COMPANIES ACT 2013 MEETINGS OF BOARD AND ITS POWERS

COMPANIES ACT 2013MEETINGS OF BOARD AND ITS

POWERS

-Mr. C DwarakanathCompany Secretary in Practice

Section 173Meetings of Board

{Corresponding Section 285, 286}173 (1): First Board Meeting

Minimum Number of Meetings

Interval between two consecutive board meetings

Exemption by notifications


{Corresponding Section 285, 286}173 (2):

Means of Participation of Directors in a meeting

Matters shall not be dealt in a

meeting through video conference-


{Corresponding Section 285, 286}

Requirements and Procedures under draft Rules:

1. Whether attending Board Meeting in person is mandatory.

2. Notice of meeting shall be sent to all the directors

3. Notice shall contain the option to attend Board Meeting.

Continued……


{Corresponding Section 285, 286}Continued……4. Whether Director (s) opting to participating

through video conference is/are required to confirm.

5. Which is the place of Board Meeting.

6. At the end of the meeting the summary of the meeting proceedings shall be announced along with the names of Directors who have assented/dissented the from decisions



Continued……

7. Whether Draft minutes to be circulated among all the Directors?

8. Whether all Directors have right to comment on the drat minutes ?


{Corresponding Section 285, 286}173 (3): Notice period of Board Meeting.

Mode of issuing of notice


{Corresponding Section 285, 286}173 (3): Shorter Notice to consider urgent business.

173(4): Default in giving notice, every officer liable to a

penalty of Rs. 25,000/-



173 (5): One Person Company, Small Company and

Dormant Company.

Where there is only one director in OPC.

Section 174Quorum for Meetings of Board{Corresponding Section 287, 288}

174 (1): Quorum for meetings of the Board

174 (2): If the number is reduced below the

quorum.

Section 174Quorum for Meetings of Board


174 (3):

Interested Directors for the purpose of quorum:

If the number of interested Directors is equal to/ more than 2/3rd of total strength of the Board.

Section 174Quorum for Meetings of Board

{Corresponding Section 287, 288}174 (4): Adjourning the Board Meeting for want of

Quorum:

Explanation:

1. Any fraction of a number shall be rounded off as One2. Total strength does not include directors whose places

are vacant

Section 175Passing of resolution by Circulation

{Corresponding Section 289}175 (1): Conditions for passing resolutions by circulation

1. resolutions has to be circulated in draft, together with necessary papers, if any.

2. Circulate to all the Directors, or members of the committee, as the case may be.

3. Circulate at the address of the Directors registered with the Company in India

4. Circulate by hand delivery or by post or by courier, or through such electronic means which may include e-mail or Fax prescribed in the draft rules.

Continued……

Section 175Passing of resolution by Circulation

{Corresponding Section 289}Continued….

5. Resolutions circulated have to be approved by a majority of the Directors

6. Can Director say the matter/motion under circulation be decided at Board Meeting.

175 (2): Whether resolutions passed by circulation should be

taken note by the Board ?

Section 176Defects in appointment of Directors

not to invalidate actions taken{Corresponding Section 290}

176: Any act done by a person as a Director shall not be

invalid till it is discovered that his appointment is invalid/defective.

Section 177Audit Committee

{Corresponding Section 292A}

177 (1): Criteria for constituting Audit Committee

Every listed Company Every other Public Company having:

Paid up capital of Rupees One Hundred Crore or more; or

Aggregate outstanding loans or borrowings or debentures or deposits exceeding Rupees Two Hundred Crore.



177 (2):

Composition Consist of 3 Directors with majority of

independent directors.

Qualifications of members Majority of members including its

Chairman shall be persons with ability to read and understand the financial statement.



177 (3):

Transitional period for constitution/ reconstitution

- One year from the date of commencement of Companies Act, 2013


{Corresponding Section 292A}177 (4): Duties/Powers/Responsibilities1. Recommendation for appointment, reappointment

appointment of Auditor.2. Review and monitor auditor’s independence and

performance of Audit Process.

3. Examining Financial Statement and Auditors’ report.

4. Approval of related party transaction.Continued…..


{Corresponding Section 292A}Continued……

5. Scrutiny of inter corporate loans and investments.

6. Valuation of undertakings and assets of the Company.

7. Valuation of internal financial control and risk management systems.

8. Monitoring the end use of funds raised through public and related matters.


{Corresponding Section 292A}177 (5): Audit Committee may call for comments of the

auditors about scope of audit, financial statements, internal and statutory auditors and management of the company.

