E-participation in general meetings
E-participation in board meetings
Comment
As part of its aim to be both digital and environmentally friendly, the Ministry of Corporate Affairs has announced that directors and shareholders will now be able to participate in meetings through video conferencing. Sections 2, 4, 5, 13 and 81 of the 2000 Information Technology Act, read with the provisions of the 1956 Companies Act, facilitate the practical implementation of conducting meetings electronically.
E-participation in general meetings
In a much-awaited development, the ministry's General Circular 27/2011 of May 20 2011 allows shareholders of Indian companies to participate in general meetings (both annual and extraordinary) through video conferencing.
In addition, the circular makes it possible for notice of a general meeting to be served electronically. As under Section 171(1) of the Companies Act, a company is required to give at least 21 days' clear notice of a general meeting in writing to its shareholders. Furthermore, Section 53(1) of the act provides that notice may be served on any shareholder, either personally or through the post. However, with the issuance of General Circular 27/2011, a company can also serve the notice via email, provided that the shareholder's email address is registered with the company. The notice will be deemed to be served once the email has entered a computer source outside the control of the company. For calculating 21 days' clear notice, it is advisable that the day on which the notice is sent via email and the day on which the general meeting will be held be excluded.
To conduct a general meeting via video conferencing, the company must comply with the following requirements and procedures, besides regular compliance under the Companies Act:
- The notice of the meeting must inform the shareholders of the availability of a video conferencing facility for participation in the meeting and how it can be accessed.
- The chairman and secretary of the meeting should be the persons responsible for:
- safeguarding the integrity of the meeting via video conferencing;
- ensuring proper video conferencing facilities;
- preparing the minutes of the meeting; and
- ensuring participation by authorised persons.
- The prescribed quorum specified under the Companies Act, along with the chairman of the meeting, should be physically present at the place of the meeting. This implies that members participating in the meeting through video conferencing will not be counted for the purpose of quorum.
- Listed companies may provide video conferencing facilities during a meeting to at least five places in India. The places should be chosen in such a manner that they cover the top five states or union territories based on either maximum number of members or at least 1,000 members, whichever is greater.
E-participation in board meetings
The ministry's General Circular 28/2011, dated May 20 2011, allows the directors of Indian companies to participate in meetings of both the board and the committee of directors through video conferencing. It also standardises the process of sending notices of board meetings electronically.
To conduct a meeting of the board or the committee of directors through video conferencing, the company must comply with the following requirements and procedures, in addition to regular compliance under the Companies Act.
Every director of the company must attend at least one meeting physically during the company's financial year.
The chairman and secretary of the meeting are responsible for:
- safeguarding the integrity of the meeting via video conferencing;
- ensuring proper video conferencing facilities;
- preparing the minutes of the meeting; and
- ensuring participation by authorised persons.
The meeting notice must inform the directors of the availability of video conferencing for participation in the meeting and how it can be accessed. It should also provide for confirmation from the directors regarding the mode of participation in the meeting (ie, in person or electronically). Furthermore, the notice should provide that in the absence of any confirmation from the director, it will be presumed that he or she will physically attend the meeting.
At the start of the meeting, the chairman or secretary must take a roll call and every director (or authorised participant) should confirm:
- his or her full name;
- his or her location;
- that he or she can completely and clearly see and communicate with other participants; and
- that he or she will ensure that no one other than the director or the authorised participant is attending the meeting through video conferencing.
After the roll call, the chairman or secretary of the meeting should certify the existence of a quorum. A director participating in a meeting through video conference will be counted for the purpose of quorum. A roll call should be taken at the conclusion of the meeting or at recommencement of the meeting after every break to ensure that the meeting remains quorate throughout.
The place where the chairman or secretary of the meeting sits during the meeting should be taken as the place of the meeting and the directors participating in the meeting should be counted for the purpose of quorum.
The statutory registers required before the board meeting should be placed before the chairman to ensure compliance with the Companies Act. For the signing requirements of statutory registers, the register will be deemed to have been signed by the directors participating electronically if they have given their consent to this effect in the meeting.
If an objection is received for a motion, the chairman should take a roll call and note the vote of each director. At the end of the meeting, the chairman should announce the summary of the decisions taken in the meeting in respect of each item on the agenda and the names of the directors who have consented or dissented to those decisions. Video recording of that part of the meeting should be preserved by the company for one year from conclusion of the meeting.
In the minutes of the meeting, the chairman should also confirm the mode of attendance of every director of the company during the last three meetings, whether personally or electronically. Draft minutes of the meeting in soft copy should be circulated not later than seven days after the meeting for comments and confirmation to the directors who attended the meeting, to dispel all doubt on matters taken up during the meeting.
Once the above formalities are complete, the minutes of the meeting should be entered in the minutes book, in the manner prescribed under the Companies Act. The minutes should also disclose the particulars of the directors who attended the meeting electronically.
For the many companies whose shareholders and directors are scattered across the globe, the ministry's green initiative in corporate governance is a welcome move. It will help a great deal in curbing the costs incurred and the time spent by shareholders and directors in attending general meetings and board meetings, respectively. The circulars provide for an effective e-participation model that is suitable for both public and private companies.
For further information on this topic please contact Rohit Jaiswal or Gunjan Gupta at Singhania & Partners LLP by telephone (+91 11 4153 1000), fax (+91 11 4153 1001) or email ([email protected] or [email protected]).