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Virtual Board Meetings: Important Points to Note

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Board Meetings through video conferencing and other audio-visual means were specifically recognized under Section 173 of the Companies Act, 2013 but there were certain restricted matters [provided under Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014 (referred to as “Board Meeting Rules” in this note)] which could not be dealt with in a meeting held through audio visual means. However, a relaxation was given during COVID [vide G.S.R. 186 (E), dated the 19th March, 2020] which was extended till June 2021 and subsequently the list of restricted matters has been permanently deleted [Rule 4 of the Board Meeting Rules was omitted vide Notification No. GSR 409(E) dated June 15, 2021].

Resultantly, all matters can be dealt with in a board meeting conducted through audio-visual means, however, certain important procedural requirements need to be complied with in such meeting. Also, there should not be any specific embargo in the articles of association (AoA) of the company to hold board meetings through audio-visual means. This note discusses all the important points which companies need to consider while conducting a board meeting through audio-visual means.

Audio-visual means

It is important to understand that board meetings can only be held through video conferencing or other audio-visual means. The two-way transmission should be both, audio as well as video transmission, and should continue throughout the Board Meeting.

Paragraph 1.2.3 of the Guidance Note on meetings of the Board of Directors issued by ICSI clarified that the participation of a director via telephone or tele-conferencing cannot be considered as participation of director through electronic mode. Furthermore, if due to any technical issue emerged during the meeting held through electronic mode, a director chooses to participate through telephone or tele-conferencing for remaining meeting, then such participation cannot be considered as valid participation and the presence of such a director should not be counted for the purpose of quorum.

Notice of virtual Board Meeting

According to Rule 3 (3)(a) and (b) of the Board Meeting Rules, notice of the virtual board meeting shall be sent to all directors informing them about the option to participate through video conferencing mode or other audio visual means. Notice shall also include all the necessary information (like platform and joining credentials, troubleshooting and support in case of any difficulty in joining, manner of conduct of board meeting) to enable the directors to participate effectively through video conferencing mode or other audio visual means.

In case all the directors are attending the meeting through electronic mode from their respective locations, the notice of the meeting should mention a deemed venue of the meeting, which may be either registered office or head office of the company or the place from where the Chairperson or Company Secretary is attending the meeting and ensuring compliance pertaining to such meeting [paragraph 1.2.2 of the Guidance Note on meetings of the Board of Directors issued by ICSI]. All recordings of the proceedings of the board meeting conducted through electronic mode should be deemed to have been made at the deemed venue [Rule 3(6) of the Board Meeting Rules]. The statutory registers which are required to be placed in the Board meeting as per the provisions of the Act shall be placed at the scheduled venue of the meeting [Rule 3(7) of the Board Meeting Rules]

Conduct of virtual Board Meeting

1. At the commencement of the meeting, a roll call shall be taken by the Chairperson wherein every director participating through video conferencing or other audio visual means shall state his name, the location from where he is participating, confirm that he has received the agenda and all the relevant material for the meeting, and that no one other than the concerned director is attending or having access to the proceedings of the meeting. The name and location of the participant has to be recorded in the minutes of meeting [Paragraph 4.1.3 of Secreterial Standard on Meeting of Board of Directors (“SS-1”)]
2. The attendance has to be recorded in attendance register along with the mode of presence [Paragraph 4.1.2 of SS-1]. After authentication of the Attendance Register, the attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode.
3. After the roll call, the Chairperson or the company secretary shall confirm that the required quorum is complete.
4. Every participant shall identify himself for the record before speaking on any item of business on the agenda and also while casting a vote on any motion.
5. At the end of the discussion on each agenda item, the Chairperson shall announce the summary of the decision taken on such item along with the names of the directors, if any, who dissented from the majority decision.

Quorum of Meeting

Section 174 (1) of the Act provides that the quorum for a board meeting of a company shall be one-third of its total strength or two directors, whichever is higher, and the participation of the directors by video conferencing or by other audio visual means shall also be counted for this purpose. It is the duty of the Chairperson to ensure that the required quorum is present throughout the meeting [Rule 3(5) of the Board Meeting Rules].

Presence of a director through electronic mode (not through telephone or tele-conferencing) is valid participation and can also be counted for the purpose of quorum only if such director remains present throughout the board meeting through audio-visual means.

Record of the meeting including video-recordings

The proceedings of the meeting have to be duly recorded [Rules 3(2)(c) and 3(2)(d) of the Board Meeting Rules]. Further the video recordings of the meeting has to be stored as part of company records. Therefore, it is prudent to inform all the participants about the recording so as to address privacy concerns.

Minutes of Meeting

Within fifteen (15) days of the Board Meeting, the draft minutes of the meeting has to be circulated among all the directors. Every director has to confirm or give his comments in writing, about the accuracy of recording of the proceedings of that particular meeting in the draft minutes, within seven days (or some reasonable time as decided by the Board) after receipt of the draft minutes failing which his approval would be presumed. Thereafter, the minutes have to be entered in the minute book and has to be signed by the Chairperson in a similar manner as was done in physical Board Meetings.

Following important points need to be considered while preparing minutes of board meeting -

1. The mode of attendance of the directors participating through electronic mode should be recorded [paragraph 7.2.2.1 of SS-1].
2. The particulars and location of the directors who attended the meeting through audio-visual means should be recorded [Rule 3(2)(b) of the Board Meeting Rules read with paragraph 7.2.2.1 of SS-1].
3. The consent of the directors in respect of their signatures on the statutory registers should be duly recorded in the minutes of the meeting [Rule 3(7) of the Board Meeting Rules].

Confidentiality

In order to maintain confidentiality, no person except the concerned directors shall be allowed access to the proceedings of the meeting [paragraph 5.1.2 of SS-1]. The chairperson and the company secretary shall take due and reasonable care to safeguard the integrity of the meeting by ensuring sufficient security and identification procedures [Rule 3(2)(a) of the Rules].

Concluding Remarks

The amendment in Board Meeting Rules to broaden the net of virtual board meetings is a welcome move. The ability to conduct board meetings virtually would be convenient for both the participants as well as for the company, however, it is advisable to take reasonable care to ensure that such meetings are conducted in accordance with the prescribed standards and procedures.