) of the Companies Act, 2013 (CA 2013) deals with the provisions related to meetings of board and its powers. Section 173 of CA 2013 provides for meetings of Board.
Recently, we have discussed in detail section 172 (Punishment) of CA 2013. Today, we learn the provisions of section 173 of Companies Act 2013.
The provisions of section 173 are effective from 1-April-2014. You may refer Notification No. S.O. 902(E) issued dated 27-03-2014. In this article, you will learn detail of the provisions of section 173 of the Companies Act 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XII |
| Chapter Name | Meetings of Board and its Powers |
| Section No. | 173 |
| Section Name | Meetings of Board |
| Monthly Updated Edition | Company Law PDF |
Section 173 of Companies Act 2013: Meetings of Board
Section 173 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
(1) Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum number of four meetings of its Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board:
Provided that the Central Government may, by notification, direct that the provisions of this sub-section shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
(2) The participation of directors in a meeting of the Board may be either in person or through video conferencing or other audio visual means, as may be prescribed, which are capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time:
Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or 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.
(3) 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:
Provided further that in case of absence of independent directors from such a meeting of the Board, 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.
(4) Every officer of the company whose duty is to give notice under this section and who fails to do so shall be liable to a penalty of twenty-five thousand rupees.
(5) A One Person Company, small company and dormant company 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.
Exception/ Modification/ Adaptation:
1) In case of Section 8 (Non-profit) Companies, sub-section (1) of section 173 shall apply only to the extent that the Board of Directors, of such Companies shall hold at least one meeting within every six calendar months. -Notification No. G.S.R. 466(E) dated 5th June, 2015.
2) In sub-section (1) of section 173, after the proviso, the following proviso shall be inserted, namely: –
“Provided further that a Specified IFSC public company shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year.”.-Notification No. G.S.R. 08(E) dated 4th January, 2017.
3) In sub-section (1) of section 173, after the proviso, the following proviso shall be inserted, namely: –
“Provided further that a Specified IFSC private company shall hold the first meeting of the Board of Directors within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year.”. -Notification No. G.S.R. 09(E) dated 4th January, 2017.
4) For sub-section (5), the following sub-section shall be substituted, namely:-
(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. -Notification No. G.S.R. 583(E) dated 13th June, 2017.
Meetings of Board (Section 173) of CA 2013
Frequency of Board Meetings [Section 173 (1)]:
If you want to know that how many number of meetings shall be conducted by the Board of a company, then you will get your answer in sub-section (1) of section 173 of CA 2013.
- First Board Meeting: Every company shall hold the first meeting of the Board of Directors (BOD) within 30 days of the date of its incorporation.
- Subsequent Board Meetings: Every company shall hold a minimum number of 4 meetings of its BOD every year. Note that the gap between two consecutive meetings of the Board shall not be more than 120 days.
Exemption to Section 8 (Non-profit) Companies:
According to the proviso of Section 173(1) of CA 2013, the Central Government (CG) may by notification, direct that the provisions of sub-section (1) of section 173 shall not apply in relation to any class or description of companies or shall apply subject to such exceptions, modifications or conditions as may be specified in the notification.
Accordingly, the CG has now notified that sub-section (1) of section 173 shall apply to Section 8 (Non-profit) Companies only to the extent that the BOD of such Companies shall hold at least 1 meeting within every 6 calendar months. – Notification No. G.S.R. 466(E) dated 5th June, 2015.
In other words, a company formed under section 8 of CA 2013 i.e. Non-profit company shall hold two BM instead of four meetings every calendar year.
Participation in Board meeting [Section 173 (2)]:
As per sub-section (2) of section 173 of CA 2013, directors are allowed to attend or participate in a meeting of the Board either:
i) in person; or
ii) through video conferencing; or
iii) other audio visual means, as may be prescribed.
Such other audio visual means should be capable of recording and recognising the participation of the directors and of recording and storing the proceedings of such meetings along with date and time.
As per explanation given in the Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014, “video conferencing or other audio visual means” means:
– 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.
However, the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means. Accordingly, CG has now notified in the Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014, the matters not to be dealt with in a meeting through video conferencing or other audio visual means:
The following matters shall not be dealt with in any meeting held through video conferencing or other audio visual means. –
(i) the approval of the Annual Financial Statements;
(ii) the approval of the Board’s Report;
(iii) the approval of the Prospectus;
(iv) the Audit Committee Meetings for consideration of financial statement including Consolidated Financial Statement (CFS), if any, to be approved by the Board under sub-section (1) of section 134 of the Act; and
(v) the approval of the matter relating to Amalgamation, Merger, Demerger, Acquisition and Takeover.
Notice of the Board meeting [Section 173 (3)]:
Section 173(3) of CA 2013 provides that a meeting of the Board shall be called by:
– giving not less than 7 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.
However, a meeting of the Board may be called at shorter notice (i.e. less than 7 days) to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting.
Note that Rule 3(3)(b) of the Companies (Meetings of Board and its Powers) Rules, 2014 states that the 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.
In case of absence of independent directors from such a meeting of the Board, 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.
Penalty for failure to give Notice [Section 173(4)]:
Every officer of the company whose duty is to give notice under section 173 and who fails to do so shall be liable to a penalty of ₹25,000.
Exception to OPC, Small and Dormant Company [Section 173(5)]:
A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of Section 173 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 90 days.
However, the provisions of sub-section (5) of section 173 and section 174 shall not apply to One Person Company in which there is only one director on its Board of Directors.