Thursday, May 07, 2009

Companies Act_Practical Problems_79

The Board meeting of Fortune Ltd. has the following schedules for the year 2009:
1st Meeting - 1st January, 2009
2nd Meeting - 30th June, 2009
3rd Meeting - 1st July, 2009
4th Meeting - 31st December, 2009
State whether the Board Meetings schedules are as per compliance with the provisions of the Companies Act, 1956. What would be your views if the meeting to be held on 30th June, 2009 is adjourned due to lack of quorum?




As per Section 285, in the case of every company, a meeting of the Board of Directors shall be held at least once in every three months and at least four such meetings shall be held in every year. The section does not state the gap between two board meetings. In the present case four meetings have been scheduled for the year 2009 even though the gap between two board meetings is more than 3 months. However, as per the section there appear to be no contravention. If the Board meeting to be held on 30th June, is adjourned due to lack of quorum, again a meeting is held on some other date, the company shall not be deemed to have
contravened the provisions of Section 285. If the said meeting is proposed to be held on 30th June, 2009 and assumingly to be adjourned for want of quorum, the meeting automatically stand adjourned by virtue of Section 288 (1) till the same day in the next week, at the same time and place. And if the same day is a public holiday, then the meeting stands adjourned till the next succeeding day which is not a public holiday.

Companies Act_Practical Problems_78

In a public company the total number of directors are 12 and 2 office of the directors have fallen vacant. Referring to the relevant provisions of the Companies Act, 1956.
(a) What would be the quorum for the Board meeting?
(b) Can the articles of a company fix the quorum (higher or lower) for the Board meeting?
(c) Assuming if there are 15 directors in the company and of which 13 happen to be interested directors, what would be the quorum?
(d) How do you resolve the situation if all the directors are interested in a particular transaction?


Where total number of directors are 12 and 2 offices of the directors have fallen vacant, we find: 1/3 of (12-2) = 1/3 of 10 = 3 1/3 directors. If the fraction of 3rd were to be rounded off as one then 4, i.e. 3+1 directors would constitute the quorum for the Board meetings. If at any time the number of the remaining directors exceeds or is equal to two thirds of the total strength, the number of the remaining directors who are non-interested but present at the meeting, not being less than two shall constitute the quorum. For example, there are in all 15 directors and the Board meeting commences with all the 15 directors. During the currency of the meeting, an item comes up for discussion in respect of which 13 happen to be “interested” directors. In this case, in spite of the excess of the interested directors being more than two-thirds, the prescribed minimum number of noninterested directors constituting the quorum, namely, 2 present at the meeting are to transact the particular item of business.