Digital Board Meetings in the time of COVID-19

The COVID19 pandemic has drastically altered the way Companies are conducting business. The dependency on the technology has increased considerably. From the secretarial point of view things are no different and many companies are rethinking their approach towards complying with various statutes. Most of the companies had already given away the age-old practice of sending hard copies of the agenda papers and implemented paperless Board Meetings. This itself was a huge step towards digitalization of the Board Meetings. Next step is conducting meetings through Video-conference. Again this is also not a new concept for Indian companies, however this would be the first time for many companies where all the participants attend the meeting through remote locations.
The Companies Act, 2013 (Act) allows every Company to conduct meetings through video conferencing or other audio-visual means (VC) which are capable of recording and recognizing the participation of the Directors and of recording and storing the proceedings of such meetings along with date and time.
‘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. Many companies have already been using VC for conducting Board Meetings for Directors who request for the same. With COVID19 pandemic and the lockdown, Video conferencing has become need of the hour.

Below are few points for conducting a Board meeting via Video Conferencing.

The following broad overview also provides some suggestions to ensure a smooth conduct of the meeting. Applicable provisions: [Sec 173(2) of the Act; Rule 3 and Rule 4 of The Companies (Meetings of Board and its Powers) Rules, 2014] Section 173(2) of the Act allows participation of directors in a meeting of the Board either in person or through VC, as may be prescribed, which are capable of recording and recognizing the participation of the directors and of recording and storing the proceedings of such meetings along with date and time. However, the proviso to section 173(2) allowed Central government to decide the items which shall not be dealt with in a meeting through VC.
Rule 4 of The Companies (Meetings of Board and its Powers) Rules, 2014 lists down the matters that cannot be dealt in any meeting through VC. Currently the list includes five such matters:
1) the approval of the annual financial statements;
2) the approval of the Board’s report;
3) the approval of the prospectus;
4) the Audit Committee Meetings for consideration of financial statement including consolidated financial statement if any, to be approved by the board
5) the approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
Further to remove the hardships caused by these exceptions, the Companies Amendment Act, 2017 which became effective from 7th May, 2018 inserted another proviso to this section stating Where there is quorum in a meeting through physical presence of directors, any other director may participate through VC in such meeting on any matter specified under the first proviso. Furthermore to conduct Board meetings during the lockdown period, Ministry of Corporate Affairs has issued Companies (Meetings of Board and its Powers) Amendment Rules, 2020 dated 19th March, 2020.
As per the amendment, For the period beginning from the commencement of these Rules and ending on the 30th June,2020, the meetings on matters referred to in sub-rule (1) may be held through VC means in accordance with rule 3.
Exception for COVID 19 lockdown: Hence for Board Meetings conducted upto 30th June, 2020, all the items including the five items in rule 4 can be conducted through Video-conferencing as per Rule 3 without any requirement of quorum through physical presence of directors. Rule 3 of The Companies (Meetings of Board and its Powers) Rules, 2014 lays down the procedure or convening and conducting the Board meetings through VC.

Some important points to be ensured for a meeting conducted through VC:

A) Notice of Board Meeting: Along with the Notice of the Board Meeting, Directors have to be informed that the VC option has been made available for the Board Meeting and seek confirmation from them if they wish to attend the meeting through VC. However since the meeting for the quarter and year end 31st March, 2020 has to be conducted through VC, it would be a good practice to inform the Directors in advance and seek their confirmations. The contact details of the person to be mentioned to whom the confirmation has to be given. The notice shall specify the venue of the meeting, and it shall be the place where all the recordings of the proceedings at the Meeting would be made. All the necessary information to enable the directors to participate through VC should be shared with the them along with the notice or separately. Necessary information includes the link to download the app, steps to do so, login id and password if required and important instructions to use the applications. Do a trial run before the meeting with more number of participants and take the test results, for any issues faced get the same clarified with an expert. While testing the application, also try presenting and sharing of the documents to facilitate the same during the Board Meeting.
B) Arrangements: Necessary arrangements to avoid failure of video or audio-visual connection. Inform all the participants in advance the bandwidth requirement, get the application downloaded few days before the meeting for smooth conduct of the Board meeting, ensure availability of proper equipment like additional speakers or camera for effective participation.
C) Safeguard Integrity: The Chairperson/Secretary shall ensure that no person other than the concerned director are attending or have access to the proceedings of the meeting conducted through VC.
D) Proper Facility: The participants attending the meeting through VC should be able to hear and see the other participants clearly during the course of the meeting. Companies are using applications like Zoom, Skype, Microsoft Teams, Vidyo Connect, Webex, GoToMeeting etc. It is important to ensure that the application helps you comply with the requirements of the Act. Hence after thorough check the right application should be chosen.
E) Recording the proceedings: The application that you have chosen should have audio/video recording facility which can be then stored for safekeeping and marking the tape recording(s) or other electronic recording mechanism as part of the records of the company at least before the time of completion of audit of that particular year.
F) Quorum: Ensure that the required quorum is present throughout the meeting.
G) Statutory registers: Registers 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 and where such registers are required to be signed by the directors, the same shall be deemed to have been signed by the directors participating through electronic mode, if they have given their consent to this effect and it is so recorded in the minutes of the meeting.

Procedure: Roll call by the Chairperson:

• To make a roll call at the commencement of the meeting and the director’s participating through electronic mode shall state the following:
• Name; Location from where he is participating;
• Confirmation the receipt of the agenda and relevant material facts of the meeting;
• Confirming that no person other than him/her is attending or have access to the proceedings of the meeting.
• A note mentioning the above details can be shared with the participants for them to better prepared at the meeting. Chairman/ Company Secretary to read out the name of the persons attending other than the Director.
• After the 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 that the required quorum is complete.

Proceedings of the Meeting

• Every person participating the meeting over VC shall identify himself for the record before speaking on any item of business on the agenda.
• If a statement of a director in the meeting through VC is interrupted or garbled, the Chairperson or Company Secretary shall request for a repeat or reiteration by the Director.
• If a motion is objected to and there is a need to put it to vote, the Chairperson shall call the roll that is to say that he shall first announce that he shall be doing the roll call and call out the name of each director who shall identify himself while casting his vote and the Chairperson shall then note the vote of each director.
• Chairperson to summarize the decisions taken during the meeting on each item of agenda transacted along with the voting details, at the end of the meeting.
• Chairperson to make roll call at the end of the meeting and after every break.

Minutes:

• The minutes shall disclose the particulars of the directors who attended the meeting through VC.
• The draft minutes of the meeting shall be circulated among all the directors within fifteen days of the meeting either in writing or in electronic mode as may be decided by the Board.
• Every director shall confirm and give his/her 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 shall be presumed.
• The minutes shall then be entered in the minute book as specified under section 118 of the Act and signed by the Chairperson.

Conclusion:

The procedure for conducting Board Meeting through VC is an elaborate one considering the fact that the Board discussions are highly sensitive and sanctity and integrity of the same has to be maintained. However, until now one or two members would remotely attend the meeting through VC and hence following the above-stated procedure was possible. But for now, if all the participants are joining through VC, the procedural part might become repetitive and time-consuming for instance, every person to identify himself before speaking on an agenda item or for the Chairman to take a roll call after every break might disrupt the free-flowing discussions.
Given the current situation it would be helpful if certain procedures can be relaxed. Also it is time to re-think the entire procedure and be future-ready. If the Act allows all business to be transacted through VC without requirement of the quorum, companies may conduct more such meetings in the future. Having said this the relaxation in procedure should not compromise the safety and integrity of the meetings. Hence focus has to be on good systems/applications with necessary security measures in place. The authorities can also prescribe safety standards and parameters, which can be made mandatory for the application to be allowed to be used for the Board Meetings.
This way we can make Digitalized Board Meetings a reality. The views mentioned in this article belong to the author alone and do not represent the opinions of the institutions affiliated with the authors. Any error is regretted.
For comprehensive understanding of the protocols in place it is advisable to go through the following links. http://ebook.mca.gov.in/default.aspx