FAQ's on Board Meeting Under Companies Act 2013

Q65: Are all companies required to hold Board Meetings every quarter A65: As per Section 173 of the CA 2013 and Secretarial Standards 1, all companies whether private limited companies or public companiesare required to hold at least four meetings of its Board of Directors in each quarter every year where the gap between two consecutive board meetings is not more than one hundred and twenty days. As per the notification No. GSR 466 E dated 05 June 2015, in case of a Section 8 company, the Board of Directors of the company shall hold at least one meeting within six calendar months. In case of an OPC, if there is only one director on the Board of Director, the quarterly board meetings are not required to be held. However, if the OPC has more than one director or in case of small or dormant companies, it will suffice the requirement, if they hold at least one meeting in each half of the calendar year and the gap between two meetings should not be less than ninety days. Further, any business which is required to be transacted at the meeting of the Board of Directors of a company, it shall be sufficient if, in case of such OPC, the resolution by such director is entered in the minutes book. Q66: Can a Company restrict a director from participating in a meeting through video conferencing if he has not given an intimation of participating in the video conference meetings at the beginning of the year A66: No, a company cannot restrict a director from participating in a meeting through video conference if he has not given intimation at the beginning of the year. An intimation given to the company or chairman on receipt of the notice calling the board meeting would suffice the requirement for attending the meeting through video conferencing. Q67: What are the matters which cannot be considered at a meeting held through video conferencing or other audio visual means A67: As per Rule 4 of the Companies (Meetings of the Board and its Powers) Rules, 2014, following matters shall not be considered through video conferencing or other audio visual means: (i) Approval of annual financial statements; (ii) Approval of boards report; (iii) Approval of prospectus; (iv) Audit Committee Meetings for consideration of financial statement including consolidated financial statement, if any,to be approved by the Board of Directors pursuant to Section 134(1) of the CA, 2013; (v) Approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover. However, as per The Companies (Amendment) Bill, 2016, which is yet to be notified, has proposed participation of Directors on certainitems at Board Meetings through video conference or other audio visual means if there is quorum through physical presence of Directors. Q68: Is the notice calling for the board meeting required to state that the meeting is being convened at a short notice A68: Yes, as per Secretarial Standards-1 effective from 1 July 2015, a company is required to state the fact that the board meeting is convened at a short notice in the notice calling the meeting. However, the CA, 2013 is silent in this regard. Q69: Can a director interested in the contract participate in the board meeting or be counted for quorum as per Section 174 of CA 2013 A69: As per provisions of Section 188 of the CA 2013, if any director is directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement then such director shall disclose the nature of his concern or interest at the meeting ofthe Board in which the contract or arrangement is discussed and shall not participate in such meeting. However, in case of a private limited company, as per notification No. GSR 464E dated 5th June 2015, an interested director can participate and vote in a board meeting after disclosing his interest in the particular transaction. The interested director, will be included for the purpose of determining the quorum of the meeting. Q70: Can meetings of the Audit Committee be held through video conference A70: Yes, the meetings of Audit Committee can be held through video conference except the meeting where financial statements includingconsolidated financial statements is considered for approval under Section 134(1) of CA, 2013. Q71: Is a company required to obtain approval of the Audit Committee for all the transaction entered into with related parties A71: Yes, as per Section 177 of CA, 2013 read with Rule 6 and 6A of the Companies (Meetings of Board and its Power) Rules, 2014, acompany is required to obtain approval of the Audit Committee for all the transactions entered into with related parties. Also, the AuditCommittee has an option to grant omnibus approval which shall be valid for a period of one financial year. However, as per the Companies (Amendment) Bill, 2016 which is yet to be notified, proposes to insert following amendments: Ratification by Audit Committee of transactions involving amount not exceeding INR 1 Crores within 3 months of transaction; Consequences of non-ratification of the transactions; Exemption from approval of audit committee to transaction between a holding company and its wholly owned subsidiary. Q72: Which powers of the board are required to be exercised at a duly convened board meeting A72: As per Section 179 of CA, 2013 read with Rule 8 the Companies (Meeting of Board and its Powers) Rules 2014, following powers of the Board can be exercised by means of a resolution passed at a duly convened Board meeting: (a) To make calls on shareholders in respect of money unpaid; (b) To authorise buy back of securities; (c) To issue securities, including debentures, whether in or outside India; (d) To borrow monies; (e) To invest the funds of the company; (f) To grant loans or give guarantee or provide security in respect of loans; (g) To approve financial statements and the Boards report; (h) To diversify the business of the company; (i) To approve amalgamation, merger or reconstruction; (j) To take over a company or acquire a controlling or substantial stake in another company; (k) To make political contributions; (l) To appoint internal auditors and secretarial auditor; (m) To appoint or remove KMP; As per the notification dated 5 June 2015, in case of a Section 8 Company, matters referred to in point no. (d), (e) and (f) may be decided by the Board by circulation instead of at a meeting. Q73: Can a private company grant loan to its directors A73: Sec 185 of the CA 2013 restricts loans to directors including private limited companies. However as per the notification dated 6th Jun 2015, a private company may grant loan to its directors subject to fulfilment of all of the following conditions: No body corporate has invested in the share capital of the company; Borrowings from banks/financial institutions/any other body corporate is less than twice the paid up share capital of the company and fifty crores whichever is lower; and There is no subsisting default in repayment of existing borrowings at the time of the transaction. Q74. Can loan be given by a holding company to its wholly owned subsidiary company or a guarantee given or security provided by a holding company to any loan made to its wholly owned subsidiary A74: Yes, as per the proviso to Section 185(1) loan given by a holding company to its wholly owned subsidiary company or a guaranteegiven or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company is exempt from the purview of Section 185 of CA, 2013 provided the same is utilised for the principal business activities by