Company Governance in India

INTRODUCTION

Company law in India has gone through massive amendments, even since its inception, and after many deliberations and considerations. The recent law regulating companies has thereafter been brought into force, known as the Companies Act of 2013.

The objective of said Act aims to improve the quality of corporate governance and protect investors from fraud. The Act also seeks to promote competition in the marketplace and increase corporate transparency.

In short, a company is considered as a separate legal entity in the eyes of law which is required to be registered. It comprises of a board of directors which are considered as the brain of the Company. The Board of directors have certain special roles to play in the day to day working of the Company, with their main role is making decisions regarding the management of a company collectively in their meetings known as Board Meetings.

MAIN ASPECTS

Under Section 149 of the Companies Act, 2013 every company shall have a minimum number of 3 directors in the case of a public company, 2 directors in a private company, and 1 director for a One Person Company.

Furthermore, a company can appoint a maximum of 15 directors. Should a Company wish to appoint more than 15 directors, it can do so after passing a special resolution in their general meeting . The maximum number of directorships a person can hold, including any alternate directorship , should not exceed 20. An alternate director is director appointed in substitute of a whole-time director who is on leave and/or not present in India for more than a period of 3 months.

It is also important to note that a company should have a minimum of 1 resident director, i.e. at least 1 director should be resident in India for a total period of not less than 182 days in the previous calendar year.

The Companies Act, 2013 also rules on the frequency of board meetings which should be held: the law prescribes that every calendar year at least four Board meetings should be held by the Company and not exceeding the interval of more than 120 days between 2 board meetings.

Board meetings are required to be held according to the prescribed quorum. Quorum is the minimum number of directors that are required to hold any meetings. Usually, the articles of association stipulate the quorum and in case if the articles are silent than at least 2 directors are required to conduct the board meeting. If a quorum is not present, the company shall be liable to adjourn the meeting.

There are various stipulations indicated in the Act that a Company is required to comply with regarding such meetings, for example the company is required to give 7 days prior written notice to the parties involved in such board meetings. However, we should note that certain provisions exist for holding such meetings either in person or via phone/video conference.

Regarding the content of the Board meeting, upon discussion of the matters placed before the board of directors in the agenda as circulated in the notice, the director can either vote assenting/dissenting to a resolution. The resolution so passed by the majority of the directors shall be noted at the subsequent meeting and shall be made part of the minutes of present meeting.

Finally, upon completion of the meeting, the minutes of the meeting drafted shall be entered in the minute book in accordance with the procedure as specified under the Companies Act, 2013. It is mandatory for the Company to maintain the minutes of the meetings register and annex all resolutions passed during the board meetings.

CONCLUSION:

The meeting held by the Board of Directors is essential and important for the functioning of the Company. Directors are bound by the resolutions passed in the meetings of the company that may decide ordinary or special business maters. The chairperson of the meeting presides over the meetings, with the directors playing a vital part in either affirming or dissenting by power of their vote from the decisions made at the meetings. The discussions which take place in order to decide on the matters of the company are known as the minutes of the company. Therefore meetings hold an important place in the Company as all essential decisions that are binding on the Company are taken during such meeting.