MCA amends provisions relating to Meetings of the Board through video conferencing or other audio-visual means

MCA amends provisions relating to Meetings of the Board through video conferencing or other audio-visual means

July 24, 2017 Corporate 0

With a view to amend the provisions governing meetings of the Board through video conferencing or other audio visual means covered in the Companies (Meetings of Board and its Powers) Rules, 2014 (“Principal Rule”), the Ministry of Corporate Affairs (“MCA”) has proposed amendments by way of the Companies (Meetings of Board and its Powers) Second Amendment Rules, 2017 (“Amendment Rule”).

The Amendment Rule is effective 13th July, 2017.

The key implications of the Amendment Rule are as follows:

Principal Rule

(Current Position)

Amendment Rule

(Proposed Position)

Implication
Rule 3(3) (e)

 

3. Meetings of Board through video conferencing or other audio visual means.-

 

(e) The director, who desire, to participate may intimate his intention of participation through the electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

Rule 3(3) (e) stands substituted

 

3. Meetings of Board through video conferencing or other audio visual means.-

 

(e) Any director who intends to participate in the meeting through electronic mode may intimate about such participation at the beginning of the calendar year and such declaration shall be valid for one year:

 

Provided that such declaration shall not debar him from participation in the meeting in person in which case he shall intimate the company sufficiently in advance of his intention to participate in person.

 

The Amendment Rule has substituted Rule 3(3)(e) of the Principal Rule.

 

A proviso is inserted after Rule 3(3) (e) which clarifies that in spite of giving advance declaration to participate in the meeting through electronic mode, if a director later intends to participate in person, he will not be restricted from such participation. The only requirement he will need to fulfil is to inform the company sufficiently in advance expressing that he would like to participate in person.

 

 

Rule 3 (11) (a)

 

3. Meetings of Board through video conferencing or other audio visual means.-

 

11. (a) At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority.

Insertion of words in Rule 3 (11) (a)

 

3. Meetings of Board through video conferencing or other audio visual means.-

 

11. (a) At the end of discussion on each agenda item, the Chairperson of the meeting shall announce the summary of the decision taken on such item along with names of the directors, if any, who dissented from the decision taken by majority and the draft minutes so recorded shall be preserved by the company till the confirmation of the draft minutes in accordance with sub-rule (12).

As per the Amendment Rule, the Company has to preserve draft minutes recorded during the meeting till its confirmation.

 

In effect, the draft minutes have to be preserved till it converts into final minutes, so that summary of the decision and record of dissented directors are available with the company at any point of time.

 

Rule 6

 

6. Committees of the Board.-The Board of directors of every listed companies and the following classes of companies shall constitute an Audit Committee and a Nomination and Remuneration Committee of the Board-

(i) all public companies with a paid up capital of ten crore rupees or more;

(ii) all public companies having turnover of one hundred crore rupees or more;

(iii) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

 

Explanation.- The paid up share capital or turnover or outstanding loans, or borrowings or debentures or deposits, as the case may be, as existing on the date of last audited Financial Statements shall be taken into account for the purposes of this rule.

Rule 6 stands substituted

 

6. Committees of the Board. – The Board of directors of every listed company and a company covered under rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 shall constitute an ‘Audit Committee’ and a ‘Nomination and Remuneration Committee of the Board’.”

The Amendment Rule has substituted Rule 6 relating to Committees of the Board thereby expressly mentioning that all listed companies and companies covered under Rule 4 of the  Companies (Appointment and Qualification of Directors) Rules, 2014, have to constitute an ‘Audit Committee’ and a ‘Nomination and Remuneration Committee of the Board’. The Amendment Rule has expressly cross referred to Rule 4.

 

The classes of companies covered in Rule 4 of the Companies (Appointment and Qualification of Directors) Rules, 2014 are:

 

(i) all public companies with a paid up capital of ten crore rupees or more;

(ii) all public companies having turnover of one hundred crore rupees or more;

(iii) all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

 

In effect, there is no change in the essence of law and the classes of companies previously referred in Rule 6, are the same categories of companies covered under Rule 4. Moreover, the explanation earlier provided in Rule 6 is also captured in Rule 4.

 

 

 

Source: Ministry of Corporate Affairs

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