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COMPANIES ACT 2013 MEETINGS OF BOARD AND ITS POWERS

COMPANIES ACT 2013 MEETINGS OF BOARD AND ITS POWERS. -Mr. C Dwarakanath Company Secretary in Practice. Section 173 Meetings of Board { Corresponding Section 285, 286}. 173 (1): First Board Meeting Minimum Number of Meetings Interval between two consecutive board meetings

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COMPANIES ACT 2013 MEETINGS OF BOARD AND ITS POWERS

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  1. COMPANIES ACT 2013MEETINGS OF BOARD AND ITS POWERS -Mr. C Dwarakanath Company Secretary in Practice

  2. 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

  3. Section 173Meetings of Board{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-

  4. Section 173Meetings of Board{Corresponding Section 285, 286} • Requirements and Procedures under draft Rules: • Whether attending Board Meeting in person is mandatory. • Notice of meeting shall be sent to all the directors • Notice shall contain the option to attend Board Meeting. Continued……

  5. Section 173Meetings of Board{Corresponding Section 285, 286} Continued…… • Whether Director (s) opting to participating through video conference is/are required to confirm. • Which is the place of Board Meeting. • 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

  6. Section 173Meetings of Board{Corresponding Section 285, 286} Continued…… • Whether Draft minutes to be circulated among all the Directors? • Whether all Directors have right to comment on the drat minutes ?

  7. Section 173Meetings of Board{Corresponding Section 285, 286} 173 (3): • Notice period of Board Meeting. • Mode of issuing of notice

  8. Section 173Meetings of Board{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/-

  9. Section 173Meetings of Board{Corresponding Section 285, 286} 173 (5): • One Person Company, Small Company and Dormant Company. • Where there is only one director in OPC.

  10. 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.

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

  12. Section 174Quorum for Meetings of Board{Corresponding Section 287, 288} 174 (4): • Adjourning the Board Meeting for want of Quorum: • Explanation: • Any fraction of a number shall be rounded off as One • Total strength does not include directors whose places are vacant

  13. Section 175Passing of resolution by Circulation{Corresponding Section 289} 175 (1): • Conditions for passing resolutions by circulation • resolutions has to be circulated in draft, together with necessary papers, if any. • Circulate to all the Directors, or members of the committee, as the case may be. • Circulate at the address of the Directors registered with the Company in India • 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……

  14. Section 175Passing of resolution by Circulation{Corresponding Section 289} Continued…. 5. Resolutions circulated have to be approved by a majority of the Directors • 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 ?

  15. 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.

  16. 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.

  17. Section 177Audit Committee{Corresponding Section 292A} 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.

  18. Section 177Audit Committee{Corresponding Section 292A} 177 (3): • Transitional period for constitution/ reconstitution - One year from the date of commencement of Companies Act, 2013

  19. Section 177Audit Committee{Corresponding Section 292A} 177 (4): • Duties/Powers/Responsibilities • Recommendation for appointment, reappointment appointment of Auditor. • Review and monitor auditor’s independence and performance of Audit Process. • Examining Financial Statement and Auditors’ report. • Approval of related party transaction. Continued…..

  20. Section 177Audit Committee{Corresponding Section 292A} Continued…… • Scrutiny of inter corporate loans and investments. • Valuation of undertakings and assets of the Company. • Valuation of internal financial control and risk management systems. • Monitoring the end use of funds raised through public and related matters.

  21. Section 177Audit Committee{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: • to investigate matters specified in section 177 (4) • to obtain professional advise from external source • to have access to records of the Company

  22. Section 177Audit Committee{Corresponding Section 292A} 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.

  23. Section 177Audit Committee 177 (9): • Vigil Mechanism shall be established for directors and employees. • Criteria: • Every listed Company • Companies which accept deposits from the public • Companies which have borrowed money from banks and public financial institutions in excess of Rupees Fifty Crore

  24. Section 177Audit Committee{Corresponding Section 292A} 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.

  25. 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.