177 (6): The Audit Committee shall have the power:

1. to investigate matters specified in section 177 (4) 2. to obtain professional advise from external source3. to have access to records of the Company



177 (7): Auditors and KMP shall have right to be herd in the

meeting of the Audit Committee but shall not have the right to vote.

177 (8): Disclosure in Board’s Report shall be made:

The constitution of the Audit Committee, If not constituted, the same shall be disclosed with

reason thereof.


177 (9):

Vigil Mechanism shall be established for directors and employees.

Criteria:1. Every listed Company2. Companies which accept deposits from the public3. Companies which have borrowed money from

banks and public financial institutions in excess of Rupees Fifty Crore



177 (10): Purpose:

To provide for adequate safeguards against victimization of persons.

To make provision for direct access to the Chairperson of the Audit Committee.

Constituting Vigil Mechanism shall be disclosed in the website of the Company and in the Board’s Report.

Section 178Nomination and remuneration committee and Stakeholders Relationship Committee

{New Section}

178(1): Nomination and remuneration committee

Criteria: - Every listed Company and such other classes of

companies as may be prescribed. Constitution: - 3 or more non-executive directors out of which

not less than half shall be independent directors. Chairperson of the Company may be appointed as

the member of the Nomination and remuneration committee but shall not chair such committee.


{New Section}178 (2), (3) & (5): Duties/ Powers:1. Identify persons who are qualified to become

directors2. Recommend to the Board for appointment or

removal3. Carry out the evaluation of every Director’s

performance.4. Formulating criteria for determining qualifications,

and independence of directors.Continued…..


{New Section}Continued…..

1. Recommend to the Board a policy relating to the remuneration for the Directors, KMP and other employees.

2. Such remuneration policy shall be disclosed in the Board’s report.


{New Section}

178 (5): Stakeholders Relationship Committee

Criteria: Company having more than 1000 share holders,

debenture holders, deposit holders and any other security holder at any time during the financial year.

Members : Chairperson shall be non- executive director Other members as may be decided buy the Board


{New Section}178 (6):

Purpose: - To consider and resolve the grievances of stake

holders of the company.

178 (7): Attending General Meeting:- The Chairperson of each committee / any member

of the committee authorized by him in this behalf shall attend the general meeting of the Company.

Section 179Powers of Board


179(1): Scope of the Board- Entitled to exercise all such powers and to do all

such acts, things, as the company is exercise and do.

- No such powers shall be exercised by the Board which are to be exercised by the Company in general meeting



179 (3): Powers to be exercised at Board Meeting:

1. To make calls on shares in respect of unpaid shares

2. To authorize buy back of securities under Section 68

3. To issue securities in or outside India4. To borrow monies5. To invest the funds of the Company

Continued……



Continued……6. To grant/give loan/guarantee/securities for any

loan7. To approve financial statement and Board’s report8. To diversify business of the Company9. To approve amalgamation, merger / reconstruction

10. To Take over a Company/acquire a controlling or substantial stake in another company

11. Any other matter which may prescribed.


{Corresponding Section 291, 292} Powers to be exercised at Board Meeting [As

per draft Rules for Chapter XII]:1. To make political contributions 2. To fill a casual vacancy in the Board 3. To enter into a joint venture /technical or financial

collaboration4. To commence a new business 5. To shift the location of a plant or factory or the

registered office 6. To appoint or remove (KMP) and senior

management personnel one level below the KMP Continued….

Continued……


{Corresponding Section 291, 292}Continued….7. To appoint internal auditors 8. To adopt common seal 9. To take note of the disclosure of director’s interest

and shareholding 10. To sell investments held, constituting 5 % or more

of the paid – up share capital and free reserves of the investee company

11. To accept public deposits and related matters 12. To approve quarterly, half yearly and annual

financial statements



Delegation of powers: The Board may, by passing resolutions, delegate its

power to any committee or the managing director or the manager or any other principal officer of the Company; the following powers:

To borrow monies To Invest Funds of the company To Grant loan/give guarantee/ Provide securities in

respect of loans

Section 180Restrictions on Powers of Board

{Corresponding Section 293}

Powers to be exercised only with the consent of the Company by Special Resolution:

1. To sell, lease or otherwise dispose off the whole or substantially whole of undertakings of the company.

2. To invest otherwise in trust securities the amount of compensation received it out of merger or amalgamation

Continued…….



Continued…….

3. To borrow money, where money to be borrowed, together with the money already borrowed will exceed the aggregate of paid up capital and free reserves.

4. To remit or give time for the repayment of any debt due from a director.



Conditions, limits, particulars of the powers to be exercised by the Board to be stipulated in special resolution.