the subsidiary. Q75: Is a private company exempt from Section 186 of CA, 2013 A75: A private company is not exempt from the applicability of Section 186 of CA, 2013. Q76: Is loan to an employee covered within the ambit of Section 186 of the CA, 2013 A76: As per General Clarification No.04/2015 issued by the Ministry of Corporate Affairs dated 10 March 2015, loans and/or advances madeby the companies to their employees, other than the managing or who-time director are not governed by the requirement of Section 186 of the CA,2013. This clarification will however, be applicable if such loans/advances to employees are in accordance with the conditions of service applicable to employees and are also in accordance withthe remuneration policy, in cases where such policy is required to be formulated. Further, as per the Companies (Amendment) Bill, 2016 which is yet to be notified, proposes to exclude employees from the definition of any person. Q77: Will salary advances made by the Company for only one or two months (without interest) come within the preview of Loan A77: There is a difference between advance and loan. Loan is lending of money with absolute promise to repay whereas advance is to be adjusted against supply of goods and services. Advance given to employees against current months salary will not be in the nature of loan and the same will not fall within the purview of Section 186. Q78: Is unanimous consent of the board required for entering into a transaction under Section 186 A78: Yes, as per Section 186(5) of the CA, 2013, consent of all the directors present at the meeting is required for entering into a transaction. Q79: When is the approval from the public financial institutions not required for entering into transactions under Section 186 A79: As per the proviso to Section 186(5) of the CA, 2013, approval of public financial institutions is not required under the below circumstances: The amount involved in the transaction does not exceed 60% of the paid up share capital, free reserves and securities premium account and 100% of its free reserves and securities premium account, whichever is higher; and There is no default in repayment of loan installments and interest to public financial institutions. Q80: What is the due date for making entries in the new format of Register of Loans, Guarantees, Security and Acquisition Also, is a company required to update the transactions covered under Section 372A of the CA 1956 A80: Since, 1 April 2014 it is mandatory for a company to maintain the Register of Loans, Guarantee, Security and Acquisition made by the company in Form MBP-2. Also, as per the clarification issued by MCA vide Circular No. 15/2014, registers maintained by companies pursuant to Section 372A (5) of the CA, 1956 may continue as per the requirement under these provisions and the new format prescribed (MBP-2) shall be used for transactions entered on and from 1 April 2014. Q81: Which are the transactions covered under Section 188 of the CA, 2013 A81: The following transactions are covered under Section 188 of the CA, 2013: Sale, purchase or supply of goods or materials; Sale or disposal of or buying of property of any kind; Leasing of property of any kind; Availing of or rendering any services; Appointment of an agent for purchase or sale of goods, materials, services or property; Related partys appointment to any office or place of profit in the company or its subsidiary or associate company; Underwriting of subscription of any securities or derivatives; Q82: Can Company provide interest free loans A82: No, the Company shall not provide any loan without interest. As per Section 186(7) of the CA, 2013, no loan shall be given at a rate lowerthan the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan. Q83: Which are the transactions that would not require approval of the shareholders under Section 188 A83: As per Section 188(1) of the CA, 2013, following transactions do not require approval of the shareholders under Section 188 of the CA, 2013: Transactions in ordinary course of business and on arms length basis; Transactions between holding company and wholly owned subsidiary company whose accounts are consolidated and laid before shareholders at AGM. Q84: Can a member of a private company interested in a particular transaction participate and vote at a general meeting A84: Yes, an interested member of a private company can participate and vote at general meeting on matters requiring approval for relatedparty transaction pursuant to exemption Notification No. GSR 464(E), dated 05th June, 2015. Q85: Can a Director who is also a member of a private company participate and vote at a meeting for the transaction related to payment of remuneration to such directors A85: Yes, an interested Director who is also a member of a private company can participate and vote at meeting to approve thetransactions related to payment of remuneration to such Director. Q86: In what circumstances is the prior approval of Board required for entering into specified contracts or arrangements with relatedparties under Section 188 A86: As per Section 188 of the CA 2013, Boards approval is required for the contracts or arrangements with related parties specified inSection 188(1) (a) to (g) which are either not in ordinary course of business or not at arms length basis. Further, in the case thetransactions exceed the prescribed threshold, prior approval byordinary resolution of the company shall be required for entering into such contract or arrangement with related party. Q87: As per the second proviso to Section 188 (1) of the CA, 2013, no member of the company shall vote on such ordinary resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party. What is the meaning of related party in such cases A87: The MCA vide General Circular No. 30/2014 dated 17 July 2014 has clarified that related party referred to in the second proviso has to beconstrued with reference to the contract or arrangement for which the said ordinary resolution is being passed. Thus, the term related party in the above context refers only to such related party with whom the contract or arrangement is being proposed and for which the said ordinary resolution is being passed. However, as per the Companies (Amendment) Bill, 2016 which is yet to be notified, proposes to remove non-participation of related party shareholder of a public Company, in passing of the resolution of such public Company in which 90% or more members, in number, are relatives or promoters of related parties. Q88: Which are the transactions exempted from being entered in Register of Contracts and Arrangements in which the directors are interested A88: The following transactions are exempted from being entered in the Register of Contracts and Arrangements in which the directors are interested: Sale/purchase/supply of any goods/services, if the value does not exceed five lakh rupees in the aggregate in any year Transaction by a banking company for the collection of bills in the ordinary course of its business Q89: Which are the different type of companies required to adopt vigil mechanism A89: Pursuant to Section 177(9) of the CA, 2013 read with Rule 7 of the Companies (meetings of Board and its Power) Rules, 2014, VigilMechanism is required to be adopted by the following companies: Every listed company; Companies which accept deposits from the public; Companies which have borrowed money from banks and public financial institutions in excess of fifty crore rupees.