  26. Section 178Nomination and remuneration committee and Stakeholders Relationship Committee{New Section} 178 (2), (3) & (5): • Duties/ Powers: • Identify persons who are qualified to become directors • Recommend to the Board for appointment or removal • Carry out the evaluation of every Director’s performance. • Formulating criteria for determining qualifications, and independence of directors. Continued…..

  27. Section 178Nomination and remuneration committee and Stakeholders Relationship Committee{New Section} Continued….. • Recommend to the Board a policy relating to the remuneration for the Directors, KMP and other employees. • Such remuneration policy shall be disclosed in the Board’s report.

  28. Section 178Nomination and remuneration committee and Stakeholders Relationship Committee{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

  29. Section 178Nomination and remuneration committee and Stakeholders Relationship Committee{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.

  30. Section 179Powers of Board{Corresponding Section 291, 292} 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

  31. Section 179Powers of Board{Corresponding Section 291, 292} 179 (3): • Powers to be exercised at Board Meeting: • To make calls on shares in respect of unpaid shares • To authorize buy back of securities under Section 68 • To issue securities in or outside India • To borrow monies • To invest the funds of the Company Continued……

  32. Section 179Powers of Board{Corresponding Section 291, 292} Continued…… • To grant/give loan/guarantee/securities for any loan • To approve financial statement and Board’s report • To diversify business of the Company • To approve amalgamation, merger / reconstruction • To Take over a Company/acquire a controlling or substantial stake in another company • Any other matter which may prescribed.

  33. Section 179Powers of Board{Corresponding Section 291, 292} • Powers to be exercised at Board Meeting [As per draft Rules for Chapter XII]: • To make political contributions • To fill a casual vacancy in the Board • To enter into a joint venture /technical or financial collaboration • To commence a new business • To shift the location of a plant or factory or the registered office • To appoint or remove (KMP) and senior management personnel one level below the KMP Continued…. Continued……

  34. Section 179Powers of Board{Corresponding Section 291, 292} Continued…. • To appoint internal auditors • To adopt common seal • To take note of the disclosure of director’s interest and shareholding • To sell investments held, constituting 5 % or more of the paid – up share capital and free reserves of the investee company • To accept public deposits and related matters • To approve quarterly, half yearly and annual financial statements

  35. Section 179Powers of Board{Corresponding Section 291, 292} • 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

  36. Section 180Restrictions on Powers of Board{Corresponding Section 293} • Powers to be exercised only with the consent of the Company by Special Resolution: • To sell, lease or otherwise dispose off the whole or substantially whole of undertakings of the company. • To invest otherwise in trust securities the amount of compensation received it out of merger or amalgamation Continued…….

  37. Section 180Restrictions on Powers of Board{Corresponding Section 293} Continued……. • 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. • To remit or give time for the repayment of any debt due from a director.

  38. Section 180Restrictions on Powers of Board{Corresponding Section 293} • 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.

  39. 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.

  40. 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.

  41. Section 182Prohibition and Restrictions regarding Political Contribution{Corresponding Section 293A} 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.

  42. Section 182Prohibition and Restrictions regarding Political Contribution{Corresponding Section 293A} 182 (3) & (4): • Disclosure in Profit and loss Account: • Total amount contributed • Name of the political party

  43. Section 182Prohibition and Restrictions regarding Political Contribution{Corresponding Section 293A} 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

  44. 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.

  45. Section 184Disclosure of interest by Directors{Corresponding Section 299, 300} 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.

  46. Section 184Disclosure of interest by Directors{Corresponding Section 299, 300} 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.

  47. Section 184Disclosure of interest by Directors{Corresponding Section 299, 300} 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.

  48. Section 184Disclosure of interest by Directors{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 voidable 184 (4): • Contravention and Penalty Director 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)

  49. 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.

  50. Section 185Loan to Directors, etc{Corresponding Section 295, 296} 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.

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