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CMA Final · Corporate and Economic Laws · Board Meetings and Procedures

Zenith Ltd has a Board with total strength of 10 directors, of whom 7 are interested in a proposed contract under the Companies Act, 2013. Only 5 directors attend the meeting: 4 interested and 1 not interested. What is the position on quorum for this item?

There is no quorum. Since interested directors number at least two-thirds of the total strength, the quorum becomes the non-interested directors present, and that must be at least two. Only one non-interested director attends, so the meeting cannot validly transact that item.

  1. AQuorum is present because 5 is more than one-third of 10
  2. BQuorum is present because the one non-interested director may act alone
  3. CQuorum is not present because interested directors are 2/3 or more of total strength, and at least two non-interested directors must be presentCorrect
  4. DQuorum is not present because at least three non-interested directors must be present

Explanation

Interested directors (7) are at least two-thirds of 10 (6.67, rounded to 7), so section 174(3) applies. The quorum is then the non-interested directors present, being not less than two. Only one is present, so there is no quorum. Counting all five attendees against the one-third test is the mistake in the first option.

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