Debt incurred by the Company in excess of the limit prescribed, shall be invalid, unless the lender proves that he has acted in a good faith.

Section 180 is now applicable to all the companies.

Section 181Company to contribute to

bonafide and Charitable Funds etc

{Corresponding Section 293}181: Board may contribute to bona fide charitable and

other funds.

If aggregate amount exceed 5% of its average net profits for the 3 immediately preceding the financial years, prior approval of the Company in general meeting is required for contribution under this section.

Section 182Prohibition and Restrictions

regarding Political Contribution{Corresponding Section 293A}

182 (1):

Criteria:A company other than: a Government company and a company which has been in existence for less

than 3 financial years

may contribute any amount, directly or indirectly, to any political party.



182 (1): Limit: - not exceeding 7.5% of average net profit during the

3 preceding financial years.

Prior approval of the Board is required for authorizing to make contribution under this section.



182 (3) & (4): Disclosure in Profit and loss Account: Total amount contributed Name of the political party



182 : Points of noting:

- Contribution to any person for political purpose is not allowed.

- For the purpose of this section, “political Party” means a political party registered under Section 29A of the Representation of the People Act, 1951

Section 183Power of Board and other persons to

make Contribution to National Defense Fund etc

{Corresponding Section 293B}183 (1): power of the Board The Board of directors may contribute such amount

as it deem fit to the National Defense Fund or any other fund approved by the Central Government for defense.

183 (2): Disclosure The total amount contributed under this Section

shall be disclosed in profit and Loss account.

Section 184Disclosure of interest by Directors


184 (1): Every Director shall: At his first meeting of the Board in which he participate; and At the first meeting of the Board in every financial year; or wherever there is change in the disclosure already made, at

the first meeting after such change;disclose his concern/interest in any other Company/Body corporate/firms/other association of individuals, by giving notice in writing in Form No. 12.1.

Notices received by Directors under this Section shall be preserved and kept at the registered for 8 years as per the draft Rules.



184 (2): Disclosure of interest/ concern in contract/

arrangement:

Every interested Director shall disclose the nature of interest/concern in any contract/arrangement, entered or to be entered with:

A body corporate in which such director/ in association with any other director holds more than 2% shares/ is a promoter/manager/ CEO of that body corporate

A firm or other entity in which such director is a partner / owner / member.



184 (2):

The interested director shall not attend the Board meeting in which the contract in which he is interested is to be considered.

If the directors becomes interested after entering in to contract/arrangement, the same shall be disclosed forthwith.


{Corresponding Section 299, 300}184 (3): Voidable Contracts: A contracted entered in to by the Company without disclosure under this section or with participation of interested director shall be voidable184 (4): Contravention and PenaltyDirector in default shall be punishable with imprisonment for a period of 1 year or a fine of Rs. 50,000 to Rs. 1 Lakh or with both.184 (5): Between two companies-Exempt if 2% or less of paid-up capital held by Director(s)

Section 185Loan to Directors, etc

{Corresponding Section 295, 296}185 (1): No Company shall give loan, provide security/

guarantee / for its director or any other person in whom the director is interested.

This provision shall not apply to: Giving any loan to MD/WTD as part of the conditions of

service applicable to employees or pursuant to shareholders approval by special resolution.

In ordinary course of business, giving loan/ providing guarantee/securities for the due repayment of any loan for which interest is charged at a rate not less than Bank rate declared by RBI.



185 (2): Contravention and penalty: - Company: punishable with Rs.5 Lakh to 25 Lakh

- Director/Person in default: punishable with imprisonment of 6 months or with fine of Rs.5 lakh to 25 lakh or with both.



Other Aspects/New Aspects:

Provisions of this Section is applicable to both private company as well as public company.

The requirement of permission of Central Government for giving loan to Director as required under the Companies Act, 1956 has been dispensed with.

The exemption given to loan/guarantee/security granted or provided by any Holding Company to its Subsidiary or the exemption given to Private Company has been dispensed with.

Section 186Loan and investment by Company

{Corresponding Section 372A}186 (1):

A company can make investment through not more than 2 layers of investment companies.

Acquiring a company incorporate outside India and such company has investment subsidiaries beyond two layers as per laws of its home country.

A subsidiary company having any investment subsidiary for meeting statutory requirements.


{Corresponding Section 372A}186 (2): Limit:A company shall not: Give loan to any person/body corporate; Give any guarantee/provide security in connection

with any loan to any body corporate; and Acquire by way of subscription, purchase or

otherwise, the securities of other body corporate;exceeding 60% of paid capital, free reserves and security premium account or 100% of free reserves and security premium account whichever is more


{Corresponding Section 372A}186 (3): Providing Loan etc., exceeding limit:Prior approval (Special resolution) at general meeting is required.

