Meetings of Board and its Committees: formula sheet

Key formulas

First meeting

First Board meeting ≤ 30 days from the date of incorporation

Section 173(1). Applies to every company.

Minimum meetings and gap

Meetings per year ≥ 4; gap between two consecutive meetings ≤ 120 days

Section 173(1). Check both conditions in every answer.

Notice period

Notice ≥ 7 days, in writing, to every director at the address registered with the company

Section 173(3). Mode: hand delivery, post or electronic means.

Shorter notice

Allowed for urgent business if at least one independent director, if any, is present

First proviso to Section 173(3).

Absence of independent director

Decisions circulated to all directors; final only on ratification by at least one independent director, if any

Second proviso to Section 173(3).

Penalty for failing to give notice

₹25,000 on every officer whose duty is to give notice and who fails to do so

Section 173(4).

OPC, small and dormant company

At least 1 meeting in each half of a calendar year; gap between the two meetings ≥ 90 days

Section 173(5). A OPC with one director is exempt from Sections 173 and 174.

Video conferencing

Directors may participate in person or by video conferencing or other audio visual means

Section 173(2). The means must record and recognise participation and store the proceedings with date and time.

General quorum for Board meeting (Section 174(1))

Quorum = higher of (1/3 × total strength) and 2

Round any fraction up to one. Video conferencing participation counts.

Total strength

Total strength = sanctioned or fixed number of directors − vacant places

Vacancies are excluded. Use directors actually in office.

Where interested directors are two-thirds or more (Section 174(3))

If interested directors ≥ 2/3 × total strength, quorum = non-interested directors present, not less than 2

Interested director means a director within Section 184(2). The quorum applies only during that time.

Continuing directors below quorum (Section 174(2))

Act only to increase directors to the quorum number, or to summon a general meeting

They cannot do anything else.

Adjournment for want of quorum (Section 174(4))

Meeting stands adjourned to same day, same time and place in next week

If that day is a national holiday, then the next day that is not a national holiday. This applies unless the Articles provide otherwise.

Mode of participation

Participation = in person OR video conferencing OR other audio visual means (s. 173(2))

The means must be capable of recording and recognising participation, and of recording and storing proceedings with date and time.

Restricted matters

Matters notified by the Central Government → not to be dealt with through video conferencing (first proviso to s. 173(2))

The restricted list is in the rules, not in the section. Learn it from the ICSI material and the rules.

Physical quorum exception

Physical quorum present → any other director may join by video conferencing even on restricted matters (second proviso to s. 173(2))

Inserted w.e.f. 7-5-2018. The quorum must be physically present.

Quorum count

Quorum = one-third of total strength or 2 directors, whichever is higher (s. 174(1))

Directors joining by video conferencing or other audio visual means are counted. Any fraction is rounded off as one, and vacant places are excluded from total strength.

Notice

Notice ≥ 7 days in writing to every director (s. 173(3))

It may be sent by hand delivery, post or electronic means.

Circulation requirement

Draft resolution + necessary papers → all directors (or committee members) at registered Indian addresses

Delivery by hand, post, courier or prescribed electronic means. Missing even one director defeats validity.

Approval requirement

Approval by a majority of directors or members entitled to vote on the resolution

The count is of those entitled to vote, not of those who respond.

One-third rule

Directors requiring a meeting ≥ 1/3 of the total number of directors → chairperson puts the resolution to a Board meeting

The base is the total number of directors for the time being, not the number present or replying.

Noting requirement

Resolution by circulation → noted at a subsequent meeting → made part of its minutes

Applies to both the Board and its committees.

Rule of Section 179(3)

Listed powers = exercised by the Board through resolutions passed at Board meetings

The list is in clauses (a) to (k). Clause (k) covers any other matter that may be prescribed.

Delegable powers (proviso to Section 179(3))

Only clauses (d) to (f): borrow monies, invest funds, grant loans / give guarantee / provide security

Delegation is by a resolution passed at a Board meeting, to a committee of directors, MD, manager or other principal officer (branch principal officer for a branch), on conditions the Board specifies.

Non-delegable powers

Clauses (a), (b), (c), (g), (h), (i), (j) stay with the Board

Calls, buy-back, issue of securities, approval of financial statement and Board's report, diversification, amalgamation/merger/reconstruction, takeover or substantial stake.

Limit on committees (Section 378U proviso, Producer Companies)

Board shall not delegate any of its powers, or assign the powers of the Chief Executive, to any committee

This is the Producer Company provision. Do not mix it with the Section 179 delegation rule for ordinary companies.

General meeting's control (Section 179(4))

Company in general meeting may impose restrictions and conditions on the Board's powers in the section

Also remember Section 179(1) second proviso: no act that must be done in general meeting.

Audit Committee: who must form it

Every listed public company and such other classes of companies as may be prescribed (section 177(1))

The Act says 'listed public company' after the 2018 amendment. The prescribed classes come from the Rules.

Audit Committee: composition

Minimum 3 directors; independent directors form a majority (section 177(2))

Majority of members, including the Chairperson, must be able to read and understand financial statements.

Audit Committee: right to be heard

Auditors and KMP may be heard when the auditor's report is considered, but cannot vote (section 177(7))

Do not say they are members.

NRC: who must form it

Every listed public company and such other classes as may be prescribed (section 178(1))

Same coverage as the Audit Committee.

NRC: composition

3 or more non-executive directors; not less than one-half independent (section 178(1))

The Chairperson of the company may be a member but cannot chair the NRC.

NRC: functions

Identify persons qualified to be directors or senior management; recommend appointment and removal; specify manner of evaluation of Board, committees and directors; formulate criteria for qualifications, positive attributes and independence; recommend remuneration policy (section 178(2) and (3))

The remuneration policy must be on the company website, if any, and its salient features in the Board's report (section 178(4) proviso).

