Law clarified on procedure for board meetings

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Law-clarified-on-procedure-for-board-meetings

The National Company Law Appellate Tribunal (NCLAT), New Delhi, recently resolved the ambiguity regarding the binding nature of a company director’s option to participate in a board meeting through video conferencing or other audio-visual means.

In Achintya Kumar Barua & Ors v Ranjit Barthkur & Anr, Ranjit, a director of WG Resorts Assam, moved an application before the National Company Law Tribunal (NCLT), Guwahati, to seek the facility of attending company board meetings via video conferencing. The NCLT allowed the application and directed that a video conferencing facility should be made available in accordance with section 173(2) of the Companies Act, 2013. The order was challenged by Barua and other directors before NCLAT contending that if a director participates in a meeting via video conferencing, it would not be possible for the chairman to ensure confidentiality as non-board members could observe the discussion. The Secretarial Standards on Meetings of the Board of Directors provide that the option of video conferencing or other audio-visual facilities should be utilized only “if the company provides such facility” and accordingly, it did not seem mandatory for all companies.

NCLAT held that it is the responsibility of the director to ensure the privacy of the board meeting, and section 173(2) gives the right to a director to participate in a meeting through video conferencing or other audio visual means. The government issued rules to enforce this right and it would be in the interest of companies to comply with the provisions in the public’s interest. Therefore, if any director desires to attend board meetings via video conferencing, the company is bound to allow attendance in this manner and it is not subject to company discretion or the discretion of the chairman/company secretary. On the issue of the secretarial standards, NCLAT further held that such guidelines cannot override the provisions under the rules, and the mandate of section 173(2) when read together with the rules cannot be avoided by companies.

The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at [email protected] or [email protected] Readers should not act on the basis of this information without seeking professional legal advice.