186 (4): Disclosure:Disclosure in financial statements to be made about the loan/guarantee/security given.186 (5): Unanimous Consent and Prior Approval:Unanimous consent of the Board and Prior approval of the public financial corporation is required for providing loan/guarantee/security under this section.

Section 186Loan and investment by

Company{Corresponding Section 372A}186 (6):

Following Companies shall not take inter-corporate loan or deposits exceeding the limit as may be prescribed:

Companies registered under SEBI Act, 1992 Such companies as may be notified by the Government

186 (7) & (8): Loan can’t be given at a rate of interest lower than

prevailing yield of 1 year, 3 year, 5 year or 10 year Government Security closest to the tenor of the loan

Company defaulting in payment of any deposit or interest thereon, can not give or provide any loan/Security/Guarantee.



186 (9) & (10):

Company giving loan / guarantee or providing security or making an acquisition under this section shall maintain register in Form No. 12.2.

Entries to be made in registers with particulars of loans and guarantees given, securities provided.

Entries to be made in chronologically within 7 days of making loans/guarantees/securities or acquisition.

Continued……


{Corresponding Section 372A}Continued…. Register shall be kept in the registered office of the

Company and entries in the registers shall be authenticated by the Secretary of the Company or any other authorized person by the Board.

The register shall be kept open to inspection; and Extract and copies of register to be furnished to any

members of the company on furnishing the fee as mentioned in the Articles of the Company which shall not exceed Rs.10 per page



186 (13):

Contravention and Penalty

Company: punishable with fine not less than Rs. 25, 000/- but may extend to Rs. 5,00,000/-

Every officer in default: punishable with imprisonment for 2 years and fine not less than Rs. 25, 000/- but may extend to Rs. 1,00,000/-


{Corresponding Section 372A} Other Aspects/New Aspects: Any intermediary associated with capital market can

not take inter corporate loan, deposits exceeding the limit as may be prescribed.

Exemption to NBFC whose business is acquisition of shares and securities.

While considering limits for making investment, providing loan/guarantee/security, the investment, loan, guarantee, security already provide shall not be considered.


{Corresponding Section 372A} Other Aspects/New Aspects:

The exemption given to following from under the Companies Act, 1956 has been dispensed with: Private Company; Acquisition by holding company the securities of its

wholly owned subsidiary; Loan made by holding company to its wholly owned

subsidiary; and To any guarantee/ security provided by a holding

company in respect of any loan made to its wholly owned subsidiary.

Section 187Investment of Company to be held in

its own name{Corresponding Section 49}

187: All investments made or held by a Company in any

property, security or other asset shall be held in its own name.

The Company may hold any shares in its subsidiary company in the name of any nominee of the Company, if required to meet statutory requirement.

Particulars to be mentioned in the Register in Form No. 12.3, where the securities are held in any other name in terms of this Section along with the reasons for such holdings.

Section 187Investment of Company to be held in

its own name{Corresponding Section 49}

187: Contravention and Penalty

- Company: punishable with fine not less than Rs.25,000/- but may extend to Rs.25 Lakh

- Officer in default: punishable with imprisonment of 6 moths or with fine not less than Rs.25,000/- but may extend to Rs.1,00,000/- or with both.

Section 188Related Party transactions

{Corresponding Section 297, 314}188 (1): Approval of the Board by passing resolution at the meeting

is required to enter into contract with related party with respect to :

Sale/purchase/supply of any goods or materials; Selling/otherwise disposing of, buying property of any kind Leasing of property of any kind; Availing/rendering of any services; Appointment of any agent for purchase/sale of

goods/services/property; Underwriting the subscription of any securities of the

Company; Related party’s appointment to any office or place of profit.


{Corresponding Section 297, 314}188 (1):Conditions to be satisfied as per draft Rules: Notice calling for meeting of the board shall disclose: Name of the related party, nature of relationship Nature, duration, particulars of the contract Material terms of contract including value, if any Any advance paid/received for the contract Any other information relevant for the Board to take

decision The interested director shall not present at the meeting

during discussion of agreement as mentioned in this section.


{Corresponding Section 297, 314}Conditions and limits as prescribed under draft rules for Certain contracts with related Parties: Company having paid up share capital of Rs. 1.00

Crore or more shall not enter into contract/arrangement with any related party; or

Company shall not enter in to any transactions where the transactions to be entered into

a) Taken together with previous transactions during the financial year, exceeds 5% of the annual turnover or 20% of the net worth of the company as per last audited financials, whichever is higher ; or

Continued……



Continued….

b) Relates to appointment to any office or place of profit in the Company, its subsidiary company or associate company at a monthly remuneration exceeding Rupees One Lakh; or

c) For a remuneration for underwriting the subscription of any securities/derivatives thereof of the company exceeding Rupees Ten Lakh.

except with the prior approval of the Company by a Special Resolution.

continued…….