SRC: who must form it

Board of a company with more than 1,000 shareholders, debenture-holders, deposit-holders and other security holders at any time during a financial year (section 178(5))

The test is the number of security holders, not listing.

SRC: composition and role

Chairperson must be a non-executive director; other members as decided by the Board; considers and resolves grievances of security holders (section 178(5) and (6))

Inability to resolve a grievance in good faith is not a contravention (proviso to section 178(8)).

Attendance at general meetings

Chairperson of each committee, or a member authorised by him, must attend general meetings (section 178(7))

Applies to committees under section 178.

Penalty for default

Company: fine not less than ₹1,00,000, up to ₹5,00,000; every officer in default: penalty of ₹1,00,000 (section 178(8))

The text as supplied is worded unclearly about the officer's penalty. Confirm the exact officer figure from your study material.

Time limit for minutes (Section 118(1))

Minutes prepared, signed and kept in the minute book within 30 days of the conclusion of the meeting

Applies to Board, committee and general meetings. For postal ballot, 30 days run from the passing of the resolution.

Form of the minute book

Books kept for the purpose, with pages consecutively numbered

Loose sheets do not satisfy this requirement.

Content of minutes (Section 118(2) and (3))

Fair and correct summary of proceedings + all appointments made at the meeting

Not a word-for-word record of the discussion.

Extra content for Board and committee minutes (Section 118(4))

Names of directors present + names of directors dissenting or not concurring on each resolution

Dissent must be linked to the specific resolution.

Matters the Chairman may exclude (Section 118(5)-(6))

Defamatory, or irrelevant or immaterial, or detrimental to company's interests

Chairman's discretion is absolute on these three grounds only.

Evidentiary value (Section 118(7)-(8))

Minutes kept per section = evidence; meeting deemed duly called and held until contrary proved

The presumption is rebuttable.

Penalty for default (Section 118(11))

Company: ₹25,000; every officer in default: ₹5,000

Applies for default in respect of any meeting.

Penalty for tampering (Section 118(12))

Imprisonment up to 2 years + fine of ₹25,000 to ₹1,00,000

Fine must be at least ₹25,000 and may extend to ₹1 lakh.

Committee minutes (Section 118 and Companies Act provisions on committees)

Committee minutes follow the same Section 118 rules

Section 118(1) expressly covers every committee of the Board.

Quick revision

• First Board meeting: within thirty days of incorporation (section 173(1)).
• Minimum four Board meetings a year, with not more than one hundred and twenty days between two consecutive meetings.
• Notice of a Board meeting: at least seven days in writing to every director, by hand, post or electronic means.
• Shorter notice is allowed for urgent business if at least one independent director, if any, is present.
• If no independent director attends, decisions are final only after ratification by at least one independent director, if any.
• Penalty on an officer who fails to give notice: ₹25,000 (section 173(4)).
• Quorum: one-third of total strength or two directors, whichever is higher; fractions round up to one.
• Total strength excludes vacant places; video conferencing participation counts for quorum.
• If quorum is lacking, the meeting stands adjourned to the same day, time and place next week, unless the articles say otherwise.
• A resolution by circulation needs draft papers sent to all directors and approval by a majority of those entitled to vote; if one-third of directors want a meeting, it must be decided at one.
• Nomination and Remuneration Committee: three or more non-executive directors, at least one-half independent; the chairperson of the company may be a member but cannot chair it.
• Stakeholders Relationship Committee: required where there are more than one thousand security holders in a year; chaired by a non-executive director.

Common mistakes

• Counting only the number of meetings and ignoring the 120-day gap. Fix: Always compute the gap between consecutive meetings. Both tests must be met.
• Saying shorter notice is allowed whenever the Chairman wishes. Fix: Shorter notice is for urgent business only, and at least one independent director, if any, must be present.
• Rounding the fraction down, for example treating 8 ÷ 3 as 2. Fix: The Explanation says any fraction is rounded off as one. 2.67 becomes 3. Always round up.
• Counting vacant seats in total strength. Fix: Total strength excludes vacant places. Use only directors in office.
• Saying a director attending by video conferencing is not counted for quorum. Fix: Quote section 174(1). Participation by video conferencing or other audio visual means is counted for quorum.
• Treating any phone call or ordinary connection as valid participation. Fix: State that the means must record and recognise participation and record and store the proceedings with date and time.
• Saying circulation to a majority of directors is enough. Fix: Remember: circulation must be to all directors; approval is by a majority of those entitled to vote.
• Counting the majority from the directors who replied. Fix: Count against all directors entitled to vote on that resolution. Silence is not approval.
• Saying the Board can delegate all Section 179(3) powers to a committee. Fix: Only clauses (d) to (f) are delegable. Write this exact limit in the answer.
• Treating delegation as valid if the managing director simply decides it. Fix: State that the Board must pass a resolution at a meeting to delegate, and may specify conditions.

Exam tips

• In fact-based questions, compute gaps in days and show the arithmetic. Marks go for the working.
• Write the rule first, then the facts, then the conclusion citing Section 173 and the relevant sub-section.
• Learn the three numbers: 30 days, 120 days and seven days, plus the ₹25,000 penalty. Do not mix them with the 90-day small-company figure.
• Remember the words "if any" after independent director. Use them when a company has none.
• Mention that the notice usually carries the agenda, but base legal answers on the Act's text.
• Show the working in numerical questions: total strength, one-third, rounding, comparison with 2. Marks are given for each step.
• Always quote Section 174 and the relevant sub-section in your conclusion. Examiners expect the provision first.
• Test the two-thirds condition for interested directors before you apply the special quorum. Show the calculation.