Companies Act_Practical Problems_92

In course of administration of the affairs of a limited company, Chairman of its Board of Directors came across a matter, which required the approval by say of a board resolution. In the prevailing circumstances, it is not possible to convent and hold a Board Meeting. The Chairman approaches you to advise him of the way and the relevant procedure to obtain such approval without holding the Board Meeting. You are required to advise him on the matter as per the provisions of the Companies Act, 1956.

Companies Act_Practical Problems_85

The Articles of Association of a company provide that the meeting of the Board of
Directors of the company will be held on the last Friday of every month. The Secretary of the company as a result does not serve the notice to the individual directors of the company. Consequently, a meeting of the Board of Directors was held on 20th February, 2008. The meeting was attended by all the directors with the exception of two directors out of a total of 10 directors and certain resolution were passed. The two absentee directors object to the meeting and the proceedings of the meeting for want of notice. Referring to the provisions of the Companies Act, 1956, decide:
(i) Whether the objection raised by the two absentee directors is valid?
(ii) Would your answer be the same in case the Secretary of the company, instead of sending notice on a usual format to the individual directors, sent a copy of the
Articles of Association to each one of the directors?

Section 286 of the Companies Act, 1956 does not specify any form of notice or period of notice. Usually, a week’s notice is considered sufficient. However, if the Articles provide that Board Meetings will be held on fixed days of every month or where the directors are duly informed that in future all meetings of the Board will be held on a fixed day of every month, it will be sufficient compliance with the statute [A. Chettiar Firm v. Kaleshwar Mills]. But, even where meetings are held on a fixed day of every month, a notice is usually sent to the directors as a reminder.

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.

Comapnies Act_Practical Problems_33

The Board meeting of Governance Ltd. has the following schedules:
1st Meeting - 1st January, 2005
2nd Meeting - 30th June, 2005
3rd Meeting - 1st July, 2005.
4th Meeting - 31st December, 2005.
State whether the Board Meetings are as per order/compliance of the provisions of the Companies Act, 1956. What would be your views if the meeting to be held on 30th June, 2005 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 2005 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 held on 30th June, 2005 and was 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_16

A Pvt. Ltd has 5 directors- 3 Indian and 2 German. On a matter concerning the company’s business, an urgent decision is necessary. Hence, a Board meeting is held at which all three Indian directors are present. They seek the German directors’ consent to the resolution by videoconference with them. The articles require at least 2 directors from each side to vote for a resolution at a Board meeting. The resolution passed in this way unanimously. Is the resolution valid?

Companies Act_Practical Problems_15

In the Board meeting, where quorum was of three Directors, four Directors were present at the meeting when it began. All participated in the discussions (audio recording is available) but only two signed the attendance register and other two refused to sign. Does this invalidate the meeting?

Is it necessary that quorum should be present at the time of each & every agenda being discussed at the meeting? OR Is it sufficient if it is present only at the beginning at the meeting? Whether the answer is same for Board and General Meetings?

Companies Act_Practical Problems_14

In the Board meeting, where quorum was of 4 Directors, Five Directors were present at the meeting when it began. All signed the attendance sheet but during the meeting due to difference of opinion, two left the meeting in between and while walking out scratched their names & signatures from the attendance sheet. Will that affect the validity of the quorum?

Companies Act_Practical Problems_13

Quorum for the Board meeting is 1/3rd of the total number of Directors. The Board had 10 members till 30th April 06. On 5th May 06 Mr. X , Director of the company died. For the meeting to be held on 3rd June 2006, what would be the quorum?