QUORUM FOR A BOARD MEETING

[Mr. M. GOVINDARAJAN]

Quorum

Section 174 of the Companies Act, 2013 (‘Act’ for short) contains the provisions relating to the quorum for the Board Meeting.

Section 174(1) provides that the quorum for a meeting of the Board of Directors of a company shall be one third of its total strength or two directors, whichever is higher.  The total strength shall not include directors whose places are vacant.  Any fraction of a number shall be round off as one.  For example total number of Directors is 7.   No. of Directors required forum is = 7/3=2.33   say 3.   The quorum required for the meeting is 3 Directors.

Clause 3.4.1 of SS-1 provides that where the quorum requirement provided in the Articles is higher than one third of the total strength of the company shall conform to such higher requirements.

Quorum for Sec. 8 companies

Notification No.F.No.n1/2/2014-CL.1, dated 05.06.2015 provides that the quorum in respect of Section 8 Companies is 8 members or 25%  of its total strength  whichever is less.  The quorum shall not be less than 2 members.

Participation by Video conferencing

The participation of the Directors, by Video conferencing or by other audio visual means shall also be counted for the purposes of the quorum.  Clause 3.3 of SS-1 provides that Directors participating through electronic mode in a meeting shall be counted for the purpose of quorum unless they are to be excluded for any items of business under the provisions of the Act or any other law.

Restricted items

Any Director participating through electronic mode in respect of the ‘restricted items’ with the permission of the Chairman, shall however neither be entitled to vote nor be counted for the purpose of quorum in respect of such restricted items.

The restricted items include-

• Approval of the Annual Financial Statement;
• Board’s Report;
• Prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover and in meetings of Audit Committee for the consideration of Annual Financial Statement if any to be approved by the Board.

Quorum in case of reduced Directors

Section 174 (2) of the Act provides that the continuing directors may act, notwithstanding any vacancy in the Board but if and so long as the number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum or of summoning a general meeting of the company and for no other purpose.

Clause 3.4.2 of SS-1 reiterates the above and provides that if the number of Directors is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors may act for the purpose of increasing the number of directors to that fixed for quorum or of summoning a general meeting of the company and for no other purpose.

Interested directors

Section 174 (3) of the Act provides that where at any time the number of interested directors exceeds or is equal to two thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and  present at the meeting being not less than two, shall be the quorum during such time.

Clause 3.2 of SS-1 provides that a Director shall not be reckoned for quorum in respect of an item which he is interested, whether physically or through electronic mode during discussion and voting such item.

A Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company-

• with the Director himself or his relative; or
• with any body corporate, if such Director along with other Directors holds 2% of the said paid up share capital of the body corporate or he is a promoter or Manager or Chief Executive Officer of that body corporate; or
• with a firm or other entity, if such Director or his relative is a partner, owner or member as the case may be of that firm or other entity.

Confirmation of quorum

Rule 3(5) (a) of the Companies (Meetings of Board and its Powers) Rules, 2014 (‘Rules’ for short) provides that after roll call, the Chairperson or the Company Secretary shall inform the Board about the names of persons other than the Directors who are present for the said meeting at the request or with the permission of the Chairperson and confirm the required quorum is complete.

Rule 3(5)(b) provides that the Chairperson shall ensure that the required quorum is present throughout the meeting.

Clause  3.1 of Secretarial Standard – 1 (‘SS-1’ for short) also reiterates that the quorum shall be present not only at the time of commencement of the meeting but also while transacting business.

Adjournment of meeting

Section174 (4) of the Act provides that where a meeting of the board could not be held for want of quorum, then unless the articles of the company otherwise provides, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday at the same time and place.

Cancellation of the meeting

If there is no quorum at the adjourned meeting also, the meeting shall stand cancelled.

Quorum for Committee meetings

Clause 3.5 of SS-1 provides that the presence of all the members of any Committee constituted by the Board is necessary to form the quorum for meetings of such Committee unless otherwise stipulated in the Act or any other law or the Articles of the Company.  Regulations framed  under any other law may contain provisions for the quorum of a Committee and such stipulation shall be followed.

The principles enunciated in the Standard for Meetings of Board of Directors are also applicable to meetings of the Committee(s) of the Board unless otherwise stated herein or stipulated by any other applicable guidelines, rules and regulations.

Meeting of Audit Committee of a listed company the quorum should be either two members or one third of the members of the Audit Committee whichever is greater, but should be a minimum of two independent directors (Clause 49 of the listing agreement)