Member shall not vote on such special resolution,

to approve any contract to be entered by the Company, if he is a related party thereon.

The provisions of this section shall not apply to any transactions entered in ordinary course of business , other than transactions which are not at arm’s length Price.

Every contract entered in under this section shall be disclosed at the Board’s report.


{Corresponding Section 297, 314}188 (5): Ratification: Contract entered in to by the director/employee with out prior approval by the Board/ approval by the Shareholder and if the same is not ratified by the Board/Share holders within 3 months from the date of entering in to contracts, such contracts shall be voidable at the option of the Board Contravention and Penalty Contravening director of a listed Company:

imprisonment for a term of 1 year or fine not less than Rs.25,000/- which may extend to Rs. 5,00,000 or with both.

Contravening director of other Company: fine not less than Rs.25,000/- which may extend to Rs. 5,00,000.

Section 189Register of Contracts or arrangements in

which directors are interested{Corresponding Section 301, 305}

189: Every Company shall maintain one or two registers in

Form No. 12.4 and shall enter the particulars of: Companies/body corporate/ firms in which the directors

are interested. Contracts/arrangements with a body corporate of firm

or other entity in which any director is interested. Contract, Arrangements entered with a related party. Extract of registers shall be provided to any member

within 7 days from the request there on upon the payment of such fee as prescribed in the Articles of the Company but not exceeding Rs. 10 per page.

Section 189Register of Contracts or arrangements in

which directors are interested{Corresponding Section 301, 305}

189: Registers to be kept open for inspection at the

registered office of the Company.

The registers shall be produced at the Annual general Meeting and shall remain accessible during the continuance of the meeting.

Section 189Register of Contracts or

arrangements in which directors are interested

{Corresponding Section 301, 305}189: The provisions shall not apply to any contract/

arrangement – For the sale/purchase/supply of goods, materials or

services, if the value of such goods and materials or the cost of such goods in aggregate does not exceed Rs. 5.00 Lakh per year.

By a banking company for the collection of bills in the ordinary course of business.

Contravention and Penalty Every Director contravening the section and the rules there under shall be liable to a penalty of Rs.25,000/-

Section 190Contract of employment with

managing or whole-time directors{Corresponding Section 302}

190: Every Company shall keep at its registered office;

A copy of contract with a Managing Director/ Whole time Director (if it is in writing); or

A written memorandum setting out terms of contract with Managing Director/ Whole time Director (if it is not in writing)

Section 190Contract of employment with

managing or whole-time directors{Corresponding Section 302}

190: Copy of contract/ memorandum shall be kept open

for inspection by any member without payment of fee

Contravention and Penalty - Company: shall be liable to penalty of Rs. 25,000/- - Officer in default: shall be liable to a penalty of

Rs. 5,000/- for each default. Provision shall not apply to private Company

Section 192Restriction on non-cash transactions

involving directors{New provision}

192: A Company shall not enter into any arrangement

by which a Director of the company or of its Holding Company or any person connected with him can acquire assets for the consideration other than cash from the Company & vice versa without the prior approval of Company in General Meeting.

Where the Director/ connected person is a director of its holding company, then resolution from Holding Company will also be required.

Section 192Restriction on non-cash transactions

involving directors{New provision}

192: The notice for approval in general meeting under

this section, from both the Companies ( holding and subsidiary), shall include particulars of the arrangement along with the value of asset duly calculated by Registered Valuer.

Section 193Contract by one person Company

{New provision}

193: Where One person Company enters in to contract

with the sole member who is also director of the company, unless the contract is in writing, the terms of the contracts;

are contained in the Memorandum; or are recorded in the minutes of the first Board

Meeting held after entering in to contract

Section 193Contract by one person Company

{New provision}

193:

Every contract entered in to by the Company under this section shall be intimated to the Registrar of Companies within 15 days of its approval by the Board

Section 194Prohibition on forward dealing

securities of company by Director/Key Managerial Personnel

{New provision}194: Prohibition forward dealing in securities of the

company by Director/KMP

Section 195Prohibition of Insider trading of

Securities{New provision}

195:

No Director/KMP of a company shall involve in insider trading of securities of the Company.

Thank you

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COMPANIES ACT 2013 MEETINGS OF BOARD AND ITS POWERS

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